[House Report 106-265]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    106-265

======================================================================



 
                 TWENTY-FIRST AMENDMENT ENFORCEMENT ACT

                                _______


 July 27, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Hyde, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

                    ADDITIONAL AND DISSENTING VIEWS

                        [To accompany H.R. 2031]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 2031) to provide for injunctive relief in Federal 
district court to enforce State laws relating to the interstate 
transportation of intoxicating liquor, having considered the 
same, reports favorably thereon with an amendment and 
recommends that the bill as amended do pass.

                           TABLE OF CONTENTS

                                                                  

                                                                 Page
The Amendment..............................................           2
Purpose and Summary........................................           3
Background and Need for the Legislation....................           3
Hearings...................................................           6
Committee Consideration....................................           6
Votes of the Committee.....................................           6
Committee Oversight Findings...............................          10
Committee on Government Reform Findings....................          10
New Budget Authority and Tax Expenditures..................          10
Congressional Budget Office Cost Estimate..................          10
Constitutional Authority Statement.........................          11
Section-by-Section Analysis................................          11
Changes in Existing Law Made by the Bill, as Reported......          12
Additional Views...........................................          15
Dissenting Views...........................................          17

    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Twenty-First Amendment Enforcement 
Act''.

SEC. 2. SHIPMENT OF INTOXICATING LIQUOR INTO STATE IN VIOLATION OF 
                    STATE LAW.

    The Act entitled ``An Act divesting intoxicating liquors of their 
interstate character in certain cases'', approved March 1, 1913 
(commonly known as the ``Webb-Kenyon Act'') (27 U.S.C. 122) is amended 
by adding at the end the following:

``SEC. 2. INJUNCTIVE RELIEF IN FEDERAL DISTRICT COURT.

    ``(a) Definitions.--In this section--
            ``(1) the term `attorney general' means the attorney 
        general or other chief law enforcement officer of a State, or 
        the designee thereof;
            ``(2) the term `intoxicating liquor' means any spirituous, 
        vinous, malted, fermented, or other intoxicating liquor of any 
        kind;
            ``(3) the term `person' means any individual and any 
        partnership, corporation, company, firm, society, association, 
        joint stock company, trust, or other entity capable of holding 
        a legal or beneficial interest in property, but does not 
        include a State or agency thereof; and
            ``(4) the term `State' means any State of the United 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, or any territory or possession of the United States.
    ``(b) Action by State Attorney General.--If the attorney general 
has reasonable cause to believe that a person is engaged in, or has 
engaged in, any act that would constitute a violation of a State law 
regulating the importation or transportation of any intoxicating 
liquor, the attorney general may bring a civil action in accordance 
with this section for injunctive relief (including a preliminary or 
permanent injunction or other order) against the person, as the 
attorney general determines to be necessary to--
            ``(1) restrain the person from engaging, or continuing to 
        engage, in the violation; and
            ``(2) enforce compliance with the State law.
    ``(c) Federal Jurisdiction.--
            ``(1) In general.--The district courts of the United States 
        shall have -jurisdiction over any action brought under this 
        section by an attorney general against any person, except one 
        licensed or otherwise authorized to produce, sell, or store 
        intoxicating liquor in such State.
            ``(2) Venue.--An action under this section may be brought 
        only in accordance with section 1391 of title 28, United States 
        Code, or in the district in which the recipient of the 
        intoxicating liquor resides or is found.
    ``(d) Requirements for Injunctions and Orders.--
            ``(1) In general.--In any action brought under this 
        section, upon a proper showing by the attorney general of the 
        State, the court may issue a preliminary or permanent 
        injunction or other order to restrain a violation of this 
        section. A proper showing under this paragraph shall require 
        clear and convincing evidence that a violation of State law as 
        described in subsection (b) has taken place. In addition, no 
        temporary restraining order or preliminary injunction may be 
        granted except upon--
                    ``(A) evidence demonstrating the probability of 
                irreparable injury if injunctive relief is not granted; 
                and
                    ``(B) evidence supporting the probability of 
                success on the merits.
            ``(2) Notice.--No preliminary injunction or permanent 
        injunction or other order may be issued under paragraph (1) 
        without notice to the adverse party and an opportunity for a 
        hearing.
            ``(3) Form and scope of order.--Any preliminary or 
        permanent --injunction or other order entered in an action 
        brought under this section shall--
                    ``(A) set forth the reasons for the issuance of the 
                order;
                    ``(B) be specific in its terms;
                    ``(C) describe in reasonable detail, and not by 
                reference to the complaint or other document, the act 
                or acts sought to be restrained;
                    ``(D) be binding upon--
                            ``(i) the parties to the action and the 
                        officers, agents, employees, and attorneys of 
                        those parties; and
                            ``(ii) persons in active concert or 
                        participation with the parties to the action 
                        who receive actual notice of the order by 
                        personal service or otherwise.
    ``(e) Additional Remedies.--
            ``(1) In general.--A remedy under this section is in 
        addition to any other remedies provided by law.
            ``(2) State court proceedings.--Nothing in this section may 
        be construed to prohibit an authorized State official from 
        proceeding in State court on the basis of an alleged violation 
        of any State law.''.

SEC. 3. EFFECTIVE DATE; APPLICATION OF AMENDMENT.

    (a) Effective Date.--Except as provided in subsection (b), this Act 
and the amendment made by this Act shall take effect on the date of the 
enactment of this Act.
    (b) Application of Amendment.--The amendment made by this Act shall 
apply only with respect to the importation or transportation of any 
intoxicating liquor occurring after--
            (1) October 31, 1999, or the expiration of the 90-day 
        period beginning on the date of the enactment of this Act, 
        whichever is earlier, if this Act is enacted before November 1, 
        1999; or
            (2) the date of the enactment of this Act if this Act is 
        enacted after October 31, 1999.

                          Purpose and Summary

    H.R. 2031 provides that the Attorney General of any state, 
the District of Columbia, the Commonwealth of Puerto Rico, or 
any territory or possession of the United States may bring a 
civil action in United States District Court to enjoin (through 
injunctive relief in the form of a preliminary or permanent 
injunction or other order) any person or entity that the 
Attorney General has reasonable cause to believe is engaged in 
any act that would constitute a violation of a state law 
regulating the importation or transportation of any 
intoxicating liquor. Under H.R. 2031, injunctive relief may be 
granted by the Federal District Court if the Attorney General 
makes a ``proper showing'' that a state law regulating the 
importation or transportation of an intoxicating liquor has 
been violated.

                Background and Need for the Legislation

    In 1913, the Congress enacted the Webb-Kenyon Act (27 
U.S.C. Sec.  122). This Act carved out an exception to the 
Commerce Clause and gave states the power to regulate the 
importation and sale of alcohol within their own borders. 
Pursuant to Webb-Kenyon, any shipment or transportation of 
alcoholic beverages from one state into another in violation of 
that state's laws is prohibited.
    The Webb-Kenyon Act was reenacted in its current form as 
section 202(b) of the Liquor Law Repeal and Enforcement Act of 
1935 (27 U.S.C. Chapter 7). This followed the adoption of the 
Twenty-First Amendment which repealed the Eighteenth Amendment 
(prohibition) and also prohibits the ``transportation or 
importation into any State, Territory, or possession of the 
United States for delivery or use therein of intoxicating 
liquors, in violation of the laws thereof.''
    Under the authority of the Twenty-First Amendment and the 
Webb-Kenyon Act, states are permitted to regulate the 
distribution and sale of alcoholic beverages (i.e., distilled 
spirits, wine and beer) within their borders. Most states 
employ the so-called ``three-tier system'' of alcohol 
distribution to control the distribution and sale of alcoholic 
beverages within their borders. Under this system alcohol 
producers go through state-licensed wholesalers, who must go 
through retailers, who alone may sell to consumers. Most states 
also either prohibit direct shipment of alcoholic beverages 
into their state or severely limit the amount of alcoholic 
beverages that may be shipped directly to any unlicenced 
individual in their state.
    There are three types of direct shipment states. First, 
there are ``express prohibition'' states that expressly outlaw 
direct shipments of alcohol from out-of-state. There are 19 
express prohibition states: Arizona, Arkansas, Delaware, 
Georgia, Indiana, Kansas, Kentucky, Maine, Maryland, 
Mississippi, Montana, New York, New Carolina, North Dakota, 
South Dakota, South Dakota, Tennessee, Texas, Utah, and 
Virginia. Second, ``limited personal importation'' states 
permit in-state consumers to purchase alcoholic beverages 
directly from out-of-state, but permit such purchases for 
personal consumption only and strictly limit the volume of 
alcohol that may be purchased. There are 20 limited personal 
importation states: Alabama, Alaska, Connecticut, District of 
Columbia, Florida, Hawaii, Louisiana, Massachusetts, Michigan, 
Nebraska, Nevada, New Hampshire, New Jersey, Ohio, Oklahoma, 
Pennsylvania, Rhode Island, South Carolina, Vermont, and 
Wyoming. Third, there are 12 ``reciprocity'' states that allow 
a significant amount of direct shipments from out-of-state 
producers from states that grant out-of-state sellers the same 
privilege. These 12 states are California, Colorado, Idaho, 
Illinois, Iowa, Minnesota, Missouri, New Mexico, Oregon, 
Washington, West Virginia and Wisconsin.
    In recent years, several new players have entered the 
alcoholic beverage industry. These groups include small 
wineries and breweries. With the advent of the Internet, they 
have been able to advertise their product nationally and have 
been able to widely expand their market access. Because they do 
not typically produce a large amount of their product, they 
sometimes depend on direct shipment sales for economic 
survival. Because most states do not allow unfettered direct 
alcohol sales and require producers to go through wholesalers, 
there is a problem of market access for small producers because 
their production volumes and consumer bases are too small for 
many wholesalers. That is, except for the limited quantities of 
alcohol that consumers can purchase directly in limited 
personal consumption states and alcohol available through 
direct shipping in reciprocity states, consumers cannot 
purchase alcohol from any source but state licensed retailers, 
and retailers cannot purchase from any source but state 
licensed wholesalers.
    The proponents of H.R. 2031 point out that illegal direct 
shipping is a growing problem, including illegal sales to 
minors using the Internet to order alcohol. Over the last 2-3 
years, several states, including Utah, Florida, and Missouri, 
have brought legal action against companies illegally shipping 
alcohol into their state. Neither the Twenty-First Amendment 
nor the Webb-Kenyon Act includes any criminal or civil 
penalties for violations of its provisions. Thus, states 
wanting to bring an action against violators in federal court 
cannot obtain jurisdiction over the violators. For example, the 
State of Florida brought an action in federal court to enjoin 
the illegal shipment of alcohol into its borders but it was 
dismissed because the court held it would not imply a right of 
access to federal court where one was not explicitly stated in 
the statute. Florida Department of Business Regulations v. 
Zachy's Wine and Liquor, Inc., et al., 125 F.3d 1399 (11th Cir. 
1997), cert denied, 118 S.C. 1402, 140 L.Ed. 666 (1998).
    Additionally, states which attempt to enforce their liquor 
laws against out-of-state companies in state courts may find 
that they do not have jurisdiction over the violators there 
either or have encountered great difficulty in asserting 
jurisdiction. In 1997, in State of Florida v. Sam's Wines and 
Liquors, a judge in the Circuit Court for the Second Judicial 
District in Florida dismissed a case for lack of personal and 
subject matter jurisdiction over the out-of-state violators of 
the state's liquor laws.
    Confronted with the difficulty of enforcing their laws in 
court, several states are beginning to take an alternate route 
to solve the problem of illegally shipped alcohol. Eight states 
(Florida, Georgia, North Carolina, Kentucky, Tennessee, 
Indiana, Oklahoma and Maryland) have enacted statutes in the 
last two years making the illegal shipment of alcoholic 
beverages into their state a felony. These states have taken 
this hard-line position in an attempt to ensure that they will 
have jurisdiction over violators of their state liquor 
transportation laws. For example, the Utah Court of Appeals 
recently ruled that the state of Utah could assert jurisdiction 
in a criminal case against an Illinois company allegedly 
shipping beer to individuals in Utah in violation of Utah law. 
The court held that the state had personal jurisdiction over a 
criminal defendant if that defendant is present in court, that 
civil concepts of minimum contacts are not applicable in 
criminal cases, and that the Illinois company is subject to 
prosecution in Utah for conduct committed in Illinois because 
its conduct caused an unlawful result in Utah. State v. 
Amoroso, Beer Across America, Case No's 971002970 FS and 
1002971 FS, First Amended Criminal Information, Utah Third 
District Court (Apr. 21, 1997) reversed Case No. 971712-CA 
(Utah Ct. App. Mar. 4, 1999).
    If states cannot effectively enforce their laws against 
illegal interstate shipment of alcoholic beverages, they may 
also lose some ability to police sales to underage purchasers. 
Illegal direct shipments also deprive the state of the excise 
and sales tax revenue that would otherwise would be generated 
by a regulated sale. Additionally, if direct shippers violate 
state law, they exclude themselves from other state obligations 
such as submitting to quality control inspections of their 
products, licensing requirements, and complying with other 
statutory restrictions that apply to sellers of alcohol. Some 
states assert that if the Webb-Kenyon Act or the 21st Amendment 
or state laws regulating the sale of alcohol are to remain 
viable, there must be a new means to enforce those laws. If the 
states continue to lack an effective enforcement method, there 
will be continual disregard of state laws. In response to these 
concerns, H.R. 2031 was introduced in order to specifically 
provide states with access to federal court to enforce their 
laws regulating interstate shipments of alcoholic beverages.\1\ 
H.R. 2031 does not change any existing state law nor does it 
change existing case law interpreting the Commerce clause.
---------------------------------------------------------------------------
    \1\ The federal government has jurisdiction, through Bureau of 
Alcohol, Tobacco and Firearms (ATF) enforcement of the Federal Alcohol 
Administration Act (``FAA Act,'' 27 U.S.C. Sec.  201 et seq.), to 
revoke the licenses of alcohol producers who are violating state direct 
shipment laws. The ATF is responsible for administering and enforcing 
the provisions of the FAA Act. The FAA Act requires a basic permit for 
those engaging in the business of importing distilled spirits, wine or 
malt beverages; the business of distilling spirits or producing wine; 
or the business of purchasing for resale at wholesale distilled 
spirits, wine, or malt beverages. 27 U.S.C. Sec.  203. Breweries and 
retailers are not required to have a basic permit. These permits are 
conditioned upon compliance with the Twenty-First Amendment. 27 U.S.C. 
Sec.  204(d). A violation of the Twenty-First Amendment, or the Webb-
Kenyon Act (i.e., a violation of a state law regulating the importation 
or transportation of any intoxicating liquor), is grounds for the ATF 
to suspend or revoke the basic permit. 27 U.S.C. Sec.  204(e).
---------------------------------------------------------------------------

                                Hearings

    No hearing was held on H.R. 2031 prior to the July 20, 1999 
Judiciary Committee markup session.

                        Committee Consideration

    On July 20, 1999, the Committee met in open session and 
ordered favorably reported the bill H.R. 2031, as amended, by 
voice vote, a quorum being present.

                         Votes of the Committee

    Mr. Gallegly and Ms. Lofgren offered an amendment in the 
nature of a substitute that (1) would have changed Section 2(b) 
to limit the types of state liquor importation or 
transportation laws that a state Attorney General could seek to 
enforce in federal court solely to state laws regarding the 
sale of intoxicating liquor to persons under the lawful 
drinking age; (2) offered a standard for a ``proper showing'' 
that an Attorney General must meet in order for the court to 
issue injunctive relief under this section; (3) deleted a 
subsection of H.R. 2031 allowing consolidation of the hearing 
for injunctive relief with a trial of the action on the merits; 
(4) deleted a subsection requiring any action under this 
section to be tried before the United States District Court 
Judge and not a jury; and (5) would have limited the venue in 
which actions under this section could be brought to districts 
where the person alleged to have violated state law had its 
principal place of business.
    Mr. Scarborough offered a substitute amendment to the 
Gallegly/Lofgren amendment in the nature of a substitute which 
incorporates the Gallegly language defining requirements for a 
``proper showing,'' deleting the consolidation subsection, and 
deleting the subsection denying a right to trial by jury. Mr. 
Scarborough's substitute amendment also provides a new section 
containing a prospective effective date, but unlike the 
Gallegly substitute, it does not limit venue to the district 
where the alleged violator resides or limit the scope of 
actions under the bill solely to violations of state laws 
regarding the sale of alcoholic beverages to minors. Thus, 
under the Scarborough substitute, a state Attorney General can 
go into federal court to seek an injunction against any person 
they believe is violating any state law regulating the 
importation or transportation of intoxicating liquor.
    Mr. Watt offered an amendment to the Scarborough substitute 
to the Gallegly/Lofgren amendment in the nature of a substitute 
to insert after ``evidence'' on page 3, line 20, the following 
``that there is no federal law which takes precedence over the 
applicable state law and . . . '' Thus, the text of the bill 
would read, ``A proper showing under this paragraph shall 
require clear and convincing evidence that there is no federal 
law which takes precedence over the applicable state law and 
that a violation of State law as described in subsection (b) 
has taken place.'' The amendment failed by a roll call vote of 
12 yeas to 18 nays.
    Mr. Nadler offered an amendment to the Scarborough 
substitute to the Gallegly/Lofgren amendment in the nature of a 
substitute to change language in Section 2(d)(1) of the Act to 
state that a United States District Court ``may'' issue an 
injunction or other order to restrain a violation of state law 
upon a proper showing by a state Attorney General. The 
Scarborough language had stated the District Court ``shall'' 
issue the injunction. The Nadler amendment was accepted by the 
Committee.
    Ms. Lofgren offered an amendment to the Scarborough 
substitute to the Gallegly/Lofgren amendment in the nature of a 
substitute to limit the scope of the Act solely to enforcement 
of state laws in federal court ``regarding the sale of 
intoxicating liquor to an individual who is not of lawful 
drinking age in such state.'' This amendment essentially 
represented a scaled down version of the Gallegly/Lofgren 
substitute. This amendment failed by a roll call vote of 8 yeas 
to 22 nays.
    The Scarborough substitute amendment was agreed to by a 
roll call vote of 22 yeas to 9 nays. The Gallegly/Lofgren 
amendment in the nature of a substitute as amended by the 
Scarborough substitute was adopted by a voice vote.

    Lofgren Amendment to the Scarborough Substitute amendment 
to the Gallegly/Lofgren amendment in the nature of a substitute 
to H.R. 2031 to strike the words ``regulating the importation 
or transportation of any intoxicating liquor,'' on page 2 lines 
14-15 and insert ``regarding the sale of intoxicating liquor to 
an individual who is not of lawful drinking age in such 
state.'' By a roll call vote of 8 yeas to 22 nays, the 
amendment was not agreed to.

                                                   ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............              X   ..............
Mr. McCollum....................................................  ..............              X   ..............
Mr. Gekas.......................................................  ..............              X   ..............
Mr. Coble.......................................................  ..............  ..............  ..............
Mr. Smith (TX)..................................................  ..............  ..............  ..............
Mr. Gallegly....................................................              X   ..............  ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............              X   ..............
Mr. Chabot......................................................  ..............              X   ..............
Mr. Barr........................................................  ..............              X   ..............
Mr. Jenkins.....................................................  ..............  ..............  ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............              X   ..............
Mr. Cannon......................................................  ..............              X   ..............
Mr. Rogan.......................................................  ..............  ..............  ..............
Mr. Graham......................................................  ..............              X   ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............  ..............  ..............
Mr. Scarborough.................................................  ..............              X   ..............
Mr. Vitter......................................................  ..............              X   ..............
Mr. Conyers.....................................................              X   ..............  ..............
Mr. Frank.......................................................  ..............              X   ..............
Mr. Berman......................................................              X   ..............  ..............
Mr. Boucher.....................................................  ..............  ..............  ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................  ..............              X   ..............
Mr. Watt........................................................  ..............              X   ..............
Ms. Lofgren.....................................................              X   ..............  ..............
Ms. Jackson Lee.................................................              X   ..............  ..............
Ms. Waters......................................................              X   ..............  ..............
Mr. Meehan......................................................  ..............              X   ..............
Mr. Delahunt....................................................  ..............              X   ..............
Mr. Wexler......................................................  ..............  ..............  ..............
Mr. Rothman.....................................................  ..............              X   ..............
Mr. Baldwin.....................................................  ..............              X   ..............
Mr. Weiner......................................................              X   ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................              8              22   ..............
----------------------------------------------------------------------------------------------------------------


    Watt amendment to the Scarborough substitute amendment to 
the Gallegly/Lofgren amendment in the nature of a substitute to 
H.R. 2031 to insert the following on page 3, line 20 after 
``evidence'', ``That there is no federal law which takes 
precedence over the applicable state law.'' By a roll call vote 
of 12 yeas to 18 nays, the amendment was not agreed to.

                                                   ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................  ..............              X   ..............
Mr. McCollum....................................................  ..............              X   ..............
Mr. Gekas.......................................................  ..............              X   ..............
Mr. Coble.......................................................  ..............  ..............  ..............
Mr. Smith (TX)..................................................  ..............  ..............  ..............
Mr. Gallegly....................................................  ..............              X   ..............
Mr. Canady......................................................  ..............              X   ..............
Mr. Goodlatte...................................................  ..............              X   ..............
Mr. Chabot......................................................  ..............              X   ..............
Mr. Barr........................................................  ..............              X   ..............
Mr. Jenkins.....................................................  ..............              X   ..............
Mr. Hutchinson..................................................  ..............              X   ..............
Mr. Pease.......................................................  ..............  ..............  ..............
Mr. Cannon......................................................  ..............  ..............  ..............
Mr. Rogan.......................................................  ..............              X   ..............
Mr. Graham......................................................  ..............              X   ..............
Ms. Bono........................................................  ..............              X   ..............
Mr. Bachus......................................................  ..............              X   ..............
Mr. Scarborough.................................................  ..............              X   ..............
Mr. Vitter......................................................  ..............              X   ..............
Mr. Conyers.....................................................  ..............              X   ..............
Mr. Frank.......................................................              X   ..............  ..............
Mr. Berman......................................................              X   ..............  ..............
Mr. Boucher.....................................................  ..............  ..............  ..............
Mr. Nadler......................................................              X   ..............  ..............
Mr. Scott.......................................................              X   ..............  ..............
Mr. Watt........................................................              X   ..............  ..............
Ms. Lofgren.....................................................              X   ..............  ..............
Ms. Jackson Lee.................................................              X   ..............  ..............
Ms. Waters......................................................              X   ..............  ..............
Mr. Meehan......................................................  ..............  ..............  ..............
Mr. Delahunt....................................................              X   ..............  ..............
Mr. Wexler......................................................  ..............  ..............  ..............
Mr. Rothman.....................................................              X   ..............  ..............
Mr. Baldwin.....................................................              X   ..............  ..............
Mr. Weiner......................................................              X   ..............  ..............
Mr. Hyde, Chairman..............................................  ..............              X   ..............
                                                                 -----------------------------------------------
    Total.......................................................             12              18   ..............
----------------------------------------------------------------------------------------------------------------


    Scarborough substitute amendment, as amended, to the 
Gallegly/Lofgren amendment in the nature of a substitute to 
H.R. 2031. By a roll call vote of 22 yeas to 9 nays, the 
amendment was agreed to.

                                                   ROLLCALL NO. 3
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Sensenbrenner...............................................              X   ..............  ..............
Mr. McCollum....................................................              X   ..............  ..............
Mr. Gekas.......................................................  ..............              X   ..............
Mr. Coble.......................................................  ..............  ..............  ..............
Mr. Smith (TX)..................................................  ..............  ..............  ..............
Mr. Gallegly....................................................  ..............              X   ..............
Mr. Canady......................................................              X   ..............  ..............
Mr. Goodlatte...................................................              X   ..............  ..............
Mr. Chabot......................................................              X   ..............  ..............
Mr. Barr........................................................              X   ..............  ..............
Mr. Jenkins.....................................................              X   ..............  ..............
Mr. Hutchinson..................................................              X   ..............  ..............
Mr. Pease.......................................................  ..............  ..............  ..............
Mr. Cannon......................................................  ..............  ..............  ..............
Mr. Rogan.......................................................              X   ..............  ..............
Mr. Graham......................................................              X   ..............  ..............
Ms. Bono........................................................              X   ..............  ..............
Mr. Bachus......................................................              X   ..............  ..............
Mr. Scarborough.................................................              X   ..............  ..............
Mr. Vitter......................................................              X   ..............  ..............
Mr. Conyers.....................................................  ..............              X   ..............
Mr. Frank.......................................................              X   ..............  ..............
Mr. Berman......................................................  ..............              X   ..............
Mr. Boucher.....................................................  ..............  ..............  ..............
Mr. Nadler......................................................  ..............              X   ..............
Mr. Scott.......................................................              X   ..............  ..............
Mr. Watt........................................................              X   ..............  ..............
Ms. Lofgren.....................................................  ..............              X   ..............
Ms. Jackson Lee.................................................  ..............              X   ..............
Ms. Waters......................................................  ..............              X   ..............
Mr. Meehan......................................................              X   ..............  ..............
Mr. Delahunt....................................................              X   ..............  ..............
Mr. Wexler......................................................  ..............  ..............  ..............
Mr. Rothman.....................................................              X   ..............  ..............
Mr. Baldwin.....................................................              X   ..............  ..............
Mr. Weiner......................................................  ..............              X   ..............
Mr. Hyde, Chairman..............................................              X   ..............  ..............
                                                                 -----------------------------------------------
    Total.......................................................             22               9   ..............
----------------------------------------------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                Committee on Government Reform Findings

    No findings or recommendations of the Committee on 
Government Reform were received as referred to in clause 
3(c)(4) of rule XIII of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of House Rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 2031, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 26, 1999.
Hon. Henry J. Hyde, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2031, the Twenty-
First Amendment Enforcement Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Mark 
Grabowicz (for federal costs), who can be reached at 226-2860, 
and Lisa Cash Driskill (for the state and local impact), who 
can be reached at 225-3220.
            Sincerely,
                                  Dan L. Crippen, Director.
H.R. 2031--Twenty-First Amendment Enforcement Act.
    CBO estimates that implementing H.R. 2031 would cost less 
than $500,000 annually, subject to the availability of 
appropriated funds. Because enactment of the bill would not 
affect direct spending or receipts, pay-as-you-go procedures 
would not apply. H.R. 2031 contains no intergovernmental or 
private-sector mandates as defined in the Unfunded Mandates 
Reform Act and would impose no costs on state, local, or tribal 
governments.
    H.R. 2031 would permit a state to bring a civil action in 
U.S. district court to obtain an injunction against an entity 
that has violated a state law relating to the interstate 
transportation of intoxicating liquor. Implementing this bill 
would increase costs to federal courts to the extent that 
states would seek federal jurisdiction in such cases. CBO 
estimates that any increase in federal costs for court 
proceedings would be less than $500,000 a year because of the 
relatively small number of cases expected and the short period 
of time required to adjudicate most cases. Any such additional 
costs would be subject to the availability of appropriated 
funds.
    State tax revenues would increase if civil actions under 
the bill result in a shift to more legal sales of alcohol, 
which would be taxable. CBO has no basis for reliably 
estimating the magnitude of any such increases.
    The CBO staff contacts for this estimate are Mark Grabowicz 
(for federal costs), who can be reached at 226-2860, and Lisa 
Cash Driskill (for the state and local impact), who can be 
reached at 225-3220. This estimate was approved by Robert A. 
Sunshine, Deputy Assistant Director for Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to rule XI, clause 2(1)(4) of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article III, section 1 of the Constitution.

                      Section-by-Section Analysis

    Section 1. This section provides that the title of the Act 
is the ``Twenty-First Amendment Enforcement Act.''
    Section 2. This section notes that the Act is amending the 
``Webb-Kenyon Act,'' first enacted in 1913 and reenacted in 
1935 after ratification of the 21st amendment. The Webb-Kenyon 
Act divests alcoholic beverages of their interstate character 
and prohibits the interstate shipment of these products in 
violation of state law.
    Section 2(b) grants authority to the Attorney General of 
any state, the District of Columbia, the Commonwealth of Puerto 
Rico, or any territory or possession of the United States to 
bring a civil action in United States District Court to seek 
injunctive relief (including a preliminary or permanent 
injunction or other order) against any person or entity that 
the Attorney General has reasonable cause to believe is engaged 
in any act that would constitute a violation of a state law 
regulating the importation or transportation of any 
intoxicating liquor. The Attorney General can seek the 
injunctive relief to (1) restrain the person from engaging, or 
continuing to engage, in the violation of the state law and (2) 
enforce compliance with the state law.
    Section 2(c) provides jurisdiction to the District Courts 
of the United States over any action brought under this section 
and delineates that venue may be established in accordance with 
section 1391 of title 28, United States Code, or in the 
district in which the recipient of the intoxicating liquor 
resides or is found. Thus, if a state Attorney General is 
asserting that an out-of-state company has shipped alcohol 
illegally to an individual or entity within their state, they 
can seek injunctive relief in the United States District Court 
serving the area within their state where the alleged illegal 
shipment was received.
    Section 2(d) states that a preliminary or permanent 
injunction or other order may be issued by the Federal District 
Court if the Attorney General makes a ``proper showing'' that a 
state law regulating the importation or transportation of an 
intoxicating liquor has been violated. A proper showing under 
this section requires the state Attorney General to show clear 
and convincing evidence that a state law as described in this 
section has been violated, evidence demonstrating the 
probability of irreparable injury if injunctive relief is not 
granted, and evidence supporting probability of success on the 
merits. These requirements are based on rule 65 of the Federal 
Rules of Civil Procedure and case law interpreting rule 65.
    Section 2(d)(2) states that no preliminary injunction or 
permanent injunction may be issued without notice to the 
adverse party and an opportunity for a hearing. Section 2(d)(3) 
provides that any preliminary or permanent injunction or other 
order entered in an action brought under this section must set 
forth the reasons for the issuance of the order, be specific in 
its terms, describe in reasonable detail the act or acts sought 
to be restrained, and it must be binding upon the parties to 
the action (and the officers, agents, employees, and attorneys 
of those parties) and persons in active concert or 
participation with the parties to the action who receive actual 
notice of the order by personal service or otherwise.
    Section 2(e) provides that a remedy under this section is 
in addition to any other remedies provided by law and that 
nothing in this section may be construed to prohibit an 
authorized State official from proceeding in State court on the 
basis of an alleged violation of any State law.
    Section 3. This section provides that the amendment made by 
this Act shall apply only with respect to the importation or 
transportation of any intoxicating liquor occurring after (1) 
October 31, 1999, or the expiration of the 90-day period 
beginning on the date of the enactment of this Act, whatever is 
earlier, if this Act is enacted before November 1, 1999; or (2) 
the date of the enactment of this Act if this Act is enacted 
after October 31, 1999.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

                          ACT OF MARCH 1, 1913

                (Commonly known as the Webb-Kenyon Act)

 CHAP. 90.--An Act Divesting intoxicating liquors of their interstate 
character in certain cases.

           *       *       *       *       *       *       *


SEC. 2. INJUNCTIVE RELIEF IN FEDERAL DISTRICT COURT.

    (a) Definitions.--In this section--
            (1) the term ``attorney general'' means the 
        attorney general or other chief law enforcement officer 
        of a State, or the designee thereof;
            (2) the term ``intoxicating liquor'' means any 
        spirituous, vinous, malted, fermented, or other 
        intoxicating liquor of any kind;
            (3) the term ``person'' means any individual and 
        any partnership, corporation, company, firm, society, 
        association, joint stock company, trust, or other 
        entity capable of holding a legal or beneficial 
        interest in property, but does not include a State or 
        agency thereof; and
            (4) the term ``State'' means any State of the 
        United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, or any territory or 
        possession of the United States.
    (b) Action by State Attorney General.--If the attorney 
general has reasonable cause to believe that a person is 
engaged in, or has engaged in, any act that would constitute a 
violation of a State law regulating the importation or 
transportation of any intoxicating liquor, the attorney general 
may bring a civil action in accordance with this section for 
injunctive relief (including a preliminary or permanent 
injunction or other order) against the person, as the attorney 
general determines to be necessary to--
            (1) restrain the person from engaging, or 
        continuing to engage, in the violation; and
            (2) enforce compliance with the State law.
    (c) Federal Jurisdiction.--
            (1) In general.--The district courts of the United 
        States shall have jurisdiction over any action brought 
        under this section by an attorney general against any 
        person, except one licensed or otherwise authorized to 
        produce, sell, or store intoxicating liquor in such 
        State.
            (2) Venue.--An action under this section may be 
        brought only in accordance with section 1391 of title 
        28, United States Code, or in the district in which the 
        recipient of the intoxicating liquor resides or is 
        found.
    (d) Requirements for Injunctions and Orders.--
            (1) In general.--In any action brought under this 
        section, upon a proper showing by the attorney general 
        of the State, the court may issue a preliminary or 
        permanent injunction or other order to restrain a 
        violation of this section. A proper showing under this 
        paragraph shall require clear and convincing evidence 
        that a violation of State law as described in 
        subsection (b) has taken place. In addition, no 
        temporary restraining order or preliminary injunction 
        may be granted except upon--
                    (A) evidence demonstrating the probability 
                of irreparable injury if injunctive relief is 
                not granted; and
                    (B) evidence supporting the probability of 
                success on the merits.
            (2) Notice.--No preliminary injunction or permanent 
        injunction or other order may be issued under paragraph 
        (1) without notice to the adverse party and an 
        opportunity for a hearing.
            (3) Form and scope of order.--Any preliminary or 
        permanent injunction or other order entered in an 
        action brought under this section shall--
                    (A) set forth the reasons for the issuance 
                of the order;
                    (B) be specific in its terms;
                    (C) describe in reasonable detail, and not 
                by reference to the complaint or other 
                document, the act or acts sought to be 
                restrained;
                    (D) be binding upon--
                            (i) the parties to the action and 
                        the officers, agents, employees, and 
                        attorneys of those parties; and
                            (ii) persons in active concert or 
                        participation with the parties to the 
                        action who receive actual notice of the 
                        order by personal service or otherwise.
    (e) Additional Remedies.--
            (1) In general.--A remedy under this section is in 
        addition to any other remedies provided by law.
            (2) State court proceedings.--Nothing in this 
        section may be construed to prohibit an authorized 
        State official from proceeding in State court on the 
        basis of an alleged violation of any State law.
      
      

                Additional Views of Hon. Joe Scarborough

    The 21st Amendment Enforcement Act is not about regulating 
e-commerce or the Internet. In fact the word ``Internet'' is 
not even mentioned in the text of the legislation. This bill 
does not interfere with shipments of alcohol that comply with 
state law--regardless of how they are ordered--in a corner 
liquor or wine store, through catalogues or on the Internet. 
This bill creates no Internet commerce policy nor does it 
change the state's or the federal government's alcohol policy. 
Most importantly this bill does not open the door for the 
taxation of e-commerce or the Internet. There are several 
companies fulfilling consumer orders of alcohol legally on the 
Internet and they should be applauded. And their illegal 
competitors should be shut down through proper enforcement.
    Some have argued that this is simply an intra-industry 
fight. This is not the case. It is a fight between those who 
comply with state law and some individuals who do not. Nor is 
this a fight between those who favor direct shipping and those 
who oppose it. Instead, it is a fight between those attempting 
to enforce state law and those individuals who are violating 
state law.
    This bill offers a comprehensive solution that bolsters 
state laws that already are on the books. It does not propose 
anything new. Many of those who are currently breaking the law 
are doing so even though they have been notified by the states 
that they are breaking the law.
    This legislation is necessary to reinforce a decision made 
decades ago by the American people to prevent underage access 
to alcohol, to carefully control the sale and distribution of 
alcohol beverages and to license and regulate those who sell 
these products. These laws are designed to prevent illegal 
sales to minors and to respect the will of the people regarding 
such regulations as dry counties.
    Unfortunately, a state's ability to exercise these controls 
is being undermined by vintners, retailers and third-party 
marketers who are shipping alcoholic beverages direct to 
consumers in defiance of state laws using orders through 
telephone, catalogues and the Internet.
    This narrowly focused bill will ensure that states have the 
course of action they need to enforce their alcohol control 
laws against out-of-state companies, many of whom have shown no 
interest in preventing sales of alcohol to minors. It would 
make clear that states have the right, under the Webb-Kenyon 
Act, to use the federal courts to enforce their laws against 
individuals who are illegally shipping alcohol products into 
the state from another jurisdiction.
    H.R. 2031 provides an effective, comprehensive solution 
without interfering with state law, the operation of the 
Internet, or legal mass marketing technology. Congress must act 
now and ensure that the laws regulating the interstate shipment 
of alcohol are not rendered meaningless.
                                   Joe Scarborough.
                            Dissenting Views

    We dissent from the Twenty-First Amendment Enforcement Act, 
H.R. 2031, because it does not address the problem of underage 
drinking, it reinforces anti-competitive practices in the 
alcohol industry and may violate the Commerce Clause, and it 
places burdensome regulations on the Internet. We dissent 
because we had a quite effective alternative that does address 
the problem of underage drinking. We also dissent because there 
is no need to enlarge unnecessarily the jurisdiction of the 
federal courts where--as here--state attorneys general are able 
to enforce their state laws in their own state courts. H.R. 
2031 is not supported by Mothers Against Drunk Driving and is 
also opposed by the American Vintners Association, the Wine 
Institute, the Electronic Commerce Association, the Association 
for Interactive Media, and Americans for Tax Reform.
I. Background on Twenty-first Amendment, the Webb-Kenyon Act, and State 
        Alcohol Distribution
    Although the legislation is characterized by its proponents 
as necessary to enforce the Twenty-first Amendment to the 
United States Constitution, close scrutiny of that Amendment 
and its enabling legislation reveals the fallacy of that 
argument. The Twenty-first Amendment ended prohibition in this 
country and granted States and Territories broad powers to pass 
laws regulating the importation and transportation of alcohol 
into their borders.\1\ The Webb-Kenyon Act, 27 U.S.C. Sec. 122, 
is an enabling statute to the Twenty-first Amendment, and it 
prohibits the shipment or transportation of liquor into a state 
if it is intended to be received, possessed, sold, or otherwise 
used in violation of the law of the receiving state.\2\
---------------------------------------------------------------------------
    \1\ The Twenty-first Amendment states, in relevant part, ``The 
transportation or importation into any State, Territory, or possession 
of the United States for delivery or use therein of intoxicating 
liquors, in violation of the laws thereof, is hereby prohibited.'' U.S. 
Const. amend. XXI, Sec. 2.
    \2\ The Webb-Kenyon Act states,

      The shipment or transportation, in any manner or by any 
      means whatsoever, of any spiritous, vinous, malted, 
      fermented, or other intoxicating liquor of any kind, from 
      one State, Territory, or District of the United States, or 
      place noncontinguous to but subject to the jurisdiction 
      thereof, into any other State, Territory, or District of 
      the United States or place noncontinguous to but subject to 
      the jurisdiction thereof, or from any foreign country into 
      any State, Territory, or District of the United States, or 
      place noncontinguous to but subject to the jurisdiction 
      thereof, which said spiritous, vinous, malted, fermented, 
      or other intoxicating liquor is intended, by any person 
      interested therein, to be received, possessed, sold, or in 
      any manner used, either in the original package or 
      otherwise, in violation of any law of such State, 
      Territory, or District of the United States, or place 
      noncontinguous to but subject to the jurisdiction thereof, 
      is hereby prohibited.
    Under the authority of the Twenty-first Amendment and the 
Webb-Kenyon Act, states are permitted to regulate the 
distribution and sale of alcoholic beverages (i.e., distilled 
spirits, wine, and beer) within their borders. Most states' 
regulations employ the so-called ``three-tier system'' of 
alcohol distribution. Under this system, states require alcohol 
producers to sell their products to state-licensed wholesalers, 
who in turn sell the alcohol to retailers, who alone are 
permitted to sell the alcohol to consumers. While some states 
have enacted laws to prohibit the direct shipment of alcoholic 
beverages into their borders, most states permit out-of-state 
producers to directly ship at least limited amounts of alcohol 
into the state. Significantly, there is nothing in either the 
Twenty-first Amendment or the Webb-Kenyon Act which mandates 
that enforcement of these laws occur through the federal 
courts.
    Recently, several new players have entered the alcoholic 
beverage industry: small- to medium-sized wineries and 
microbreweries. With the advent of Internet commerce, these 
alcohol producers have been able to access a market that might 
otherwise have been closed to them. Through the Internet as 
well as mail-order catalogues, these producers have been able 
to advertise their products nationally and expand their market 
share. Because these small- to medium-sized producers typically 
do not produce a large amount of their product, they often 
depend on direct shipment sales for economic survival.
    As the market for Internet and mail-order sales of alcohol 
has grown, some have expressed concerns about these direct 
marketing strategies. They argue that Internet sales of alcohol 
will increase underage drinking because of the absence of a 
face-to-face purchase. They also argue these sales techniques 
violate state laws that require people to purchase alcohol only 
from a licensed entity, and that states are unable to enforce 
these laws in state court because they have difficulty 
obtaining jurisdiction over out-of-state defendants. Because we 
are reluctant to interfere in a developing market on behalf of 
any of the competitors, we dissent.
II. H.R. 2031 Does Not Address the Problem of Underage Drinking
    Proponents of H.R. 2031 argue that the legislation will 
help crack down on businesses that sell alcohol to minors over 
the Internet or via mail-order. There is some anecdotal 
evidence that minors have successfully been able to order 
alcohol over the Internet. It is far from clear, however, that 
this is a widespread problem. What is the likelihood that a 
minor will be able to obtain a credit card and order wine or 
beer over the Internet or through mail-order, only to wait 3-5 
days to have the product shipped--all without any knowledge by 
their parents? \3\ We know that, unfortunately, young people 
are already able to obtain alcohol illegally at the corner 
liquor store in far too many circumstances. There is no 
systematic evidence that the problem of underage access to 
alcohol is more severe over the Internet. In California, 
telephone- and mail-ordered wine deliveries have been legal 
since 1963, but law enforcement agencies say that this does not 
pose an enforcement problem for them.\4\
---------------------------------------------------------------------------
    \3\ One commentator wryly noted, ``Wholesalers have very 
successfully raised harrowing visions of minors receiving crates of 
mail-order merlot. No doubt that's what teens do. They make credit card 
purchases of rare vintages from obscure wineries thousands of miles 
away and then wait for three days so they can go binge with their 
pals.'' Editorial, Booze Busters, Wall St. J., Sept. 26, 1997.
    \4\ Letter from Manuel R. Espinoza, Chief Deputy Director of 
California Dept. of Alcoholic Beverage Control, to Representative Mike 
Thompson and Representative George Radanovich, March 3, 1999.
---------------------------------------------------------------------------
    Nevertheless, to the extent that businesses illegally sell 
alcohol to minors over the Internet and via mail-order, it is a 
problem that should be addressed. Tellingly, H.R. 2031 does not 
target this problem specifically. Rather than focusing on the 
problem of youth access to alcohol, the legislation's overbroad 
scope permits state attorneys general to come into federal 
court to enforce any state law pertaining to the importation 
and transportation of alcohol. Because H.R. 2031 does not 
directly address underage drinking, Mothers Against Drunk 
Driving (``MADD'') refused to endorse the Senate counterpart to 
H.R. 2031. MADD concluded that the legislation ``has 
implications far beyond [MADD's] concerns and is, in fact, a 
battle between various elements within the alcoholic beverages 
industry.''\5\
---------------------------------------------------------------------------
    \5\ Letter from Karolyn V. Nunnallee, MADD National President, to 
Senator Diane Feinstein, May 13, 1999.
---------------------------------------------------------------------------
    Representatives Gallegly and Lofgren introduced a 
bipartisan substitute to H.R. 2031 that would have directly 
targeted the problem of underage drinking by permitting state 
attorneys general to come into federal court for the purpose of 
enforcing state laws regarding the sale of liquor to minors. 
This substitute was defeated, however. If the purpose of H.R. 
2031 truly was to crack down on underage drinking, the 
Gallegly/Lofgren substitute--with its narrowly tailored 
provisions--would have carried the day.
III. H.R. 2031 May Violate the Commerce Clause and Can Aggravate Anti-
        Competitive Effects of State Importation and Transportation 
        Laws
    This legislation may violate the Commerce Clause of the 
United States Constitution and can aggravate the anti-
competitive effects of state importation and transportation 
laws. States' direct shipment laws generally fall into three 
categories. In one category are ``reciprocity'' laws \6\ that 
allow direct shipments from out-of-state producers whose states 
grant out-of-state sellers the same privilege. The second 
category, ``limited personal importation'' laws, permit in-
state consumers to purchase alcoholic beverages directly from 
out-of-state, but only for personal consumption and only for 
limited volumes of alcohol.\7\ Finally, there are ``express 
prohibition'' laws that expressly outlaw direct shipments from 
other states and instead require that all alcohol producers 
sell through specified wholesalers and distributors.\8\
---------------------------------------------------------------------------
    \6\ There are currently 12 reciprocity states: California, 
Colorado, Idaho, Illinois, Iowa, Minnesota, Missouri, New Mexico, 
Oregon, Washington, West Virginia, and Wisconsin.
    \7\ There are currently 20 limited personal importation 
jurisdictions: Alabama, Alaska, Connecticut, District of Columbia, 
Florida, Hawaii, Louisiana, Massachusetts, Michigan, Nebraska, Nevada, 
New Hampshire, New Jersey, Ohio, Oklahoma, Pennsylvania, Rhode Island, 
South Carolina, Vermont, and Wyoming.
    \8\ There are currently 19 express prohibition states: Arizona, 
Arkansas, Delaware, Georgia, Indiana, Kansas, Kentucky, Maine, 
Maryland, Mississippi, Montana, New York, North Carolina, North Dakota, 
South Dakota, Tennessee, Texas, Utah, and Virginia. Because ``express 
prohibition'' states require the use of wholesalers and distributors, 
some argue that the wholesalers and distributors in such states have a 
state-sanctioned monopoly over the alcohol market.
---------------------------------------------------------------------------
    It is possible that some of these state policies may 
adversely affect out-of-state sellers in violation of the 
Commerce Clause of the U.S. Constitution.\9\ The Majority has 
argued that the Twenty-First Amendment renders the Commerce 
Clause null and void with respect to the state regulation of 
alcohol. It is uncontroverted, however, that the Supreme Court 
has clearly held that protectionist state alcohol laws are 
outside the scope of the Twenty-First Amendment and violate the 
Commerce Clause.
---------------------------------------------------------------------------
    \9\ The Commerce Clause of the Constitution states that ``(t)he 
Congress shall have power . . . To regulate Commerce with foreign 
Nations, among the several States, and with the Indian Tribes.'' U.S. 
Const. art. I, Sec. 8, cl. 1, 3. This clause has been read to include a 
negative corollary: the states may not pass laws which burden 
interstate commerce.
---------------------------------------------------------------------------
    Thus, for example, in 1984 the Supreme Court in Bacchus 
Imports v. Dias \10\ held that a state law which imposed an 
excise tax on sales of liquor but exempted certain locally 
produced alcoholic beverages violated the Commerce Clause. The 
Court concluded that this state legislative scheme was clearly 
discriminatory legislation and constituted ``economic 
protectionism.'' The Court noted that ``one thing is certain: 
The central purpose of the [Twenty-First Amendment] was not to 
empower States to favor local liquor industries by erecting 
barriers to competition.'' The Court held that the state's law 
was not designed to promote temperance but was ``mere economic 
protectionism.'' The Court has adopted this line of reasoning 
in striking down numerous other state liquor laws.\11\
---------------------------------------------------------------------------
    \10\ 468 U.S. 263 (1984).
    \11\ See, e.g., Brown-Forman Distillers Corp. v. New York State 
Liquor Auth., 476 U.S. 573 (1986) (relying on Bacchus); Healy v. Beer 
Institute, 491 U.S. 324 (1989) (relying on Brown-Forman). See also 
Capital Cities Cable v. Crisp (holding that a state statute which 
banned the transmission of out of state alcoholic beverage commercials 
by cable television stations in the state violated the Commerce Clause 
and was outside of the state's Twenty-First Amendment power); 
California Retail Liquor Dealers Ass'n v. Medcal Aluminum 445 U.S. 97 
(1980) (holding that a state wine pricing system violated Sherman 
Antitrust Act and noting that the ``Federal Government retains some 
Commerce Clause authority over liquor); Hostetter v. Idlewild Bon 
Voyage, 377 U.S. 324, (1968) (holding that the Commerce Clause 
prohibited the State of New York from interfering with the sale of 
alcohol to departing international airline travelers at a New York 
airport and that the argument that the Twenty-First amendment trumps 
the Commerce Clause where states regulate alcohol is ``patently 
bizarre,'' ``an absurd oversimplification,'' and ``demonstrably 
incorrect''). See also Vijay Shanker, Alcohol Direct Shipment Laws, the 
Commerce Clause, and the Twenty-First Amendment, 85 Va. L. Rev. 353, 
372-377 (1999) (hereinafter ``Shanker article'').
---------------------------------------------------------------------------
    In addition to possibly violating the Commerce Clause, some 
people argue that the state ``express prohibition'' systems 
create anti-competitive market effects by limiting the outlets 
for alcohol sale and distribution.\12\ It is not Congress's 
role to further entrench this system by providing a federal 
forum (i.e. federal courts) to strengthen their reach by 
allowing state attorneys general to avail themselves of the 
broader jurisdiction of the federal courts and, therefore, 
bring more cases to enforce these state laws. In this regard, 
we are concerned that the bill is ``special interest'' 
legislation, which may grant an advantage to one business 
sector over another.\13\ We do not want to use the federal 
courts for this purpose.
---------------------------------------------------------------------------
    \12\ Moreover, some argue that the consolidation of wholesalers and 
distributors has further exacerbated anti-competitive effects. Shanker 
article at 362. Since 1950, for example, the number of national 
wholesalers has declined from 5,000 to about 250. Chris Knap, Wine 
Wars, Orange County Register, October 23, 1997, at C07 (hereinafter 
``Knap article''). Twenty wholesalers now control the $22 billion U.S. 
liquor wholesaling market, handling 52% of the business. Id. Some 
believe that the decreasing number of distributors has disadvantaged 
consumers by limiting consumer choice and creating artificially high 
prices. Knap article; Shanker article. Because the wholesalers 
sometimes refuse to distribute low-volume, premium wines, some small 
wine makers rely on direct shipment. In California, for example, the 
largest 25 brands ship 90 percent of the 400 million gallons exported 
from the state, while 350 small producers, who make fewer than 5,000 
cases for wine each year, struggle to find legal channels to market 
their products. Knap article.
    \13\ In California, the Wine and Spirits Wholesaler's Association 
of California and the California Beer and Wine Wholesaler's Association 
have contributed $1.2 million to state politicians and campaigns in the 
past ten years. Shanker article.
---------------------------------------------------------------------------
IV. H.R. 2031 Would Represent the First Congressional Regulation of 
        Internet Commerce and Encourage the Imposition of Internet 
        Taxes
    Internet commerce has opened new doors of opportunity for 
entrepreneurs around this country, as well as provided 
consumers with a vast new array of choices in goods and 
services. With the expansion of commerce over the Internet 
comes the added benefit of greater competition--which leads to 
lower prices for consumers.
    We do not want to burden Internet commerce unnecessarily. 
Nor do we want to hinder other types of commercial transactions 
that permit direct contact between producers and consumers. The 
best marketplace is one that promotes robust competition. 
Therefore, we want to encourage new entrants to the market--not 
erect barriers blocking them.
    Although the Majority purports to disdain regulation--
especially as it pertains to commercial transactions over the 
Internet--H.R. 2031 actually hinders Internet commerce. The 
legislation selectively opens up the federal courts to state 
attorney general actions against small- and medium-sized 
alcohol manufacturers who sell alcohol over the Internet and 
who ship their products directly to consumers, without limiting 
the application of the law to the narrowly proclaimed purpose 
of curtailing underage drinking. As the Electronic Commerce 
Association recognized, ``The legislation prevents small 
businesses, including web-based merchants and wineries, from 
utilizing the [I]nternet as a sales tool while providing no 
practical remedy for the problems that allegedly exist.'' \14\
---------------------------------------------------------------------------
    \14\ Electronic Commerce Association, News Release, June 15, 1999.
---------------------------------------------------------------------------
    Arguably, small vineyards, wineries, and microbreweries may 
not be able to distribute their products through ordinary 
channels because large wholesalers will not carry their small 
lots of merchandise. Thus, small businesspeople may utilize and 
depend upon the Internet to provide their products to 
customers. Without access to the direct marketing that the 
Internet enables, small alcohol producers would be forced to 
rely on local--mostly tourist--sales for revenue. The Internet 
has provided new markets for these producers, and now, if this 
bill becomes law, that market may be eliminated. By encouraging 
legal action against those who would use the Internet to sell 
their products, H.R. 2031 constitutes the regulation of 
Internet commerce--plain and simple.
    Furthermore, although the Majority claims to be the party 
of lower taxes, the legislation encourages the taxation of 
alcohol purchased over the Internet. This is because it will 
empower state attorneys general to use federal courts to 
enforce their state sales tax laws against Internet alcohol 
sales--a power no other industry is subject to. In this regard, 
the legislation is totally inconsistent with the passage in the 
105th Congress of the ``Internet Tax Freedom Act,'' which 
places a 3-year moratorium on multiple or discriminatory taxes 
on electronic commerce, and expressed the sense of Congress 
that the Internet should be free of new federal taxes.
    In addition to making it easier to enforce state alcohol 
control laws banning distribution by mail and sales taxes, the 
legislation raises the ominous specter of even more intrusive 
regulation of the Internet. For example, H.R. 2031 would appear 
to sanction future state laws that create on-line service 
liability for direct alcohol sales or that mandate blocking 
software on all web browsers, even if the state laws do not go 
this far yet. Since H.R. 2031 has no limitation on the scope or 
date of alcohol control laws, the bill could easily permit 
federal court enforcement of these state Internet regulations.
V. The Majority's Position Against the Direct Shipment of Alcohol is 
        Contradicted by Its Previous Support for the Direct Shipment of 
        Firearms
    It is ironic that the Majority does not demonstrate the 
same concern for the dangers of interstate shipment of firearms 
as it claims to have about the interstate shipment of alcohol. 
One winery owner recently commented that ``[t]hese days you can 
buy an AK-47 through the mail easier than a bottle of wine.'' 
\15\ While this is an incorrect interpretation of current 
law,\16\ it is an unintentionally prescient observation. If 
this bill and the Majority's recent gun show bill (H.R. 2122) 
\17\ became law, it would indeed be the case that a gun could 
be more easily obtained than alcohol through the mail.
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    \15\ Knap article.
    \16\ Current federal law prohibits the interstate direct shipment 
of firearms and instead requires that firearms be shipped through 
licensed firearm dealers. 18 U.S.C. Sec. 922 (1998).
    \17\ H.R. 2122 would have generally required that some unlicensed 
firearm dealers conduct criminal background checks of gun purchasers at 
events where 10 or more ``firearm vendors'' are selling guns and 50 or 
more firearms are offered for sale.
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    While the Majority has focused on the dangers of Internet 
alcohol sales, Internet sales of firearms, which evade state 
and federal gun safety laws, are an increasing concern. 
Websites offer a number of unsafe weapons for sale, including 
high capacity ammunition clips and semi-automatic assault 
weapons. Indeed, one such site, ``Guns Unlimited,'' describes 
itself as a ``virtual gun show.'' \18\ Yet, when Representative 
Lofgren offered an amendment to extend this bill's prohibitions 
on interstate shipment to firearms, the Majority asserted a 
procedural point of order against her amendment that prevented 
its consideration by the Committee.
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    \18\ http://guns-unlimited.com/
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    Even more puzzling, in arguing for this bill, the Majority 
has cited the need to use licensed state wholesalers as 
conduits in interstate shipments of alcohol in order to assure 
adherence to state alcohol regulations and child safety. Yet, 
just one month ago, the Majority found these concerns 
unpersuasive with respect to guns. Current federal law 
prohibits the direct interstate shipment of firearms and 
instead requires the use of federally-licensed firearms dealers 
as conduits.\19\ Among the reasons for this law are the need to 
ensure compliance with state gun safety laws and the need to 
protect children from misdelivered shipments. However, 
Representative McCollum, Chairman of the Crime Subcommittee, 
recently introduced H.R. 2122, the ``Mandatory Gun Show 
Background Check Act,'' which would have permitted the direct 
interstate shipment of a firearm for the first time since 
Congress outlawed such shipments in the wake of Lee Harvey 
Oswald's assassination of President John F. Kennedy with a mail 
order rifle.\20\
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    \19\ 18 U.S.C. Sec. 922 (1998).
    \20\ Fortunately, on June 18, 1999, the House rejected this 
misguided proposal by a vote of 147 to 280. House Roll Call #244, 106th 
Congress.
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VI. H.R. 2031 Is Unnecessarily Overbroad Because State Attorneys 
        General Can Bring Enforcement Actions in State Courts
    As stated, we have suggested a narrow remedy to the 
presumed problem of underage drinking, the Gallegly/Lofgren 
substitute. H.R. 2031 is not only unwise in its overbreadth, 
however, it is also unnecessary because state attorneys general 
can otherwise bring actions to enforce their state alcohol laws 
in state court. In fact, state courts are the traditional and 
proper forum in which to enforce state laws.
    Proponents of H.R. 2031 argue that state attorneys general 
are having difficulty enforcing their laws in their own state 
courts because states are sometimes unable to obtain personal 
jurisdiction over out-of-state defendants.\21\ To the extent 
that this is true--and it is unclear how widespread this 
problem is--difficulties in obtaining jurisdiction can be 
addressed by several legal mechanisms on the state level, 
rather than by further overburdening the federal courts by this 
overbroad grant of jurisdictional authority.
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    \21\ See Florida Dep't of Bus. Regulation v. Sam's Wines & Liquors 
(Fla. Cir. Ct. Sept. 3, 1997).
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    By way of background, it is important to recognize that--
consistent with constitutional due process requirements--states 
obtain jurisdiction over out-of-state defendants by virtue of 
their own ``long arm'' statutes. These long arm statutes vary 
from state to state, and some are broader than others. For 
example, whereas some state long arm statutes contain a list of 
activities that would subject an out-of-state party to 
jurisdiction in that state's courts,\22\ other states permit 
their long arm jurisdiction to be co-extensive with the due 
process limits of the Constitution.\23\
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    \22\ For example, Florida, Illinois, Michigan, New York, and Texas.
    \23\ For example, California, New Jersey, Oklahoma, Rhode Island, 
and Wyoming. California's statute states, ``A court of this state may 
exercise jurisdiction on any basis not inconsistent with the 
Constitution of this state or of the United States.'' Cal. Civ. Proc. 
Code Sec. 410.10 (West 1999).
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    The Supreme Court has held that constitutional due process 
requirements for personal jurisdiction are met where a party 
has ``minimum contacts'' with a state and the assertion of 
jurisdiction comports with ``traditional notions of fair play 
and substantial justice.'' \24\ Minimum contacts are 
established where the party ``purposefully avails'' itself of 
the privilege of conducting business within a state.\25\ In 
Burger King Corp. v. Rudzewicz, the Supreme Court recognized 
that
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    \24\ International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) 
(citations and internal quotations omitted). See, e.g., Asahi Metal 
Indus. v. Superior Ct. of Calif., Solano County, 480 U.S. 102, 111-13 
(1986); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-76 (1985).
    \25\ Asahi, 480 U.S. at 112; Burger King, 471 U.S. at 475; Hanson 
v. Denckla, 357 U.S. 235, 253 (1958).

        it is an inescapable fact of modern commercial life 
        that a substantial amount of business is transacted 
        solely by mail and wire communications across state 
        lines, thus obviating the need for physical presence 
        within a State in which business is conducted. So long 
        as a commercial actor's efforts are ``purposefully 
        directed'' toward residents of another State, we have 
        consistently rejected the notion that an absence of 
        physical contacts can defeat personal jurisdiction 
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        there.

471 U.S. 462, 476 (1985).
    Based on the Supreme Court's pronouncements on 
jurisdiction, it is unlikely that a state's assertion of 
personal jurisdiction over an alcohol producer who markets, 
sells, and ships alcohol into that state would be found to 
violate the Constitution. Nevertheless, if a state's long arm 
statute is too narrowly drawn, this conduct may not be 
sufficient to establish personal jurisdiction over the alcohol 
producer in that state--regardless of the constitutionality of 
such assertion of jurisdiction.
    For example, Florida's long arm statute extends personal 
jurisdiction over out-of-state persons who are ``[o]perating, 
conducting, engaging in, or carrying on a business or business 
venture in this state or having an office or agency in this 
state.'' \26\ An out-of-state alcohol producer who merely ships 
alcohol into Florida may not satisfy that statutory requirement 
and, hence, may not be subject to personal jurisdiction in 
Florida. By comparison, that same alcohol producer would likely 
be subject to personal jurisdiction in New York under that 
State's long arm statute, because it permits the exercise of 
personal jurisdiction over a party that ``transacts any 
business within the state or contracts anywhere to supply goods 
or services in the state.'' \27\
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    \26\ Fla. Stat. Ann. Sec. 48.193 (West 1999).
    \27\ N.Y. Civ. Prac. Law Sec. 302 (McKinney 1999).
---------------------------------------------------------------------------
    If there are not sufficient contacts to enable a state 
attorney general to obtain jurisdiction over an out-of-state 
producer, it is only because that state has determined that a 
higher threshold of contact is needed as a prerequisite to the 
exercise jurisdiction. In other words, if a state attorney 
general cannot obtain personal jurisdiction over an out-of-
state alcohol producer, it is the result of that state's own 
laws. There is no constitutional impediment to the assertion of 
jurisdiction--the state's long arm statute is simply not broad 
enough to encompass the producer's conduct. Thus, the problem 
does not appear to be an issue for the federal government to 
address. Rather, it is purely a problem of state law that can 
and should be addressed at the state level.\28\
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    \28\ If we open the federal courts to state enforcement actions 
here, this may set a precedent for further expansion of federal court 
jurisdiction, whenever a state has difficulty enforcing its own laws 
because of jurisdictional impediments. For example, the same personal 
jurisdiction argument could be made with respect to a state's 
enforcement of its own consumer protection statute, where the state 
attempts to regulate a product shipped into the state from another 
state. Rather than reforming that state's long arm jurisdiction, there 
may be an attempt to permit states to enforce those claims in federal 
court, as well.
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Conclusion
    We are concerned about underage drinking in this country 
and supported an alternative--the Gallegly/Lofgren substitute--
that addressed that problem. We should not address this problem 
with overbroad legislation that opens up the federal courts to 
a multitude of unnecessary actions by state attorneys general. 
Before we permit state attorneys general to pursue state causes 
of action in federal court, we should ensure that this grant of 
jurisdiction is necessary and does not reinforce anti-
competitive regulations. There is a better way to crack down on 
illegal underage drinking while maintaining a free and open 
marketplace. We proposed that alternative. H.R. 2031 goes too 
far beyond our substitute and common sense and should be 
rejected.
                                   John Conyers, Jr.
                                   Howard L. Berman.
                                   Jerrold Nadler.
                                   Zoe Lofgren.
                                   Anthony D. Weiner.

                                  
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