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.

  1. CBD: An Exciting New Fall Schedule… or Not?
  2. MISSISSIPPI RISING - A VICTORY FOR LEGAL RETAILER TO CONSUMER SALES, AND PASSAGE OF TITLE UNDER THE UNIFORM COMMERCIAL CODE
  3. California ABC's Cannabis Advisory - Not Just for Stoners
  4. NEW CALIFORNIA WARNINGS FOR ALCOHOLIC BEVERAGES AND CANNABIS PRODUCTS TAKE EFFECT AUGUST 30, 2018, NOW INCLUDING ADDENDUM REGARDING 2014 CONSENT AGREEMENT PARTIES AND PARTICIPANTS
  5. National Conference of State Liquor Administrators – The Alcohol Industry gathers in Hawaii to figure out how to enforce the US “Highly Archaic Regulatory Scheme.”
  6. Founder John Hinman Honored with the Raphael House Community Impact Award
  7. ROUTE TO MARKET AND MARKETING RESTRICTIONS - NAVIGATING REGULATORY SYSTEM CONSTRAINTS
  8. Alcohol and Cannabis Ventures: Top 5 Legal Considerations
  9. ATF and TTB: Is Another Divorce on the Horizon? What’s Going on with the Agency?
  10. STRIKE 3 - YOU REALLY ARE OUT! THE ABC'S STRICT APPLICATION OF PENALTIES FOR SALES TO MINORS
  11. TTB Temporarily Fixes Problem with Fulfillment Warehouse Tax Credits - an “Alternate Procedure” for Paying Taxes & Reporting
  12. CUSTOMERS WHO HAVE HAD ONE TOO MANY - THE FREE TRANSPORTATION DILEMMA
  13. The Renaissance of Federal Unfair Trade Practices - Current Issues and Strategies
  14. ‘Twas the week before New Year’s and the ABC is out in Force – Alerts for the Last Week of 2017, including the Limits on Free Rides
  15. Big Bottles, Caviar and a CA Wine Strong Silent Auction for the Holidays!
  16. The FDA and the Wine and Spirits Industry – Surprise inspections anyone?
  17. NORTHERN CALIFORNIA WILDFIRES: UPDATED REGULATORY AGENCY DISASTER RELIEF RESOURCES AT A GLANCE
  18. NORTHERN CALIFORNIA WILDFIRES: REGULATORY AGENCY DISASTER RELIEF RESOURCES AT A GLANCE
  19. Soon to come to your Local Supermarket– Instant Redeemable Coupons of the digital age!
  20. The License Piggyback Dilemma – If it Sounds Too Good to be True, it Probably is
  21. A timely message from our Florida colleagues on the tied house laws, the three-tier system and the need for reform
  22. ABC Declaratory Rulings – A Modest Proposal Whose Time has Come
  23. More on FDA Inspections - Breweries, Distilleries and Questions
  24. WHY THE FDA IS INSPECTING WINERIES
  25. Senate Bill 378—The Proposed Demise of Due Process for Alcohol Licensees
  26. ABC Enforcement - Trends and Predictions
  27. The Corruption Chronicles – Volume One: A New Hope
  28. New Alcohol Delivery Oversight on the Horizon
  29. Michigan: Canary in the DtC Coal Mine?
  30. California ABC and Federal Credit Laws – Active Enforcement and Lots of Questions!
  31. Big Bottles For The Holidays - The Highest Calling Of The Winemaker's Art
  32. FINAL COMMENTS TO TTB NOTICE 160 DUE ON WEDNESDAY DECEMBER 7TH – WE ARE ASKING THE TTB TO EXTEND THE COMMENT PERIOD AGAIN TO ALLOW FOR INDUSTRY NEGOTIATION AND ALIGNMENT OF INTERESTS
  33. SONOMA COUNTY WINERY USE PERMITS, EVENT RESTICTIONS AND DTC
  34. New TTB Labeling Requirement Regulations: Out-of-State Bottling Is Not Created Equal and Consumers Right to Know Where the Grapes in their Wine Come from is Compromised
  35. Isn't A Written Agreement With A Distributor Worthless In A Franchise State?
  36. Crowd Funding for Alcohol Producers and Retailers – Down the Rabbit Hole with the Tied House laws
  37. Everything you ever wanted to know about the BPA Warning Statement but were afraid to ask
  38. AB 2082 - A Hunting License for Police and a Lethal Weapon for Politicians that Deprives Licensees of Currently Available Due Process Rights
  39. “Better Late Than Never”-- Judge in Illinois Dismisses 201 Sales Tax Cases against Retailers
  40. The Day the Music Almost Died: The Story of the BottleRock ABC Accusations, the ABC Appeals Board and a Victory for a Common Sense Interpretation of the Tied House Laws
  41. The Arsenic in Wine Class Action Dismissal – what it means
  42. Counterfeit or Artisanal Mexican Spirits? Pick your Poison, or your lime wedge
  43. Warning - CA ABC enforcement teams are on the prowl this weekend!
  44. RELIEF AT LAST! ILLINOIS MOVES TO FIX THE SALES TAX LAWSUITS AGAINST OUT-OF-STATE SELLERS BUT PROPOSES TO PENALIZE WINERIES AND RETAILERS THAT SHIP WITHOUT PERMITS
  45. The TTB Speaks on Category Management or, be Careful What you Ask for Because you might Get it!
  46. Hinman & Carmichael LLP Announces the Addition of Jeremy Siegel to its team of top beverage law lawyers
  47. 2016 LEGISLATIVE UPDATES: Part IV
  48. 2016 LEGISLATIVE UPDATES: Part III
  49. 2016 LEGISLATIVE UPDATES: Part II
  50. 2016 LEGISLATIVE UPDATES: Part I
  51. Hinman & Carmichael LLP is Hiring!
  52. John Hinman Presents NBI Webinar on Basics of Alcohol Beverage Law
  53. ABC DISMISSES SAVE MART GRAPE ESCAPE ACCUSATION BUT REFUSES TO ADOPT JUDGE’S DECISION FINDING NO STRICT LIABILITY FOR ABC VIOLATIONS
  54. Speakeasies are still with us, and proliferating!
  55. The War for the Soul of Sonoma County – the Winery Working Group Battle
  56. Santa Claus isn’t the only one coming to town this Christmas!
  57. Arizona's Direct to Consumer Shipping Rules - An Exercise in Complexity
  58. AB 780 - Social Media and the ABC: The California Legislative “Fix” that Fails
  59. Illinois Finally Offers Certainty and Relief for Victims of Sales Tax Lawsuits, but Prompt Action is Required in Pending Cases
  60. A Modest Proposal – Adopt the federal rule on Tied-House liability in California
  61. The Grapes Escaped - Why the First Amendment Matters
  62. Appellate Court Ruling Strikes Blow Against State’s Arbitrary Beer Label Ban
  63. Illinois Attorney General's Office Announces Intention to Dismiss False Claims Act Against Liquor Retailers
  64. Commercial Speech And Alcoholic Beverages - Part III
  65. Commercial Speech And Alcoholic Beverages - Part II
  66. Craft Beverages: Social Media Marketing the Effective and Compliant Way
  67. Commercial Speech And Alcoholic Beverages - Part I
  68. A LAYPERSON LOOKS AT ARSENIC IN WINE
  69. The Biggest Retailer in the World vs. the TABC
  70. Rebecca Stamey-White presents Emerging Issues in Wine Law
  71. Top Beverage Alcohol Law Firm Adds and Elevates Partners
  72. Illinois Qui Tam Lawsuits—Private Enforcement Of a State Claim: A Bonanza For A Plaintiff’s Lawyer And A Rip-Off Of Retailers
  73. BOOZE RULES OF SOCIAL MEDIA: The Retailer Right to Pay Exception
  74. LIONS AND TIGERS AND TWEETS, OH MY!
  75. AB 2004: Brewer's Incremental Parity with Wine Makers
  76. Expanding, Proud Of It, and Wanting to Tell the World
  77. DC Weighs in Strongly on Third Party Marketer Delivery Services
  78. “Visual Links” between Beer, Wine and Spirits Labels and Retailers Ruled Unlawful in California — the tied house laws run amok
  79. Hard Cider Legislative Update
  80. New Marketing Model for New York – Lot 18 and the NYSLA
  81. Sweeping Changes in Proposed NYSLA Bill Include Expansion for Craft
  82. Minimum Resale Price Policies - How to Control Price-Cutters
  83. AB 2130 – Gloves Off?
  84. “Gluten-Free” Labels for Wine, Beer and Distilled Spirits. We’re Still Waiting.
  85. AB 1252: Sanitation Overkill?
  86. Growlers: Not Just for Beer Anymore
  87. California Legislative Roundup 2014
  88. Build It and They Will Come: Craft Products Get New Privileges in CA and TX
  89. AB 1128: Veto of the “Serve a Minor” Felony Penalty Bill, or How to Lose a Winery in One Sale
  90. California Grocers Association v. ABC, Part 2: California Appeals Court Vacates ABC’s Adoption of a Trade Advisory That Correctly Guided Licensee Conduct
  91. California Grocers Association v. ABC, Part 1: California Appeals Court Prohibits Alcohol Sales at Self-Check Out Stands
  92. AB 1128: The “Serve a Minor” Felony Penalty Bill, or How to Lose a Winery in One Sale
  93. The New York SLA and Online Wine Sales: A Work in Progress
  94. California SB 635: What the 4am Bill Really Means for California Communities
  95. Electronic Invoices in California: Welcome to the 19th Century
  96. The History of Amazon and Wine: What Has Changed?
  97. Third Party Marketing Checklist
  98. BOOZE RULES – PROMOTIONAL APPEARANCES AND AUTOGRAPHS
  99. Washington State: Down the Rabbit Hole of the Tied-House Laws