ABC Launches New Online Portal for Mandatory Alcohol Beverage Server Training
The California Department of Alcoholic Beverage Control (ABC) has launched a new Responsible Beverage Service (RBS) portal to provide mandatory alcohol beverage service training and certification.
Under the Responsible Beverage Services Training Act, starting on July 1, 2022, all California licensees with on-premise consumption privileges (including bars, restaurants, and wineries, breweries, and distilleries with tasting rooms) must require all alcohol beverage servers and managers to attend responsible beverage service training. All servers and managers in licensees’ employment as of July 1, 2022, must attend this training and pass an online RBS exam by August 30, 2022. If any servers or managers were hired after July 1, 2022, then they must attend training and pass the RBS exam within 60 days after their hire date.
The ABC designed the RBS portal to be a one-stop shop for servers, managers, licensees, and RBS trainers and provides customized access based on user roles. Servers and managers can use the RBS portal to register as servers with the ABC, search for approved training providers, and, after completing training, take an alcohol server certification exam on the RBS portal. Licensees can soon use the RBS portal to confirm server certification and maintain online records. In addition, prospective RBS trainers who will provide training to servers on safe and responsible beverage service can submit their applications using the RBS portal.
The purpose of the mandatory training is to provide licensees, servers, and managers with tools and knowledge to promote responsible consumption and community safety and to reduce underage drinking, including by educating trainees on alcohol beverage control laws and on the impact of alcohol on the body.
All licensees with on-sale privileges should become familiar with the RBS portal and begin preparing their servers and managers to meet the training and certification deadlines above. Although the RBS training does not become mandatory until July 1, 2022, servers may use the RBS portal to search for RBS training providers and take the online certification exam now. There is no harm in fulfilling RBS training and certification requirements before July 1, 2022, so servers may want to register and complete their requirements on the RBS portal sooner rather than later. The RBS portal is available here. For any specific questions, please reach out to Bahaneh Hobel (Head of Alcohol Beverage Law) or Michael Mercurio (Law Clerk).
A Bridge too Far for Granholm? Florida Importer Challenges California Three-Tier System
A Florida-based wine importer is hoping to shake up the California three-tier system. If successful, any importer or wholesaler in the U.S. may be permitted to sell directly to California retailers.
Earlier this year, Orion Wine Imports, LLC filed a lawsuit against the director of the California Department of Alcoholic Beverage Control arguing that licensed wine importers and wholesalers in California and in other states must be given the same right to sell and deliver wine directly to California-licensed retailers. Orion Wine Imports, LLC v. Applesmith, Case No. 2:18-cv-01721-KJM-DB (E.D. Cal.). Orion argues that, under the U.S. Supreme Court’s decision in Granholm v. Heald, state laws that discriminate against out-of-state importers and wholesalers are unconstitutional.
This argument may sound familiar. In Granholm, the Court invalidated state direct-to-consumer shipping laws that discriminated against out-of-state producers. Since then, a number of lawsuits have been filed arguing that the Granholm holding should also apply to laws that discriminate against out-of-state retailers. As we reported a few weeks ago, the Supreme Court will be hearing a case that may answer that question.
Defendant in the Orion case is likely to argue that applying Granholm to the wholesale tier is a bridge too far. Plaintiff’s are looking to invalidate long-standing provisions of the state’s three-tier licensing structure. The challenged statutes, adopted by the California legislature in 1953 as part of the state’s post-Prohibition codification of the Alcoholic Beverage Control Act, are core to the establishment of the state’s three-tier system.
Orion is also facing opposition from its fellow wholesalers. Two industry trade associations, California Beer and Beverage Distributors and the Wine and Spirits Wholesalers of California, have filed an amicus brief in support of defendant’s position.
The court has scheduled a December 21, 2018 hearing in Sacramento on defendant’s motion to dismiss.
For more information regarding the three-tier system, please contact John Trinidad.
California Tied House Law Upheld by Federal Appeals Court
An en banc panel of the U.S. Court of Appeal for the Ninth Circuit (the federal appeals court with jurisdiction for the nine western states) has rejected a First Amendment challenge to California’s tied house laws. In so doing, the court overturned an earlier decision by a three-judge panel that had applied a more rigorous standard for regulations that restrict commercial speech and, thereby, raised questions about the state’s ability to enforce certain laws that restrict supplier-sponsored advertisements at alcohol beverage retail premises. The case is Retail Digital Network v. Prieto, Case No. 13-56069 (9th Cir. June 14, 2017).
The case involved a company, Retail Digital Network (“RDN”), that installed and operated digital displays in wine and spirit retail stores. RDN sold advertising space on those displays to companies, and RDN shared a portion of its advertising revenue with retail stores. Alcohol beverage manufacturers were wary of buying advertising on the RDN displays in light of California ABC Act Section 25503 which prohibits alcohol beverage manufacturers, importers, and wholesalers from “paying money” or providing “anything of value for the privilege of placing or painting a sign or advertisement…on or in any” alcohol beverage retail premises. RDN filed suit, claiming that Section 25503 impermissibly restricted commercial speech in violation of the First Amendment.
The Ninth Circuit concluded that Section 25503 did not violate the First Amendment, holding in pertinent part that the regulation directly advances the government’s interest in preventing the undue influence of manufacturers and wholesalers over alcohol beverage retailers, and that the regulation was not more extensive than necessary to serve that interest.
If you have any questions regarding tied house laws, please contact John Trinidad at [email protected].
New Bill Targets California Alcohol Delivery Services
California lawmakers are considering legislation that would regulate companies offering alcohol delivery services, such as Instacart and Drizly.
Senate Bill 254 stops short of requiring “delivery network services” from obtaining a license from the Department of Alcoholic Beverage Control (“ABC”), but does require that the ABC review and approve of their “system” before they engage in alcohol deliveries. The delivery services company’s “system” would have to meet certain criteria, including ensuring that consumers and delivery personnel were over age 21. If passed, SB 254 would also prevent delivery network services from delivering to locations on college or university campuses.
To date, many of these delivery service companies have adopted models that closely follow the third party provider guidelines issued by the ABC in 2011 and have not had to submit a summary of their system for ABC review. If passed as currently drafted, SB 254 may require these companies to suspend operations until such time as the ABC has reviewed and approved of the company’s system. Also of note, SB 254 does not appear to apply to other third party marketers that do not engage in delivery of alcoholic beverages, but instead forward orders to wineries or retailers who are ultimately responsible for delivery.
For more information on alcohol beverage laws and regulations for third party marketers and delivery services, please contact John Trinidad.
ABC Provides Guidance on Passport Events
On March 4, 2016, the California Department of Alcoholic Beverage Control (“ABC”) published an Industry Advisory providing guidance to licensees, marketing companies and winegrower associations participating in “passport” marketing events.
Most passport events have the same format – consumers purchase an identifiable event glass, wrist band, passport or punch card from a marketing company or winegrower association organizing the event, which provides the consumers access to various experiences and tastings at the premises of participating manufacturer licensees (beer, wine or spirits). The experiences and tastings are then provided to the consumers by the participating manufacturer licensees at their licensed premises to the extent such experiences and tastings are permitted under their existing licenses. So, for example, tastings by wineries, breweries and distilleries as part of such passport events are permissible, since such licensees have the right to conduct such tastings under their licenses (subject to restrictions set forth in the ABC Act). However, Type 17/20 licensees would not be able to provide tastings as part of any such passport event, since such licensees are not permitted to conduct consumer tastings.
While these events have been occurring for many years throughout California, ABC district offices throughout the state were dealing with licensing for these events in different and inconsistent ways (i.e., if a license was required at all, if one license could cover the whole event at all locations, if a separate license was required at each location, etc.). As such, ABC provided the Passport Event Guidelines which set forth the conditions under which these events can be held without a license.
In order for a marketing agency or a winegrower association to organize a Passport Event without obtaining its own ABC license(s) for the event, the Passport Event has to satisfy all of the following requirements:
- The marketing organization or winegrower association is only marketing the event which is actually put on by the participating manufacturers.
- The organization sells only access to the experiences or activities that the manufacturer licensee may lawfully provide free of charge to consumers (such as tastings).
- The manufacturer licensees involved are doing no more than providing tastes of wine, beer, or distilled spirits to participating consumers under the authority of their license (which allows such manufacturer licensee to give or sell such tastes).
- There is no commingling of funds or sharing of revenue between the marketing organization and manufacturer licensee (i.e., all proceeds for the sale of the passport go to the organization, and revenue from sales of alcoholic beverages to consumers separate and apart from the tastes given during the marketing event are not shared with the marketing organization).
Events that fall outside of these parameters will require a license for the marketing company (if a license is even possible under the ABC Act), or the nonprofit winegrower association. Thus, for example, Passport Events that include a gala dinner or tasting event where wines from multiple wineries are being poured at one location will require a temporary daily license held by the event organizer. Or, where the tickets being sold by the organization include alcohol (in excess of the “tastings” permitted at a licensed manufacturer’s premises under the ABC Act), a temporary daily license will be required. Note that because not all organizations are eligible for temporary daily licenses under the ABC Act (as such licenses are typically limited to nonprofit or other charitable organizations), event organizers should contact counsel or the ABC while organizing their event to determine if a license, if required, is even available to the event organizer.
For more information on licensing and other questions related to passport or other events at licensed premises, please contact Bahaneh Hobel, Partner in DP&F’s alcohol beverage law group, or Katy Barfield, Associate in DP&F’s alcohol beverage law group.
New Law Amends California Tied-House Law
Governor Jerry Brown has signed AB 780, a law which helps clarify the rules that permit an alcohol beverage producer, importer, or wholesaler (collectively, a “supplier”) to list or mention on- and off- premise retailers in supplier-sponsored advertising, including supplier websites and social media channels. As described in more detail below, the new law is fairly limited, and does not give suppliers carte blanche to begin mentioning retailers in their social media posts.
State alcohol beverage law prohibits suppliers from providing retailers with “things of value.” These “tied-house” restrictions are generally aimed at preventing undue influence by suppliers over retailers. The ABC Act, however, also contains numerous exceptions to tied-house laws. For example, ABC Act Sections 25500.1 and 25502.1 allow suppliers to list certain information such as the address, phone number, email address and website address of two or more unaffiliated retailers so long as the listing (1) is made in response to a direct consumer inquiry, (2) does not contain the product’s retail price, and (3) is made by, produced by, or paid for exclusively by the supplier.
AB 780 amends these tied-house exceptions that pertain to on- and off-premise retailer listings. Here are a few key things that AB 780 will do when it goes into effect on January 1, 2016.
- Creates one set of rules for producer’s listing of on- and off- premise retailers . Previously, the ABC Act had two different rules that governed supplier listings of retailers: on-premise retailer listings were governed by ABC Act Sec. 25500.1, and off-premise retailer listings were governed by Sec 25502.1. AB 780 repeals 25502.1 and consolidates rules governing on- and off- premise retailer listings into Section 25500.1, meaning that there is now one set of rules that governs retailer listings.
- Impact. Under current law, a supplier listing of on-premise retailers could include the “names, addresses, telephone numbers, email addresses, or Internet Web site addresses, or other electronic media” of those retailers. The law governing listings of off-premise retailers did not include the “other electronic media” language. Thus, current law could be interpreted to prohibit a supplier from including the Twitter handle of an off-premise retailer in a listing because the handle may be considered “other electronic media” of the retailer. Once AB 780 goes into effect, the listing of on- and off-premise retailers’ “other electronic media” is allowed so long as the other requirements of Sec 25500.1 are met.
- Deletes language requiring customer inquiry for retailer listing. Under the ABC Act, any listing of a retailer could only be made “in response to a direct inquiry from a consumer.” AB 780 eliminates this requirement.
- Impact. The current law could be interpreted as prohibiting a producer from issuing a social media post (such as a tweet) listing two or more twitter handles of on-premise retailers unless it was in direct response (and potentially in a direct message not viewable by the general public) to a consumer inquiry. AB 780 would allow such a post, whether or not it was in direct response to a consumer, provided that all other requirements are met.
- Continues to restrict the type of listing allowed. Once amended. Section 25500.1 will continue to prohibit any supplier sponsored listing from referring to only one retailer or listing the retail price of the product. In addition, the listings must be made, produced, or paid for exclusively by the supplier.
- Impact. Suppliers should familiarize themselves with the limitations contained in Section 25500.1.
- Does not change rules governing events at retailer locations. AB 780 does not alter the sections of the ABC Act that govern the promotion of producer events at retailer locations, such as ABC Act Sec. 25503.4 (regarding winegrower instructional events).
- Impact. Suppliers wishing to promote upcoming events at on-premise retailer must continue to follow the applicable rules for events, which may be more restrictive than the amended Sec. 25500.1. For example, under ABC Act 25503.4, a winemaker instructional event held at a retailer cannot include laudatory statements about the retailer, nor can they include pictures of the retailer.
Finally, suppliers should keep in mind that the adoption of AB 780 does not repeal state tied-house laws and that it is still generally impermissible for a producer to provide a “thing of value” (such as free advertising) to a retailer, absent an explicit exception in the ABC Act. AB 780 simply clarifies one exception to the state’s tied-house laws by declaring that certain listings of retailers are not considered “things of value.”
For more information or assistance on alcohol beverage advertising, social media, and tied house laws, contact John Trinidad ([email protected]).
This post is made available for general informational purposes only and none of the information provided should be considered to constitute legal advice.
5 Tips for Alcohol Beverage Suppliers Participating in Events & Festivals
Festival season approaches, and many promoters reach out to supplier-side licensees (including wineries and breweries) asking them to participate in or sponsor such events. Here are five important tips to keep in mind when participating in, or deciding whether to participate in, such events held in California:
1) Make sure your sponsorship is legal.
Who? California ABC Act has strict provisions that govern alcohol supplier’s ability to sponsor events. In general sponsorships by suppliers are only permitted where (1) the sponsorship is of a nonprofit organization that will be holding the ABC license for the event (so long as the event does not benefit a permanent retail licensee); (2) the sponsorship is of a contest, race, tournament, and other similar activity and where the sponsorship is only in the form of “monetary payments to bona fide amateur or professional organizations established for the encouragement and promotion of the activities involved”; or (3) where there is an exception in the ABC Act that specifically allows the sponsorship of a certain entity or at a certain venue.
What? The ABC Act defines what types of sponsorship are permitted and how the sponsorships can be funded. For example, sponsorships of nonprofits can be accomplished with both monetary payments and/or the donation of goods or services (such as the donation of wine or assistance of the nonprofit at the event), whereas sponsorships of certain organizations at contests or races described in item 2 above are limited to only monetary payments.
How? The ABC Act details how sponsorships can be structured and what can be included. For example, most sponsorships cannot require or be tied to the purchase or sale of any alcoholic beverages and cannot require that the sponsor’s products be exclusively served at a venue. As noted above, there may be specific exceptions based on the event or venue in the ABC Act and these must be considered.
2) Make sure the correct entity holds the ABC license.
If the sponsorship is of a event being held by a nonprofit, the nonprofit should be obtaining a temporary one day (or multiple day) license for the event. If the sponsorship is of another entity specifically permitted by the ABC Act (as noted above), then that entity or a licensed concessionaire typically will hold the license.
3) Make sure all sales are being made by the license holder for the event.
All sales of alcoholic beverages at festivals or events must be made by the license holder for the event. If a supplier (such as a winery or brewery) is permitted to participate at the event by pouring or educating consumers on the products (for example, at a nonprofit event or where such participation is specifically permitted by the ABC Act), that supplier is not permitted to make any sales at the event. Order forms can be filled out, but all sales and order processing must be completed back at the supplier’s licensed premises. No sales on an Ipad or other mobile device are permitted.
4) Make sure that your presence at, and participation in, the event itself is permitted.
The ABC Act contains very strict rules regarding the ability of a supplier to advertise and participate at events. Suppliers needs to ensure that both their presence and activities at the event (pouring, educating consumers, providing tastings, etc.) and all of their advertising at and about the event (banners, signs, etc.) are in full compliance with the ABC Act.
Typically, suppliers such as wineries and breweries are only permitted to pour, participate and have signage at events where the event is being held by the nonprofit and they are simply assisting the nonprofit. Such participation and signage may be permitted at contest/races or where there is a specific code exception allowing the sponsorship, but that must be determined on a case by case basis. Supplier participation and signage at events held at retail locations (such as restaurants and bars) need to be given careful consideration, since they are only permitted under very limited circumstances.
Note that the type of license held (whether it’s a nonprofit license versus a retail concessionaire license) will impact the rights of the supplier at the event itself and should be carefully considered.
5) Make sure you are complying at all times with your obligations as a licensee.
Suppliers sponsoring an event are still required to comply with all of their obligations as a licensee. For example, this means that no free goods can be given away unless explicitly otherwise permitted by the ABC Act. So, while donations to a nonprofit are permitted, donations to other entities are not unless specifically permitted by the Act. And while giveaways of consumer advertising specialties (as limited by the ABC Act) may be permitted, other free goods typically are not. You should also ensure that no payments, donations or advertisements made in connection with the sponsorship that would violate the tied-house laws.
Sponsorships and events are extremely complicated and the points above are just the “tip” of the iceberg when it comes to the issues that need to be considered by suppliers.
New Bill to Aid Private Equity Firms Applying for ABC License
The California Senate Committee on Governmental Organization is considering a bill to streamline the process for qualification of private equity firms seeking to hold an interest in a state alcohol beverage license. SB 796 would add Section 23405.4 to the California Business and Professions Code, which would allow a private equity fund to hold a license and avoid having each and every investor of that fund qualified so long as certain conditions are met. Those conditions are:
- The fund holds a passive interest, meaning that neither the fund nor any manager, employee or agent of the fund has any management, control, or involvement in the licensed business;
- The fund advisors are registered under the federal Investment Advisors Act, and the fund advisors are subject to Section 275.204(b)-1 of Title 17 of the Code of Federal Regulations;
- No investor holds more than 10% interest — directly or indirectly — in the fund; and
- No investor has direct or indirect control over the investment decisions of the fund.
Although the investors of the fund need not be qualified under the new regulation, the Department of Alcoholic Beverage Control (“ABC”) may require the fund manager to execute an affidavit to confirm compliance with these requirements.
The proposed regulation does not apply to hedge funds, liquidity funds, real estate funds, secured asset funds, and venture capital funds.
Although the fund investors need not each individually submit detailed material and fingerprints in order for the fund to qualify for a license, the regulation specifically states:
“This section is not intended to allow a person, by reason of his or her investment in a private equity fund, to hold an interest in a license issued by the department if that interest is not otherwise permitted under this division.”
In other words, it appears that proposed legislation would bar a private equity fund from qualifying for an alcohol beverage license if any of its investors, for example, holds a disqualifying tied-house interest in another alcohol beverage license.
The full text of SB 796 as introduced on March 12, 2015 can be found here.
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.
Earthquake-Related Info from ABC & TTB
Both the California Department of Alcoholic Beverage Control (“ABC”) and the Department of Treasury’s Alcohol and Tobacco Tax and Trade Bureau (“TTB”) have made information available on their websites for alcohol beverage businesses (including producers, wholesalers, and retailers) seeking earthquake related information. Here are links to those bulletins:
Some of the highlights:
- Under the ABC Act, any producer or wholesaler whose premises have been destroyed by an “act of God” may carry on its business for up to six months at a location within 500 feet of the licensed premises. A representative from the Governor’s office has stated that if a demand is identified, the 500-foot limitation may also be waived.
- There is no fee for transferring a license from one premise to another if the originally licensed premise was destroyed by an“act of God” and the new premise is located in the same county. Cal. Bus. & Prof. Code Sec. 24082.
- Over the next three months, alcohol beverage suppliers (producers and wholesalers, or any officer or agent of such businesses) may give, lend, or sell equipment, fixtures, or supplies other than alcohol beverages to any retailer that has suffered losses or damages as a result of the earthquake. This exception to tied house law is found in Cal. Bus. & Prof. Code Sec. 25511
- Although typically businesses must report any casualty loss immediately to TTB, TTB has relaxed that rule, but is encouraging business to report losses “as soon as they are able to determine the extent of the damage to their inventories.”
- Alcohol Beverage retailers, wholesalers, importers and producers may eligible for a refund of the federal excise taxes paid on lost alcohol beverage products. For more information go to When Disaster Strikes. http://www.ttb.gov/public_info/120068_disaster2005.shtml
- TTB will consider waiving late filing, payment or deposit penalties for those that have been directly affected by the earthquake.
New California Law Allows Wine Tastings at Farmers’ Markets
On July 8, 2014, Governor Jerry Brown signed a bill allowing state licensed winegrowers (Type 02 license holders) to host “instructional tasting events” at certified state farmers’ markets. The bill (AB 2488) passed the Senate last month and had the support of the Wine Institute and Family Winemakers of California.
Prior to the law’s passage, a Type 02 licensed winegrower could apply for a “Certified Farmers’ Market Sales Permit” (Type 79) which would allow the winegrower to sell wine at farmers’ markets, so long as the wine was (a) produced entirely from grapes grown by the licensee and (b) bottled by the licensee.
Under the new law, Certified Farmers’ Market Sales Permit holders may host an “instructional tasting event” under certain circumstances.
- The operator of the certified farmers’ market must approve the event;
- The event must be conducted by either the licensee, a member of licensee’s family, or an employee of licensee;
- The area for the event must be separated from the remainder of the market by some permanent or temporary barrier (wall, rope, cable, etc.);
- Tasting is limited to three ounces of wine per person per day; and
- No open container of wine may leave the instructional tasting area.
Under Proposed Bill, California ABC Would Regulate Medical Marijuana
A bill recently introduced by state assembly member Tom Ammiano in the California State Assembly (AB 1894) would create a Division of Medical Cannabis Regulation and Enforcement within the state’s Department of Alcoholic Beverage Control. The bill also gives the department the power to create a registration system for persons interested in cultivating, manufacturing, testing, transporting, storing, distributing, and selling medical marijuana within the state.
Should AB1894 pass, and should California voters pass a ballot initiative in 2016 to legalize recreational marijuana, it is highly likely that the state ABC would be in charge of both medical and recreational marijuana regulation.
The State Assembly’s Committee on Public Safety will hold a hearing on AB 1894 on April 22.
Consignment Sales – Don’t Do Them!
As a friendly reminder to all alcoholic beverage industry members, consignment sales of alcoholic beverages are illegal under both California and Federal law. Consignment sales are transactions where title to the alcoholic beverages in question is retained by the seller or where the licensee receiving the alcoholic beverages has the right at any time to return them to the original seller if they don’t sell. However, Section 25503 of the California Business and Professions Code (the “ABC Act”) specifically prohibits consignment sales by manufacturer, winegrowers, manufacturer’s agents, California winegrower’s agents, rectifiers, distillers, bottlers, importers, or wholesalers. Federal law similarly prohibits consignment sales in interstate or foreign commerce. While returns of products are allowed under very specific and enumerated circumstances under the ABC Act, the general rule continues to be that products must be sold in a bona fide sales transaction by the supplier to an authorized licensee and title to the product must pass before that licensee makes a subsequent sale of the product. While consignment sales may still be occurring in the industry, all licensees should remember that the excuse of “other people are doing it” is not a valid defense in the event of an ABC or TTB enforcement action!
Gov. Brown Makes Wine Sweepstakes and Contests Legal in California
SB 778 contains significant restrictions, examples of which are described below. However, it does not contain the restrictive monetary provisions imposed by B&P section 25600 and ABC Rule 106 for “free goods” or “things of value” provided to the consumer. The most significant aspect of the new statutes is the absence of such monetary limits for prizes provided to the consumer in connection with these new marketing tools.
SB 778 addresses two major marketing concepts: contests (a game of skill) and sweepstakes (a game of chance), defined as follows:
B&P Section 25600.1 defines a contest as a game, contest, puzzle, or similar activity that holds out or offers to participants the opportunity to receive or compete for gifts, prizes, gratuities, or other things of value as determined by skill, knowledge, or ability rather than upon random selection.
B&P Section 25600.2 defines a sweepstakes as a procedure, activity, or event for the distribution of anything of value by lot, chance, or random selection where the odds for winning a prize are equal for each entry.
As for restrictions, one key restriction is that which identifies what industry members may participate in, or conduct contests and sweepstakes (referred to as “authorized licensees”).
Sections 25600.1 and 25600.2 both define “authorized licensees” as a winegrower, beer and wine importer general, beer manufacturer, out-of-state beer manufacturer certificate holder, distilled spirits manufacturer, distilled spirits manufacturer’s agent, distilled spirits importer general, distilled spirits general rectifier, rectifier, out-of-state distilled spirits shipper’s certificate holder, brandy manufacturer, and brandy importer.
These authorized licensees may conduct these marketing activities regardless of whether the licensee holds any additional license in conjunction with those defined here. It is imperative that one qualifies as an authorized licensee before entering the consumer contest or sweepstakes arena.
Note that an authorized licensee does not include a beer and wine wholesaler, a beer and wine importer general, or a distilled spirits importer general that only holds a wholesaler’s or retailer’s license as an additional license.
B&P Section 25600.1 restrictions (see below link to statute for additional restrictions and means of contest entry) include:
- Entry into or participation in a contest shall be limited to persons 21 years of age or older.
- Skill, knowledge, or ability does not include the consumption or use of alcoholic beverages.
- Entry or extra chances in a contest shall not be made available via the purchase of an alcoholic beverage.
- No contest shall involve consumption of alcoholic beverages by a participant.
- A contest may not be conducted for the benefit of any permanent retail licensee.
- A contest shall not provide for the instant or immediate awarding of a prize or prizes.
- Instant or immediate notification to the consumer that he or she is a winner is permissible.
- Except for providing a means of entry, a contest authorized by this section shall not be conducted at the premises of a retail licensee or the premises of a winegrower or beer manufacturer operating under a duplicate license for a branch office.
- Alcoholic beverages or anything redeemable for alcoholic beverages shall not be awarded as a contest prize. This shall not prohibit a contest in which the prize is cash or cash equivalent or the awarding of cash or cash equivalent.
- A retail licensee shall not serve as the agent of an authorized licensee by collecting or forwarding entries or awarding prizes to, or redeeming prizes for, a contest winner.
- A licensee that is not an authorized licensee shall not directly or indirectly underwrite, share in, or contribute to, the costs of an authorized contest, or serve as the agent of an authorized licensee to collect or forward entries or to furnish any prize to a contest winner.
Section 25600.2 restrictions (see below link to statute for additional restrictions and means of sweepstakes entry) include:
- No entry fee may be charged to participate in a sweepstakes.
- Entry or extra chances in a sweepstakes shall not be made available via the purchase of an alcoholic beverage.
- Entry into or participation in a sweepstakes shall be limited to persons 21 years of age or older and shall be open to all residents ofCalifornia.
- No sweepstakes shall involve consumption of alcoholic beverages by a participant.
- A sweepstakes may not be conducted for the benefit of any permanent retail license.
Under both statutes, an authorized licensee that violates any provision of sections 25600.1 or 25600.2 in addition to any other penalty imposed may be prohibited by the department from offering a contest or sweepstakes to California residents for a period of 12 months.
FINAL NOTE: Now that these new tools are legal we envision many authorized licensees participating by offering consumer contests and sweepstakes as part of their marketing programs. With that said, be sure you understand the new privileges being given and the many limitations associated with them. We think it is safe to say that ABC as well as your competitors in the industry will be watching closely. As in all cases if you are unsure of how to proceed seek guidance. For more information contact Dickenson, Peatman & Fogarty at [email protected].
Self-Checkout Purchase of Alcohol Still Prohibited Despite California Grocer’s Petition
On January 1, 2012 California Business & Professions Code Section 23394.7 took effect prohibiting the sale of alcoholic beverages at customer-operated checkout stands. On December 23, 2011, prior to the enactment of this provision, the California ABC issued an Industry Advisory providing guidance to retailers in complying with the new law. This was promptly followed on December 28, 2011 by the California Grocer’s Association filing a petition for writ of mandate with the 3rd District Court of Appeal in Sacramento to stay the advisory on the basis it was not a proper interpretation of the law.
While the 3rd District has temporarily stayed the Advisory pending a full hearing on the matter, the law remains in full effect. Historically, ABC has not enforced a statute or rule that is the subject of an appeal or writ. However, it is unclear as to how the ABC may proceed given that, even though the Advisory has been stayed, the underlying law that is the subject of the Advisory remains in full effect. Accordingly, retailers continuing the sale of alcoholic beverages at self-checkout stands do so at their own risk.
For further information or assistance on California ABC matters contact Dickenson, Peatman & Fogarty at [email protected].
California ABC Reverses Position on Third-Party Providers Following Industry Input
Holders of California ABC On-Sale Licenses May Now Infuse Spirits and Wine
New California Direct-to-Consumer Wine License Available January 1, 2012
- Sales are restricted to those solicited and accepted via direct mail, telephone, or the Internet;
- Sales are not conducted from a retail premises open to the public;
- The licensee takes possession of and title to all alcoholic beverages sold by the licensee; and
- All alcoholic beverages sold by the licensee are delivered to the purchaser from the licensee’s licensed premises or from a Type 14 licensed public warehouse.
Current type 17/20 licensees who must make sales to a licensed retailer (under Type 17 license) every 45 days could transition to the new license and conduct consumer-only sales.
For more information or assistance on California ABC matters contact Dickenson, Peatman & Fogarty at [email protected].
California ABC Announces On-Sale Liquor Licenses for Napa County
The California Department of Alcoholic Beverage Control (ABC) announced authorization for the issuance of five (5) original on-sale general liquor licenses for bona fide public eating places in Napa County, as authorized in Section 23826.10 of the Business & Professions Code. These licenses are to be issued only to premises having a seating capacity for 50 or more diners. The fee for a new on-sale general license is $13,800