Groupon and Alcohol Discounts: Do They Mix in California?

The State of Massachusetts ABC recently held that Groupon’s online coupon discounts for alcohol at bars and restaurants run afoul of that state’s ABC regulation regarding happy hours. This case made clear that the many Groupon-type coupon marketing businesses currently in the market need to recognize the regulatory aspect of their offers when alcoholic beverages become part of the mix. Could the State of California ABC reach a conclusion similar to that of Massachusetts? The State of California doesn’t have the same specific “happy hour” restriction as does Massachusetts.  However, these coupon offers could raise other concerns in California under its regulations for alcoholic beverages.
As an example, the California ABC currently has an unresolved issue concerning the compensation of unlicensed third parties from the sale of alcoholic beverages. The assumption is that coupon-marketing businesses are compensated either by a percentage of the sale or by fixed fees which are paid by the participating business. These businesses include ABC licensed retailers, or in some cases manufacturers. If coupons offered to the consumer include alcoholic beverages, these marketing companies could unknowingly fall into this unresolved category of unlicensed third parties. If this were to occur, the unfortunate aspect for the retailers, bars, restaurants and wineries participating in these programs is that California ABC has no administrative authority over unlicensed businesses, only the licensees.  Thus, it would be the licensees that took part in these arrangements who would be prosecuted by ABC.  Therefore, so long as this remains as an unresolved issue with California ABC, there would appear to be some risk for retailers, bars, restaurants and wineries participating in these online coupon programs.
More often than not, marketing companies are simply unaware of the regulatory intricacies surrounding the alcoholic beverage industry, as exhibited in the Massachusetts case. Many of these companies operate with good intention, but just don’t do their homework in the proper arena.  In turn, licensees who take part in these programs assume the programs are legal and comply with the law by the very fact that they exist.  However, when it comes to alcohol beverage regulation, the first rule is to not assume that a practiced activity within the alcoholic beverage industry is an acceptable and compliant one, it is always best to first seek guidance.
Some good news is that California ABC has reached out to industry members, their representatives and other stakeholders to examine these types of issues, as well as numerous others, that have resulted from the evolution of technology and marketing related to alcoholic beverages.  As a result, ABC has created committees which include representative stakeholders to review current industry trends and determine if they can be addressed with the archaic regulations which were established many years before current media capabilities and marketing techniques were ever contemplated. If attempts to fit the new marketing trends within the existing framework of regulations fail, the door will be open to seek legislative remedies to meet the current needs of the industry.  Until then, there remains uncertainty.
For more information please contact Dickenson, Peatman & Fogarty at [email protected].
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