BOOZE RULES OF SOCIAL MEDIA: The Retailer Right to Pay Exception

This is the first in what will be an ongoing series of blog posts called the “Booze Rules of Social Media” so bookmark this blog, and stay tuned.

The California ABC Act is complicated and contains hundreds of exceptions to the regulatory strictures that have been adopted over the course of the last 60 years. Every time a stakeholder with enough clout gets upset about a provision, another bill is introduced to carve out a special privilege, or to create another crime or restriction.  In 1997, the General Counsel of the ABC testified in front of the legislature (in an unsuccessful attempt to encourage reform of the tied-house laws) that there were so many exceptions to the tied house laws that it was almost impossible to navigate them all, much less enforce them. That is even truer today, because none of the exceptions have gone away, and more are created every year, now usually accompanied by byzantine procedures and protocols.

The latest drama in this ongoing saga is the angst created over the course of the last week since the Sacramento Bee and other media covered the story of the ABC accusations against the wineries and breweries who tweeted about the Save-Mart Grape Escape event.  See also http://www.beveragelaw.com/booze-rules/2014/11/10/lions-and-tigers-and-tweets-oh-my.

We have been asked if there is any way that retailers and suppliers can jointly promote their events and products through social media under the statutory scheme as it currently exists. The answer is yes. There are many exceptions that permit the promotion of retailers and of events in the ABC Act, depending on the kind of event being promoted and how the advertising is structured. The Act also contains specific exceptions for certain types of events, which will be the subject of later posts.

But are there any general exceptions that would allow suppliers to include retailers in their social media posts and link to retailers who carry their products or who are having events where their products are available or featured?

The answer is yes, if the retailer pays for that post.

The essence of the crime that the ABC charged in the Grape Escape matter is “free advertising” of a retailer.  Well, if the advertising had NOT been free then the post could have been lawful. The ABC Act is clear that a retailer may pay for “advertising” in any “publication” of a supplier.

Business and Professions Code Section 25500(f) provides:

“Nothing in this division prohibits the holder of any retail on-sale or off-sale license from purchasing, for fair consideration, advertising in any publication published by any manufacturer, winegrower, manufacturer's agent, rectifier, California winegrower's agent, distiller, bottler, importer, or wholesaler, or any person who directly or indirectly holds the ownership of any interest in the premises of the retail licensee.”

This privilege applies to all retailers and all suppliers. Retailers have the right to purchase advertising in any supplier publication as long as the retailer pays “fair consideration” (a subjective test if there ever was one) for the ad. If challenged, the “fair consideration” would need to be proven through records of payment to the “publisher” (in this case the supplier) of the media outlet and proof that the payment was “fair.”  

Is a social media post or mention an advertisement? Yes, according to the friendly folks at the TTB, who have clarified that social media is advertising.  See TTB Industry Circular 2013-01, available at http://www.ttb.gov/industry_circulars/archives/2013/13-01.html

The possibilities for cutting through the tied house restrictions are almost unlimited when one thinks them through. For example, the rules against suppliers making “laudatory” statements about retailers and mentioning the retail prices of the alcoholic beverage do not apply to retailer advertisements (because it’s the retailer being laudatory about its own establishment and advertising its own prices).  So, for example, a retailer could post an ad on a supplier’s Facebook page that extolled the great selection and prices of the supplier’s products in their store, bar or restaurant.  But to establish entitlement to the exception, the post, mention or advertisement must be clearly identified as the retailer’s ad in order to pass muster under Section 25500(f). This would entail some sort of retail disclaimer on the post; perhaps similar to the TTB “responsible advertiser” requirement (See, for example, 27 CFR 4.62(a)).

Would we expect any pushback from the ABC if this exception were more widely used?  While we think it’s possible that the ABC would interpret this provision differently, the statute is very clear that retailers may purchase ads in supplier publications even though suppliers do not enjoy the same privilege in retailer publications. 

The ABC has always said that they just enforce the law as written. Well, this could be their chance. 

WARNING STATEMENT: This post does not constitute legal advice and is intended for informational use and discussion purposes only. Undertake a program like this only after receiving the advice of your counsel and clearing ALL the elements with your counsel.

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