by CIO Staff

WASHINGTON WATCH -After Booze, Drugs?

Jul 15, 20052 mins
BPM Systems

Now that the Supreme Court has struck down restrictions on online interstate wine sales, expect companies that sell other regulated products, from caskets to cars, to pursue more business online.

In May, the high court ruled 5-4 that state laws allowing local wineries, but not out-of-state wineries, to ship to state residents are discriminatory. The decision will force 24 states to revise their wine shipment restrictions.

Justice Anthony Kennedy, writing the majority opinion, said states that restrict wine shipments did not prove the laws prevent minors from buying alcohol. “The burden is on the state to show that the discrimination is demonstrably justified,” according to Kennedy’s opinion.

As a result, other state laws restricting e-commerce may come under fire. “The court reaffirmed that state laws which merely protect in-state businesses from out-of-state competition are unconstitutional,” says Jerry Ellig at the Mercatus Center, a think tank at George Mason University.

States are the primary venue for e-commerce restrictions, but Congress hasn’t moved to outright preempt the laws. Most bills in Congress would allow online sales of pharmaceuticals, for example, if the pharmacy complies with rules such as listing the states in which pharmacists are licensed.

With products such as cigarettes and contact lenses, states may argue they need to protect consumers, which requires them to restrict online sales, says Neal Osten, counsel with the National Conference of State Legislatures.

Still, expect more pressure from lobbying groups such as the Washington, D.C.-based NetChoice Coalition to block e-commerce restrictions. E-commerce restrictions cost consumers more than $44 billion a year, according to Steve DelBianco, NetChoice executive director. Now, however, “the ruling raises the bar for a state to maintain legacy barriers to e-commerce,” he says.