New Marketing Model for New York – Lot 18 and the NYSLA

On April 23, the New York State Liquor Authority held a hearing on Lot 18’s request for declaratory ruling on (as worded in the request for ruling), the “validity of using nationally recognized marketing companies to market wine clubs in New York State, which are offered for sale by a New York State licensed package store.”  The hearing was interesting and informative for anyone in the business of marketing wine to NY consumers. Lot 18 told the NYSLA in the hearing that it has secured a NY retail package store license (and location) and plans to provide product and fulfill orders for third party marketers, including the Forbes wine club.    As a licensed retailer, Lot 18 will be doing most of the work in connection with the Forbes Wine Club orders (accepting the orders, taking the consumer’s payment, customer service, and making the delivery arrangements).  Lot 18 will be purchasing the inventory for the Forbes Wine Club in advance of taking customer orders.

Based on the comments and questions by the SLA Board members at the meeting (most questions were friendly and the approach was approving), it appears likely that the SLA will approve Lot 18’s model as presented.

During the meeting representatives of other NY package stores spoke, or rather, aired their grievances regarding the Lot 18 model.  Most of the remarks addressed the concern that if third party marketing entities were allowed to utilize the services of a NY retailer,  the perceived result would be the lack of a “level playing field” for regular retailers (regular retailers being, in this case, those who do not affiliate themselves with third party marketing entities).  The NY retailers also voiced concern that they wouldn’t have access to the same products that were being sold by Lot 18 for the Forbes club. Lot 18 responded that about 40% of their products are true private labels (owned by Lot 18), which can be lawfully restricted to Lot 18.  The other 60% would be available to other retailers through the NY wholesale system.

In response to the accusations that Lot 18 is not a bona fide retailer since its store is only 800 square feet and only open 30 hours a week, Chairman Rosen observed that the SLA had held two public hearings on Lot 18’s license application, and that after investigation, the SLA does in fact consider Lot 18 to be a bona fide retailer.  Chairman Rosen also noted that the SLA has no policy against just in time inventory models.

Chairman Rosen mentioned that the SLA has been receiving complaints that the agency is not  offering more guidance regarding the subject of Internet marketing, unlike – for example – the CA ABC, with its 2011 Advisory.  Chairman Rosen pointed out that the SLA’s declaratory ruling on ShipCompliant was lengthy, offered good guidance, and that rather than having strict parameters, using the “rule of reason” is a better method by which to evaluate Internet marketing programs.  This observation comported with H&C’s blog post following the ShipCompliant hearing making the same point.

The next event will be the Wine Cellar’s hearing on its similar request for declaratory ruling, which has been rescheduled for June 4.