Discarding the North Dakota Dictum: An Argument for Strict Scrutiny of the Three-Tier Distribution System

In Granholm v. Heald, the Supreme Court held that states must treat instate and out-of-state alcoholic beverages equally under the dormant Commerce Clause and established a heightened standard of review for state alcohol laws. Yet in dictum the Court acknowledged that the three-tier distribution system-a regime that imposes a physical presence requirement on alcoholic beverage wholesalers and retailers-was "unquestionably legitimate." Though the system's physical presence requirement should trigger strict scrutiny, lower courts have placed special emphasis on Granholm's dictum, refusing to subject the three-tier distribution system to Granholm's heightened standard of review. This Note argues that the dictum should be discarded and that courts should carefully scrutinize the three-tier distribution system. Under Granholm's heightened standard of review, the three-tier distribution system would be found unconstitutional.IntroductionFrom 1920 until 1933, the United States prohibited the manufacture, transportation, and sale of alcohol. In spite of this constitutional mandate, people went to great lengths to obtain alcohol. In turn, the federal government went to even greater lengths to enforce Prohibition. In one memorable example, the Coolidge Administration initiated a poisoning program, aimed at deterring citizens from drinking.1 Soon after Prohibition began, criminal syndicates started stealing industrial alcohol, which is not intended for human consumption, and selling it to American citizens. The federal government ordered manufacturers to incorporate toxic chemicals such as methyl in the alcohol to render it undrinkable. Undeterred, the syndicates hired chemists to "renature" the alcohol, returning it to its semi-potable, and thus marketable, state.2 The government again upped the ante, adding more potent levels of chemicals, such as gasoline, mercury salts, ether, and formaldehyde, to the alcohol. The problem with this poisoning program, which lasted through the repeal of Prohibition in 1933, was that it failed to achieve its purpose: people kept drinking the alcohol, even when it made them fatally ill. By Prohibition's end, an estimated 10,000 people had died from poisoned industrial alcohol.3Prohibition era stories such as the federal poisoning program reveal our country's uneasy approach to alcohol regulation. Though the failed experiment of Prohibition is one of the United States' distant memories, vestiges of that era persist in alcohol laws around the country that make the retail sale of alcohol an overly complicated and burdensome process. The threetier distribution system, which is the most common regulatory system in the United States, is a prime example of the country's rigorous approach to alcohol regulation.Because the three-tier system was a reaction to Prohibition,4 a brief background on the Prohibition Amendment and its repeal is important to understanding the current state of alcohol regulation. In 1919, Congress rati- fied the Eighteenth Amendment to the United States Constitution, prohibiting the manufacture, sale, or transportation of "intoxicating liquors."5 By 1933, thirteen years of syndicate-dominated bootlegging, bathtub gin, and speakeasies had led one outspoken proponent of Prohibition, John D. Rockefeller, Jr., to abandon his position. In a letter to the president of Columbia University, which was subsequently published by the New York Times on June 7, 1932, Rockefeller acknowledged, "[Prohibition's] benefits, important and far reaching as they are, are more than outweighed by the evils that have developed and flourished since its adoption . . . ."6 Congress agreed and enacted the Twenty-First Amendment on December 5, 1933.The first section of the Twenty-First Amendment ("Section One") accomplished the goal of erasing the Eighteenth Amendment.7 The lesserknown, second section of the Twenty-First Amendment ("Section Two") prohibits the transportation of alcohol into a state in violation of that state's laws. …