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Imbiblog is published for general informational purposes only and is not intended as legal advice.

Category archives for “ABC law”

Selling Alcohol to California Consumers Online

September 4th, 2014

Traditionally a customer wanting a bottle of alcohol in California would go to their local package or grocery store to get it or, if they were lucky enough to be in wine country, directly to a winery. In recent years, with consumers actively experimenting and looking for more variety, and with the boom in online shopping generally, consumers have a lot more options to find that elusive boutique wine, craft beer or small batch spirit brand that they have heard about and have been looking for. All of this means that consumers are turning more and more to the internet to find the alcohol that they want to serve at home. A quick Google search of internet alcohol sales in California yields more than 10 million results.

SPIRITS: Only a California Type 21 off-sale general licensee can sell a bottle of distilled spirits direct to consumer (DTC). Although a distiller can host a customer at the distillery to taste the products that are made there, a distiller cannot sell a bottle of spirits to a customer to take home.

BEER: There is a bit more leeway for beer with brewers being able to offer tastings and sell beer to customers. The CA law was revised just this year to make it very clear that a brewer can only sell its own beer to customers, and not beer made by other brewers, unless it gets a retail license. As a matter of policy, the ABC will allow a beer manufacturer to also make an online sale of its beer to a consumer. An on-premises retailer like a restaurant or a bar can also sell beer to customers to take home, and by the same ABC policy can sell online.  Off-sale retailers like grocery stores can sell beer to consumers online.

WINE: As with other alcohol, wine can be sold DTC by off-sale retailers. An on-sale retailer can also sell wine online, under ABC policy allowing online sales by retailers. A winery can also sell wine DTC, both at the winery and online, including through wine clubs. The state also offers two opportunities for the online retail sale of wine without a traditional brick and mortar store. The first of these is with a 17/20 wholesale and retail combination, or a 9/17/20 import/wholesale/retail combination. In both cases, wine can be sold online to customers and indeed can only be sold by direct mail, telephone or the internet from a location which is not open to the public. The license combination is often located right at the warehouse, enabling the licensee to easily pick and pack and ship out customer orders. The 17/20 combination allows the holder to sell directly to retailers as well as consumers and, with the addition of the type 9, the licensee can bring in wine from out-of-state and get it all the way to a consumer without passing through any other licensee’s hands. The second option is more recent and consists of a type 85 license, which gives the licensee the ability to sell wine at retail without the added wholesale or import rights. The chief distinction between the 85 and the 17/20 combination is that the 17/20 licensees have a wholesale license so they are required to make sales to retailers in addition to consumers, whereas the type 85 licensee sells only to consumers.

OUT-OF-STATE SELLERS: If you are a seller of alcohol located out-of-state, only wine can be sold DTC to California consumers and only under certain circumstances. A licensed winery in another U.S. state can get a direct shipper’s permit to sell DTC. For a licensed retailer in another state, the laws are murkier. California has a “reciprocity” statute which only permits out-of-state retail sales from states which allow a California retailer to ship to that state’s consumers. Currently, only thirteen states and the District of Columbia allow such sales. However, the concept of “reciprocity” was criticized by the Supreme Court in its 2005 decision in Granholm v. Heald, 544 U.S. 460, with specific reference to this California law. The law itself has not been challenged and thus the limitation remains on the books.

If you are interested in learning more about direct shipping laws in California or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

Supplier-Funded Instant Rebates No Longer Permitted on Beer in California

August 7th, 2014

On July 18th, California Governor Jerry Brown signed into law Section 25600.3 of the Business and Professions Code, which expressly prohibits beer manufacturers, importers, and wholesalers from offering, funding, sponsoring, or furnishing any type of coupon whereby a consumer gets an instant discount on beer, cider or perry, at the time of purchase. Prohibited coupons include instantly redeemable coupons (IRCs) of all kinds, whether paper, digital or electronic. The bill also prohibits retail licensees from accepting or possessing any such coupon funded by a beer wholesaler or manufacturer, although it does not prevent a retailer from offering its own coupons as set out below.

Per the bill sponsor, beer IRCs have been targets for fraud and have created liability issues for beer suppliers, as well as creating an imbalance in the beer marketplace among major breweries and the burgeoning craft beer market. The bill received major support from MillerCoors and Anheuser-Busch.

Not affected by the law are mail-in rebates, retailer-sponsored coupons, instant coupons for distilled spirits and wine (provided the coupons do not also discount beer), and instant rebates offered by beer manufacturers at the production facility or other premises owned or operated by the manufacturer. This last exception keeps the door open for small brewers licensed with a Type 23 license to offer instant rebates at brew-pubs owned and operated by the brewery.

Suppliers and retailers should be careful with all beer, cider and perry coupons as they may be affected by the new prohibition. We have put together a chart below to show what coupons are caught by the law. You should check each license that is held by the sponsor to see if the law prevents the coupon.

California IRCs  by Alcohol and ABC License Type

            

 

 

Beer Manufacturer (CA or out-of-state)

Beer and Wine Wholesaler

Beer and Wine Importer

Winegrower (if wholly owned by a Beer Manufacturer)

Winegrower (not owned by Beer Manufacturer)

Retailer

Malt beverages (incl. beer)

No

No

No

No

N/A

Yes

Cider

No

No

No

No

Yes

Yes

Perry

No

No

No

No

Yes

Yes

Wine/spirits

N/A

Yes

Yes

Yes

Yes

Yes

Rebate regulations vary from state to state. For more information on coupon laws for wine, beer, and distilled spirits, contact an attorney at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

TTB Reconsiders Use of “Estate Bottled” Following a Winery Sale

May 21st, 2014

To be labeled as “estate bottled,” a wine must be, among other things, made from grapes grown in an American Viticultural Area, on land that is owned or “controlled by” the winery, and the winery must crush, finish, age and bottle the wine in a continuous process.

Previous guidance from the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) suggested that a wine would not be entitled to use the “estate bottled” designation if a change of ownership of the winery occurred at any point during the winemaking process, because the new owner technically would not have “controlled” all phases of the process. To address this issue, sellers and buyers of wineries that produce “estate bottled” wines would sometimes enter into an Alternating Proprietorship Agreement (“AP”) whereby the seller would maintain its bonded winery operations until all wine in process at the winery as of the closing date had been bottled and labeled. This approach was difficult for both sellers and buyers, given that the AP could be in effect for a lengthy period of time depending on which stage of production the “estate bottled” wine was in.

In a recent private letter ruling, the TTB advised that it has reconsidered its position and that the proprietor of a winery can  use an “estate bottled” designation for wine that was grown and fermented by a predecessor proprietor and bottled by a new proprietor (provided the wine also met the other requirements under 27 C.F.R. § 4.26). The ruling provides that the ownership of a winery may change while the wine is in process as long as the bottling winery does not change. The TTB further explains that the definition of “controlled by” refers to the land on which the grapes are grown and the winery operates, as opposed to the owner of such land. With a change in winery ownership, the “estate” land is not altered, and thus the new owner can maintain the “estate bottled” designation.

This guidance from the TTB should come as a welcome relief to potential purchasers and sellers of wineries that produce “estate bottled” wines.

For questions about the acquisition or sale of a winery, please contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

NYSLA Expands Suppliers’ Ability to Entertain Consumers

May 6th, 2014

Suppliers’ ability to run events for consumers in the New York market has been up in the air for a number of years now, and especially since the industry consent orders in 2006. Now, the New York State Liquor Authority (SLA) has given helpful and detailed guidance on how these events can be run.

Supplier Purchases of Alcohol from On-Premise Retailers – #2014-8

This new SLA Advisory covers the ways in which suppliers and wholesalers may purchase alcoholic beverages from on premise retailers for consumers. Under the consent orders issued in 2006, there were three ways in which this could be done: (1) on an incidental basis; (2) for employees or private guests at an invitation-only event; or (3) at a bar spend promotional event open to the general public. The new advisory clarifies the scope of those activities and also expands on them.

Purchases for Consumers on an Individual or Incidental Basis

This is unchanged from SLA’s prior position. It is not intended to be an option for promotional events. It permits a supplier rep to buy themselves a drink and to buy a drink for individual patrons of a retailer.

Business Meetings and Private Events

- Business meetings or business entertainment

This means a gathering of a supplier employees, and/or representatives for entities that do business with a supplier (including other suppliers, distributors and retailers). There must be a legitimate business purpose for the meeting, like discussing product sales, new product introductions etc. It does not include holiday parties or other special occasion events. There are no spending restrictions, or limits on the number of meetings at any particular on premise location. The event must be in a reserved area (can be as little as one table), and at least one supplier employee must be present. Retail licensees and their employees can be invited and an invite can be sent to all employees of a particular retailer.  Media reps can be present.

- Private invitation only events closed to the general public

This is an event not conducted for a business purpose or for promotional purposes. It must be a gathering of invitees who have an identifiable affiliation with a supplier (e.g., a party for employees, vendors or business associates), or a common affiliation or relationship with each other (e.g. journalists, sports teams or non-profit organizations). The language of the advisory makes it clear the group cannot just be a large gathering of a group of consumers or potential consumers without meaningful commonality other than an attempt to market or target a demographic. Invitations must be sent by a supplier to invitees by individual name, each such invitee may bring only one guest. Invites can be by phone, e-mail, letter, in person, etc. Invites cannot be in any type of media advertisement or generic communication to anyone wishing to attend and cannot be sent to a “mailing list” of consumers obtained or created by a supplier. The event must be in a reserved area (can be as little as one table) and at least one supplier employee must be present. Despite the stated non-business and non-promotional purpose of the events, retail licensees and their employees can be invited, as can the media.  A supplier cannot send a general invite to all employees of a retailer or a retail chain.

Promotional Events Open to the General Public – No Invitation Required

Prior to the advisory, a bar spend was limited to $500 (plus 20% tip) and no more than six events per retailer, per year. Now, the limit is $700 (plus 20% tip), and no more than ten events per retailer, per year. A supplier cannot purchase food, non-alcoholic beverages, or anything else from the retailer for such an event. These events can now be advertised, identifying the time, date and location. Invites may also be sent to members of the general public, but the event cannot be restricted to people that received such invitations. There is no longer a need to submit statements after these events; a supplier must maintain a record of each event for two years that includes date, time, location and duration, brands that were purchased, and names of supplier reps or agents who conducted the event.

Promotional Events Open to the General Public – Invitation Required (“Brand Experience Events”)

This is a new category of events which will be extremely helpful for supplier marketing and promotions in New York. The advisory refers to these as “brand experience” events that are “much larger” than bar spend events. At a brand experience event, a supplier can spend up to $10,000 (plus 20% tip), and may purchase alcoholic beverages, non-alcoholic beverages and food. A supplier can also apply to the SLA for advance permission to spend more than $10,000 for an event. A supplier can have up to six such events per retailer per year (whether the event is at a retail premises or whether a retailer caters the event, as catering permits in New York are only held by on premise licensees). Attendees at these events must be invited and an event can be restricted to invitees only. A supplier can invite people individually (by phone, letter, e-mail, in person, etc.), or can also place media advertisements including invitations, generic communications inviting anyone who wishes to attend to register, and “mailing lists” of consumers. A supplier can advertise brand experience events, including date, time and location. Each person registered as an invitee may bring one guest. A supplier must maintain a record of each event for two years that includes date, time, location and duration, brands that were purchased, and names of supplier reps or agents who conducted the event.

Events Where the Supplier or Wholesaler Provides the Alcoholic Beverages

In a very helpful clarification, the new advisory notes that it is only intended to cover occasions where a supplier is purchasing alcoholic beverages from a retailer. It goes on to discuss the fact that a supplier may provide alcoholic beverages for an event without being bound to any of the above exceptions.  Specifically:

- Not-for-profit organizations

A supplier may donate product to a not-for-profit organization for an event which the not-for-profit organization is conducting, either at licensed premises or at an unlicensed location with a permit from the SLA. A supplier can also receive promotional benefits in exchange for the donation to the organization. The only real restriction is that a supplier cannot choose the retailer for the event. The new advisory does not use the same restrictive “bona fide charitable organization” language used in the tasting advisory published in July, 2013. It appears that non-charitable not-for-profit organizations qualify for these events.

- Private/Brand Experience events at unlicensed locations

The new advisory allows a supplier to conduct a private invitation-only event or a brand experience event at an unlicensed location and to provide the alcoholic beverages for that event without having to fit into one of the four event types above. Note that any unused alcoholic beverages must be removed by a supplier after any event under this section.

An appropriate permit must be in place for these events. This means that a supplier should use a retail licensee caterer for such events at this stage. We anticipate a new supplier event permit will available in the future.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Brewing Beer in California

April 14th, 2014

With the explosive growth in craft beers and micro and nano and other really, really small breweries, we at Strike & Techel wanted to put together some helpful tips for anyone looking to brew beer in the state. If you want to make beer commercially, these guidelines will help you work out the best way to start your new business. You will find three ways to get going in the guidelines: small beer manufacturing, beer manufacturing (over 60,000 barrels of beer), and brewpub operations where you get to brew beer and sell it to people in a restaurant or pub setting.

Contact one of the attorneys at Strike & Techel if you have questions about brewing beer in California or other states.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Nevada Signals Intention to More Actively Monitor Trade Practices

March 5th, 2014

Almost three years ago now, as reported on Imbiblog here, the TTB accepted its largest set of offers in compromise ever, for trade practices violations. Some of the biggest names in the business agreed to pay hundreds of thousands of dollars to the TTB even though they denied violating any laws or regulations. The allegations of trade practice violations came from participation by the companies in the 2008-2009 Harrah’s Nationwide Beverage Program. Unlike notable earlier trade practice investigations by the TTB, where there was state participation and a parallel investigation, there were no allegations made against retailers involved in the program, and no fines or penalties assessed against retailers (see for example the 2004-2009 joint investigation by Illinois and TTB into payments made by suppliers and wholesalers to Sam’s Wine & Spirits, Inc., then the largest wine retailer in the country, and its captive third party marketing organization Skyline Marketing, Inc.). The 2011 settlement by TTB was acknowledged to result from a retailer-initiated promotional program. Given that the TTB has extremely limited jurisdiction over alcohol retailers, however, the agency was unable to enforce any allegations against Harrah’s for the promotion. Had the State of Nevada participated in the investigation, it is more likely that charges could have been brought.

Now, the Office of the Attorney-General in Nevada has come out with an open letter to retailers, wholesalers and suppliers of liquor in Nevada in what appears to signal an intention to focus more attention on trade practice issues in the State. The advice contained in the letter is phrased as a “reminder” to the industry of prohibited and restricted activities. It covers the following issues:

-          No loans from wholesalers to retailers of money or other thing of value, no investments by a wholesaler in a retailer, no complimentary furnishing of premises or equipment, and no joint operation of a retail business;

-          Adherence to strict payment terms, with no preference accorded by wholesalers to certain retailers, and with a cessation of sales and monthly service charges in case of delinquency;

-          No substitution of brands without consent, and no delivery of unwanted or unnecessary inventory;

-          No required boycotts of other suppliers;

-          No price fixing down the supply chain by suppliers imposing resale prices on wholesalers, and no profit splitting with the supplier getting a specified portion of the wholesaler’s profit margin;

-          No excessive marketing contributions being required by suppliers of their wholesalers, for promotions outside the wholesaler’s market or beyond the terms agreed by the parties;

-          Strict adherence to the quoted price from suppliers to wholesalers;

-          No discrimination by suppliers among wholesalers (note that Nevada has a franchise law meaning that this refers to discrimination between wholesalers in different parts of the state as only one wholesaler can be appointed in any given market); and,

-          No deceptive trade practices.

The letter refers to concerns with illegal terms or incentives by industry members looking for a competitive edge in the market. It notes that the Attorney General has jurisdiction over these issues and is required by law to take appropriate legal action to enforce the provisions of law setting forth the restrictions above. The Attorney General’s office recognizes in the letter its duty to investigate and prosecute deceptive trade practices in Nevada. Should the type of circumstances in the TTB’s investigation in 2011 arise again, it will be very interesting to see what action is taken by the state in light of this clear signal that it is unlikely to sit by if unlawful trade practices occur in Nevada.

If you have any questions about trade practice issues, in Nevada or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Tennessee House of Representatives Overwhelmingly Passes Wine in Grocery Stores Bill

February 24th, 2014

Last Thursday, the Tennessee House of Representatives passed House Bill 610 by a vote of 71-15, voting to allow the issue of the sale of wine in grocery stores to be submitted to voters in local referendums, and creating a permit for the sale of wine by grocery stores. On January 30, the Senate had approved Senate Bill 837 by a vote of 23-8. The Bill will now be returned to the Senate to review the remaining differences between the two bills, before it goes to the Governor for signature. If signed by the Governor, it is anticipated that the issue could be on local November ballots for consumers to weigh in on local approval of grocery store wine sales.

One of the key differences between the two bills was fixed by the House in its new version, with the reduction of minimum size for grocery and convenience stores from 2,000 to 1,200 square feet, allowing about 500 more convenience stores to qualify. The House also reduced the fee for a grocery store wine license to $1,250 from $2,000, bringing it closer to the $850 in the Senate Bill. Already, following the House vote, Sen. Bill Ketron, the Republican who sponsored the Senate Bill, indicated to reporters that he planned to accept the House version and could ask for a vote as soon as March 3.

Even if approved, wine sales won’t be possible in grocery locations until summer 2016 due to an agreement reached with lobbies for liquor stores and wholesalers that had opposed the proposals. In another concession to liquor stores, both bills open up opportunities for traditional liquor stores to sell items other than alcohol and to do so as soon as this summer, two years before any grocery store wine sales could begin. Liquor stores are currently allowed to sell only wine and distilled spirits and a few minor accessories like corkscrews. Additionally, grocery stores would be subject to a minimum 20% markup on wines sold, in an attempt to address volume discounting, and would be prevented from offering combined deals of wine and other grocery items. To encourage wholesaler support, the Senate Bill allows for wholesalers to be located outside the four major cities in the state which they are currently restricted to, and the House Bill would extend that even further to any county which currently permits bars or liquor stores to operate. Blue laws, preventing Sunday sales of alcohol, will not be affected by any new legislation, and such sales will continue to be prohibited.

The debate in Tennessee has been ongoing since 2006. It is not the only state which has been discussing this issue as we previously blogged here. Currently, thirty-five states do not restrict the sale of wine in grocery stores. No state has managed to pass legislation changing the status quo since Iowa permitted grocery store sales in 1985. Factions in New York, now the second largest wine-producing state by volume, have attempted to pass wine in grocery store bills on numerous occasions, including a significant push in 2011. The Kansas House Commerce, Labor and Economic Development Committee held a hearing Wednesday on House Bill 2556 which would allow the sale of full strength beer and wine in grocery stores, inducing vigorous debate. A bill introduced to the Oklahoma Legislature this month, which would permit wine to be sold in grocery stores and nonalcoholic beverages and refrigerated beer and wine to be sold in liquor stores, died in Committee. And last month, a federal appeals court in Kentucky ruled that the state’s ban on grocery store sales of wine and liquor was constitutional. The court said that the state had every right to ban such sales, “just as a parent can reduce a child’s access to liquor.” The grocers who filed the original challenge to the law are reviewing rehearing and appeal options now.

If you have any questions about where wine can be sold, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Kate Hardy Joins Strike & Techel!

February 12th, 2014

We are pleased to announce that Kate Hardy has joined the firm as a partner. Kate joins Strike & Techel from Nixon Peabody LLP’s Beverage Alcohol Group. Previously, Kate spent four years as manager of the Economy and Law Commission for the International Organization of Wine and Vine (OIV) in Paris, preceded by years of law practice in Australia. We are thrilled to add Kate to the Strike & Techel team!

Kate’s many years of beverage industry experience will be invaluable to wineries, breweries, distillers, suppliers, importers, distributors, retailers, ecommerce providers and other industry members that make up the diverse Strike & Techel client base. To learn more about Kate and the firm, visit strikeandtechel.com.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

TTB Updates its Position on Gluten-Free Label Claims

February 11th, 2014

On Tuesday, the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) issued an Announcement regarding its treatment of “gluten-free” claims on alcoholic beverage labels. As we previously blogged here, TTB has been looking into the issue of gluten-free labeling since at least 2012, and TTB Ruling 2012-2 implemented a policy of allowing the term “gluten-free” only on the labels of products that are produced without any ingredients that contain gluten. For products made from gluten-containing materials, the 2012 Ruling implemented several requirements, including: a) a statement that the product is “Processed or Treated or Crafted to remove gluten;” b) a qualifying statement to inform consumers that (i) the product was made from a grain that contains gluten, (ii) there is currently no valid test to verify the gluten content of fermented products, and (iii) the finished product may contain gluten; and, c) a detailed description of the method used to remove gluten from the product.

TTB explains in its most recent announcement that it has finished its review of the FDA’s rule on gluten-free labeling, and has updated its requirements accordingly. TTB will continue to allow the term “gluten-free” only on the labels of products that are produced without any ingredients that contain gluten. However, for products made from gluten-containing materials, TTB has lessened the labeling requirements, and now provides that such products may be labeled with a statement that the product was “processed, “treated” or “crafted” to remove gluten, if that claim “is made together with a qualifying statement that warns the consumer that the gluten content of the product cannot be determined and that the product may contain gluten.” Labels no longer require a detailed description of the method used to remove gluten from the product.

If you have any questions about alcoholic beverage labeling, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Dan Kramer Featured in The San Francisco Examiner!

February 3rd, 2014

Strike & Techel’s own Dan Kramer was featured in an article in Sunday’s San Francisco Examiner. Dan was interviewed for the article “Want to be in the booze business in SF? Better know the law” in which he discusses his experience in the alcoholic beverage industry, including the complications and expenses of obtaining a retail license in San Francisco, California promotional issues, as well as distribution and direct shipping. As Dan pointed out, alcoholic beverage legal issues can not only be complicated, but they are often not on people’s radar as they venture into the industry. If you’re just getting started in the industry or have any questions about retail licensing, distribution, direct shipping, or just about anything else in the industry, call Dan or one of the other attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved