Tennessee Attorney General Tosses Residency Requirements

On June 6, 2012, the Tennessee Attorney General declared that the Tennessee residency requirements for alcoholic beverage wholesalers and retailers violates the Commerce Clause of the U.S. Constitution.  State law requires that the owners of wholesalers and retail package stores meet Tennessee residency requirements.  

For example, all owners of package stores must be Tennessee residents for two years before applying, with a few exceptions. A full copy of the Opinion is here.

For many cities in Tennessee, the Opinion may not have an immediate impact on licensing for retail package stores.  Nashville, for example, has a local residency requirement of 2 years.  The Attorney General Opinion does not directly address local residency requirements, which most likely would have failed if analyzed by the Attorney General.

The Tennessee Alcoholic Beverage Commission has deferred to advice provided by the Attorney General on numerous occasions.  Whether or not the Commission follows this opinion will most likely be decided by the full Commission.  The Commission is not legally bound by the Opinion.

The fall of the residency requirement could be a game changer for wholesalers.

If the ABC adopts the Opinion, out-of-state wholesalers will be able to enter the market. Although a handful of existing wholesalers have been acquired by out-of-state wholesalers, these acquisitions do not increase the total number of wholesalers.  New wholesalers mean more competition, although brand franchise laws will hamper market penetration for new wholesalers.

For retail package stores, the decision did not address the one store per person limitation.  With the one store limitation remaining in effect, the fall of residency requirements is not as likely to dramatically affect the market for retail package stores.

For example, although an out-of-state grocery chain may be able to obtain one retail license, the chain could not obtain licenses for any other stores.  Plus, the liquor store would have to be completely separate from the grocery store.

Tom Humphreys from the Knoxville News Sentinel has more analysis at this link.