LEX VINI

California Tied House Laws and Social Media

According to a recent article in the Sacramento Bee, the California Department of Alcoholic Beverage Control (“ABC”) recently accused a California winery of violating tied house laws by sending the following tweet:  “Two days till @SaveMart Grape Escape in Downtown #Sacramento!” SaveMart Supermarkets holds a California alcohol beverage retailer license, and the ABC considered the tweet free advertisement given by a supplier to a retailer in violation of California tied house laws.

Tied-house laws are federal and state laws that attempt to prohibit brewers, distillers, winegrowers and other alcohol beverage suppliers from exerting undue influence over retailers.  In theory, such laws minimize the potential for unfair business practices in the industry and protect against social ills such as over-consumption.  Certain tied house laws bar suppliers from providing anything of value (such as a free advertisements) to alcohol beverage retailers. Both federal and state regulators have treated winery websites and social media pages and accounts as advertising platforms, so mentioning retailers on such channels can give rise to tied-house claims.

Federal and state tied-house regulations share the same intent, but their provisions differ greatly.

A.  Federal Tied-house Laws

Under federal tied-house law, it is unlawful for an alcohol beverage manufacturer or supplier to “induce” directly or indirectly, any alcohol beverage retailer (such as a bottle store, bar or restaurant) to purchase any products from that supplier to the “exclusion,” in whole or in part, of other suppliers’ products.  Inducements include, but are not limited to, furnishing, giving, renting, lending, or selling to the retailer anything of value (subject to various exceptions).

A violation of federal law only occurs if the inducement leads to “exclusion.”  Exclusion occurs when a supplier directly or indirectly places retailer independence at risk because of a connection between the supplier and retailer or by any other means of control over the retailer; and where such practice by the supplier-side licensee results in the retailer purchasing less than it would have of a competitor’s product.

B.  California State Tied-house Laws

Under California law, no alcohol beverage manufacturer or supplier may “[f]urnish, give, or lend any money or other thing of value, directly or indirectly, to” an on- or off-premise alcohol beverage retailer.  Unlike federal law, there is no need for there to be actual exclusion for a violation to arise.  Nor does the supplier’s intent play any role in evaluating if a tied house violation has occurred.

Although an advertisement placed by a supplier for a retailer is a “thing of value,” there are certain exceptions to California tied house laws.  For example, supplier advertisements of instructional tasting events held on a retailer’s premise do not violate state tied house law, so long as they adhere to certain restrictions.  See ABC Ac Sec. 25503.4.  Such ads cannot contain the retail price of the wines, any “laudatory references” to the retailer, or any picture or illustrations of the retailer’s premises, and any mention of the retailer must be “relatively inconspicuous in relation to the advertisement as a whole.”

It should be noted, however, that not all states have tied house exception, and before posting information related to a retailer outside of California, wineries should review the tied house provisions of the retailer’s home state.

For more information or assistance on alcohol beverage advertising, social media, and tied house laws, contact John Trinidad (jtrinidad@dpf-law.com).
This post is made available for general informational purposes only and none of the information provided should be considered to constitute legal advice

4 Comments

  • Carin Oliver
    Nov 13, 2014 @ 13:14:22

    Hi John,

    Thanks for posting this. Can you give an example of how a social media post that mentions a retailer could be legal vs. not? The instructional tasting event clause has me intrigued.

    Thanks,

    Carin

    Reply

  • RT this: Winery tweet jeopardizes license | blog3
    Dec 10, 2014 @ 01:41:20

    […] For context, let’s venture back in time. Before Prohibition, brewers frequently owned or controlled some saloons, forcing them to pour and promote only their beers. After Prohibition, laws came into effect to prevent even a whiff of vertical integration–alcohol producers were not even allowed to “induce” retailers or restaurants into pouring their wares with free anything, including advertising. (These laws were called “tied-house laws” and there is a federal version as well as some differing state versions; see a discussion of the variations over on Lex Vini.) […]

    Reply

  • Casey Miles
    Feb 18, 2015 @ 19:52:09

    This is an interesting balance between the spirit of the law and the word of the law. Obviously, when the law was written, the fast communication to broad markets with the use of social media wasn’t a thing. Let’s face it, the tweet was innocent, the laws are outdated, and good people are paying high prices for this broken and antiquated system. It’s time for change! Also, with provisions about allowing producers to actually buy promotion on indoor water skiing events in venues that seat over 3,000 people (yes, it’s that specific… yes it said indoor water skiing in the ABC code) one tends to think that the laws that are there were… well… paid for by private interest. What was the old slogan in law school? Equal for all or not at all?

    Anyhow, to the previous reply; I don’t think you would call it “forcing them” to promote their own beer if they literally owned the retail outlet. That would just be called a business plan and if you own the place, you can sell whatever you want. I think you may have been sold a bum bill of goods about the temperance movement, corruption of the era, and prohibition. For the record, lobbyists (paid people who influence lawmakers) are actually the definition of corruption and illegal in almost every other developed country. We’ve made an industry out of it! I would imagine that was the source of your disinformation, these busted and terribly one-sided laws, and the systemic infection that plagues most of our legislation. IMHO

    Reply

  • Dre
    Apr 07, 2015 @ 10:46:06

    Wineries will frequently host winemaker dinners at restaurants. Is posting about the event on social media a violation of the Tied Laws if there is no “educational” component?

    Reply

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