California Grocers Association v. ABC, Part 2: California Appeals Court Vacates ABC’s Adoption of a Trade Advisory That Correctly Guided Licensee Conduct

In Part 1 of this blog post, we reported on a September 19th case from the CA District Court of Appeal (DCA) finding that sales of alcoholic beverages could not be made from any checkout stands operated by customers.  See Cal. Grocers Ass'n v. Dep't of Alcoholic Beverage Control, C070375, 2013 WL 5278729 (Sept. 19, 2013). The California Grocers Association (CGA) challenged the CA ABC industry advisory interpreting Business and Professions Code Section 23394.7, which prohibited sales of alcohol from customer-operated checkout stands.

The Trade Advisory at issue interpreted the section to mean that no alcohol could be sold through any checkout stand that the customer operated at any point during the check-out process.  While the DCA agreed with the CA ABC’s interpretation, it also found that the advisory was invalid and violated the APA’s rulemaking requirement for public notice and comment, because “the interpretation is more than a simple paraphrase of section 23394.7.” Id. at *7.

This case thus calls into question whether or not industry members can rely on any CA ABC Trade Advisory that reaches interpretive conclusions about permitted and non-permitted activity and that are adopted without going through the APA rule-making process.

The legacy of this case thus may be more troubling in the long run than the prohibition on self-checkout, because the CA ABC has adopted dozens of Trade Advisories over the last decade interpreting new and complex statutes and policies, from contests, sweepstakes and autographs, to gambling, direct shipping and third party marketing.  For this reason, the CA ABC itself may appeal this case in order to protect the agency’s ability to use advisories to set compliance policies without having to go through the very time-consuming APA rule-making process; which includes public notice, public comment and extensive public hearings.

Hinman & Carmichael LLP lawyers are available should you need assistance complying with Section 23394.7 or with any ABC Trade Advisory.