Stock Market Reaction to Court Decisions Related to Differential Treatment of In-State and Out-of-State Internet Wine Sales

This paper analyzes stock market reaction to court decisions related to the differential treatment of in-state and out-of-state internet wine sales. Several states had differential laws governing internet sales of wine directly to consumers for in-state and out-of-state wineries. These laws were possibly more harmful to small wine producers as their products are less likely to be carried by retailers. In May of 2005, The Supreme Court of the United States declared these practices unconstitutional. Prior to the Supreme Court granting the writ of certiorari there was a circuit split on the issue. Our study seeks to measure the impact of the Courts' decisions on the stock returns of wineries using standard event study methodology. The results show a negative stock market reaction to publically traded large wineries to the Supreme Court ruling. It appears that differential treatment laws were, indeed, beneficial to the large wineries. (JEL Classification: G18, Q28)