2016 LEGISLATIVE UPDATES: Part II

By Rebecca Stamey-White and Erin Kelleher

This is the second legislative update blog post we are doing to discuss all the fun new laws in store for 2016.  For this edition, we’ll get into the main course of advertising, events and tied house.

SECOND COURSE: ADVERTISING, EVENTS AND TIED HOUSE

Co-sponsoring charitable events with retailers now permitted (AB 776: 23355.3)

While there are a lot of changes to the laws around advertising, events and tied house (a particularly nuanced specialty of our firm’s marketing practice), the new law getting the most attention lately has been AB 776, which purports to provide an exception to the thing of value restrictions on supplier social media posts mentioning retailers.

This kind of social media activity (which is rampant in the industry) led to many ABC accusations against suppliers who advertised their participation in Sacramento’s 2014 Save Mart Grape Escape, which our firm defended in front of the ABC.  While the law does permit licensees sponsoring a charity event to mention retailers who are co-sponsors without it being deemed an unlawful thing of value to the retailer, this law does not permit broad advertising by suppliers of retail accounts, as many mistakenly believe.  

Under 23355.3, licensees (which means everybody – you too, virtual wineries!), can sponsor and participate in non-profit events that a permanent retailer is also sponsoring without giving this charitable retailer a thing of value through their sponsorship… BUT (you knew there was a but, right?):

  • The money has to go to the charity (who must also get an ABC license)
  • The supplier licensee can’t give the sponsoring retailer anything of value
  • A retail licensee can’t sell alcohol to the charity licensee
  • A licensee can advertise its participation in the event via social media and can share a retailer’s post about the event, as long as it doesn’t post prices, promote the retailer, or pay or reimburse the retailer for advertising
  • Non-retail licensee sponsorships can’t involve exclusive products at the event
  • Charity licensees can’t get a benefit from permanent retailers in connection with the sponsorship, and
  • Permanent retailers can’t offer supplier advertising, sales or promotions in connection with the sponsorship

All of these conditions raise many questions, such as: How the ABC will interpret contracts between licensees and third-party event producers hired by charities? What kinds of lawful activities might be an impermissible thing of value when combined with an event co-sponsorship? Will retailer in-store promotions related to the event be permissible? And, will a retailer will be liable if the charity purchases alcohol for its event from its retail sponsor without the sponsor’s knowledge?

The passage of this law also served as an excuse for the ABC’s dismissal of a good decision in the Renwood case.  Had the decision been adopted, it would have restricted the ABC’s enforcement of the tied house laws more broadly when there is no evidence of an actual thing of value flowing to a retailer.

Alas, onward and upward… it’s a new year, with new social strategies, and we can’t wait to see how our clients will try to push the envelope in this area!

Retailers may purchase digital advertising on supplier sites and social accounts (AB 776: 25500)

AB 776 also calls out an exception that we’ve written about before (the retailer right to pay exception). This exception was already in the code, but with AB 776 is now expressly applied to digital advertising, and it permits retailers to pay fair market value for advertising in supplier publications and social media accounts. This means that if a retailer wants to promote a supplier product or campaign, it can now pay to do so!

You may be wondering: why is that a thing? This is a concept so foreign to other industries that it’s worth mentioning why an alcohol beverage retailer would have to pay a supplier for advertising when it’s already buying the supplier’s product (isn’t that included in the price?).  In the alcohol industry, a supplier can’t legally give a retail licensee (either on-premises or off-premises) anything of value, including a form of advertising common in other industries – the “retailer shout out.”  While the middle tier members may bemoan the gradual chipping away at these so-called tied house laws, until that happens, this is a decent fix for the current advertising predicament, in which rather than giving a retailer a thing of value, most suppliers just want to be able to let their fans know they’re doing an event.

Minimal changes made to retailer locator laws (AB 780: 25500.1)

Another bill getting a lot of attention is AB 780, which we wrote about in a previous post.  This law does not change the privileges available, but recodifies them into one statute that permits suppliers to advertise two or more unaffiliated retail accounts (sometimes referred to as retailer locators). We find it interesting that in its advisory, ABC makes a point of interpreting what constitutes a "direct communication" with consumers, requiring "some relationship between the non-retail licensee and the consumer(s) to whom the information is provided." Apparently "following" or affirmatively going to the supplier's website qualifies, but taking out an ad in a newspaper does not. While we think this distinction is likely irrelevant based on how suppliers are likely to use this exception, we note that we find little basis for the ABC's interpretation here to distinguish between a website retailer locator and a traditional advertising retailer locator. If anyone gets an accusation for this kind of activity, please give us a call - it would be a fun case to defend!

Napa gets a sponsorship money exception for Bottle Rock Festival (AB 527: 25503.40)

After the Bottle Rock cases we defended this past year and the continuing appeals we will argue this week in front of the ABC Appeals Board related to sponsorships paid for the Bottle Rock Festival 2014 in Napa, we had hoped for an overhaul of the special event provisions in California as an entire state. But alas, AB 1547, which would have created a major event license, didn’t make it out of committee this session. Instead we are left with AB 527, which is one more in a growing list of venue- and event-specific exceptions to the tied house laws rather than a larger fix, this time couched bizarrely as “earthquake relief” for Napa County.

The Bottle Rock cases centered on the allegation that a winery cannot pay an event producer sponsorship funds, meaning it’s on the supplier to conduct event-by-event vetting to determine whether that sponsorship money will somewhere down the line support any retail licensees or whether those event producers happen to have any investments – even distant ones – in retail licensees.  According to the ABC, a supplier can be subject to a $10,000 fine for sponsoring an event if it’s possible that those funds eventually made their way to a retail account—except in Napa under the exception in AB 527, and the dozen or more other venues in the state that have already been granted similar exceptions.

Throw another one onto the pile - Sonoma State Green Music Center and San Diego Del Mar Racetrack Exceptions (SB 462: 25503.6 and 25503.34)

We have long lamented the piecemeal approach to tied-house legislation in California, and this is just another example. SB 462 expands existing tied-house exceptions in 25503.6 of the code applicable to advertising arrangements between licensees at certain venues to include the Green Music Center at Sonoma State University, and fairgrounds with a horse racetrack and equestrian and sports facilities located in San Diego County.

Additionally, 25503.34 was added to the code, permitting alcoholic beverage licensees to make monetary or alcoholic beverage contributions to the Green Music Center under certain conditions.

Brewers can now have instructional tasting events at farmers' markets (AB 774: 23399.45, 24045.6 and 25607.5)

We have blogged before about brewers’ incremental parity with wineries with regard to tasting opportunities at farmers’ markets, and it seems as though they are closing the gap. Brewers who obtain a Type 84 Certified Farmers’ Market Beer Sales Permit may now also hold instructional events for consumers, brief outline of the parameters below:

  • Existing off-sale privileges are unchanged;
  • Eight ounces of beer can be provided per person, per day;
  • The tasting area must be roped off in some way from the rest of the market and consumers may not leave the area with open containers;
  • Only one licensed beer manufacturer may conduct an instructional event per farmers’ market;
  • Type 84 permits may be issued for up to a year, but are not valid for more than one day a week at any particular farmers’ market, however more than one permit can be held at a time for multiple markets; and
  • Annual sales at farmers’ markets cannot exceed 5,000 gallons annually.

Find our next post tomorrow for the third course of our legislative updates series!

  1. National Conference of State Liquor Administrators – The Alcohol Industry gathers in Hawaii to figure out how to enforce the US “Highly Archaic Regulatory Scheme.”
  2. Founder John Hinman Honored with the Raphael House Community Impact Award
  3. ROUTE TO MARKET AND MARKETING RESTRICTIONS - NAVIGATING REGULATORY SYSTEM CONSTRAINTS
  4. Alcohol and Cannabis Ventures: Top 5 Legal Considerations
  5. ATF and TTB: Is Another Divorce on the Horizon? What’s Going on with the Agency?
  6. STRIKE 3 - YOU REALLY ARE OUT! THE ABC'S STRICT APPLICATION OF PENALTIES FOR SALES TO MINORS
  7. TTB Temporarily Fixes Problem with Fulfillment Warehouse Tax Credits - an “Alternate Procedure” for Paying Taxes & Reporting
  8. CUSTOMERS WHO HAVE HAD ONE TOO MANY - THE FREE TRANSPORTATION DILEMMA
  9. The Renaissance of Federal Unfair Trade Practices - Current Issues and Strategies
  10. ‘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
  11. Big Bottles, Caviar and a CA Wine Strong Silent Auction for the Holidays!
  12. The FDA and the Wine and Spirits Industry – Surprise inspections anyone?
  13. NORTHERN CALIFORNIA WILDFIRES: UPDATED REGULATORY AGENCY DISASTER RELIEF RESOURCES AT A GLANCE
  14. NORTHERN CALIFORNIA WILDFIRES: REGULATORY AGENCY DISASTER RELIEF RESOURCES AT A GLANCE
  15. Soon to come to your Local Supermarket– Instant Redeemable Coupons of the digital age!
  16. The License Piggyback Dilemma – If it Sounds Too Good to be True, it Probably is
  17. A timely message from our Florida colleagues on the tied house laws, the three-tier system and the need for reform
  18. ABC Declaratory Rulings – A Modest Proposal Whose Time has Come
  19. More on FDA Inspections - Breweries, Distilleries and Questions
  20. WHY THE FDA IS INSPECTING WINERIES
  21. Senate Bill 378—The Proposed Demise of Due Process for Alcohol Licensees
  22. ABC Enforcement - Trends and Predictions
  23. The Corruption Chronicles – Volume One: A New Hope
  24. New Alcohol Delivery Oversight on the Horizon
  25. Michigan: Canary in the DtC Coal Mine?
  26. California ABC and Federal Credit Laws – Active Enforcement and Lots of Questions!
  27. Big Bottles For The Holidays - The Highest Calling Of The Winemaker's Art
  28. 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
  29. SONOMA COUNTY WINERY USE PERMITS, EVENT RESTICTIONS AND DTC
  30. 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
  31. Isn't A Written Agreement With A Distributor Worthless In A Franchise State?
  32. Crowd Funding for Alcohol Producers and Retailers – Down the Rabbit Hole with the Tied House laws
  33. Everything you ever wanted to know about the BPA Warning Statement but were afraid to ask
  34. AB 2082 - A Hunting License for Police and a Lethal Weapon for Politicians that Deprives Licensees of Currently Available Due Process Rights
  35. “Better Late Than Never”-- Judge in Illinois Dismisses 201 Sales Tax Cases against Retailers
  36. 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
  37. The Arsenic in Wine Class Action Dismissal – what it means
  38. Counterfeit or Artisanal Mexican Spirits? Pick your Poison, or your lime wedge
  39. Warning - CA ABC enforcement teams are on the prowl this weekend!
  40. 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
  41. The TTB Speaks on Category Management or, be Careful What you Ask for Because you might Get it!
  42. Hinman & Carmichael LLP Announces the Addition of Jeremy Siegel to its team of top beverage law lawyers
  43. 2016 LEGISLATIVE UPDATES: Part IV
  44. 2016 LEGISLATIVE UPDATES: Part III
  45. 2016 LEGISLATIVE UPDATES: Part II
  46. 2016 LEGISLATIVE UPDATES: Part I
  47. Hinman & Carmichael LLP is Hiring!
  48. John Hinman Presents NBI Webinar on Basics of Alcohol Beverage Law
  49. ABC DISMISSES SAVE MART GRAPE ESCAPE ACCUSATION BUT REFUSES TO ADOPT JUDGE’S DECISION FINDING NO STRICT LIABILITY FOR ABC VIOLATIONS
  50. Speakeasies are still with us, and proliferating!
  51. The War for the Soul of Sonoma County – the Winery Working Group Battle
  52. Santa Claus isn’t the only one coming to town this Christmas!
  53. Arizona's Direct to Consumer Shipping Rules - An Exercise in Complexity
  54. AB 780 - Social Media and the ABC: The California Legislative “Fix” that Fails
  55. Illinois Finally Offers Certainty and Relief for Victims of Sales Tax Lawsuits, but Prompt Action is Required in Pending Cases
  56. A Modest Proposal – Adopt the federal rule on Tied-House liability in California
  57. The Grapes Escaped - Why the First Amendment Matters
  58. Appellate Court Ruling Strikes Blow Against State’s Arbitrary Beer Label Ban
  59. Illinois Attorney General's Office Announces Intention to Dismiss False Claims Act Against Liquor Retailers
  60. Commercial Speech And Alcoholic Beverages - Part III
  61. Commercial Speech And Alcoholic Beverages - Part II
  62. Craft Beverages: Social Media Marketing the Effective and Compliant Way
  63. Commercial Speech And Alcoholic Beverages - Part I
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  65. The Biggest Retailer in the World vs. the TABC
  66. Rebecca Stamey-White presents Emerging Issues in Wine Law
  67. Top Beverage Alcohol Law Firm Adds and Elevates Partners
  68. Illinois Qui Tam Lawsuits—Private Enforcement Of a State Claim: A Bonanza For A Plaintiff’s Lawyer And A Rip-Off Of Retailers
  69. BOOZE RULES OF SOCIAL MEDIA: The Retailer Right to Pay Exception
  70. LIONS AND TIGERS AND TWEETS, OH MY!
  71. AB 2004: Brewer's Incremental Parity with Wine Makers
  72. Expanding, Proud Of It, and Wanting to Tell the World
  73. DC Weighs in Strongly on Third Party Marketer Delivery Services
  74. “Visual Links” between Beer, Wine and Spirits Labels and Retailers Ruled Unlawful in California — the tied house laws run amok
  75. Hard Cider Legislative Update
  76. New Marketing Model for New York – Lot 18 and the NYSLA
  77. Sweeping Changes in Proposed NYSLA Bill Include Expansion for Craft
  78. Minimum Resale Price Policies - How to Control Price-Cutters
  79. AB 2130 – Gloves Off?
  80. “Gluten-Free” Labels for Wine, Beer and Distilled Spirits. We’re Still Waiting.
  81. AB 1252: Sanitation Overkill?
  82. Growlers: Not Just for Beer Anymore
  83. California Legislative Roundup 2014
  84. Build It and They Will Come: Craft Products Get New Privileges in CA and TX
  85. AB 1128: Veto of the “Serve a Minor” Felony Penalty Bill, or How to Lose a Winery in One Sale
  86. California Grocers Association v. ABC, Part 2: California Appeals Court Vacates ABC’s Adoption of a Trade Advisory That Correctly Guided Licensee Conduct
  87. California Grocers Association v. ABC, Part 1: California Appeals Court Prohibits Alcohol Sales at Self-Check Out Stands
  88. AB 1128: The “Serve a Minor” Felony Penalty Bill, or How to Lose a Winery in One Sale
  89. The New York SLA and Online Wine Sales: A Work in Progress
  90. California SB 635: What the 4am Bill Really Means for California Communities
  91. Electronic Invoices in California: Welcome to the 19th Century
  92. The History of Amazon and Wine: What Has Changed?
  93. Third Party Marketing Checklist
  94. BOOZE RULES – PROMOTIONAL APPEARANCES AND AUTOGRAPHS
  95. Washington State: Down the Rabbit Hole of the Tied-House Laws