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. Strategic Exit Planning: Positioning Your Alcohol Beverage Business for Successful Acquisition or Investment
  2. New California Alcohol Laws for 2024 – a Mixed Bag of Privileges, Punishments, Clarifications, and Politics
  3. TTB Speaks up on Social Media
  4. Alcohol Trade Practices Update
  5. President Biden just made a big cannabis announcement... what does it mean?
  6. The Uniform Law Commission – Encouraging Consistent State by State Definitions, Protocols and Procedures
  7. San Francisco to the Governor - Review the RBS Program and Delay Implementation. Problems must be Corrected.
  8. TTB and Consignment Sales – Is There a Disconnect Between Policy Development and Business Reality?
  9. RBS ADDENDUM – THE LATEST FROM THE ABC AS THE AGENCY PROVIDES MORE INFORMATION ON THE CALIFORNIA ABC’S MANDATORY RESPONSIBLE BEVERAGE SERVER PROGRAM
  10. THE STATE OF TO-GO BOOZE IN CALIFORNIA
  11. BOOZE RULES SPECIAL EDITION – THE RESPONSIBLE BEVERAGE SERVICE PROGRAM FACTS AND REQUIREMENTS
  12. Competition in the Beverage Alcohol Industry Continues Under the Microscope – Part 3
  13. Competition in the Beverage Alcohol Industry Under the Microscope – Part 2
  14. Competition in the Beverage Alcohol Industry Now Under the Microscope
  15. Alcohol Marketplaces 2.0 Part 5: Looking Ahead
  16. It’s Time for a Regulatory Check-Up: Privacy Policies for email marketing and websites
  17. Alcohol Marketplaces 2.0 Part 4: Who’s responsible for ensuring legal drinking age?
  18. Alcohol Marketplaces 2.0 Part 3: Follow the Money
  19. BOOZE RULES 2021 – NEW CONTAINER SIZES APPROVED FOR ALCOHOLIC BEVERAGES: KEEPING TRACK OF THE TTB’S ATTEMPTS TO REGULATE CONTANER SIZES
  20. Alcohol Marketplaces 2.0 Part 2: Collect sales tax from marketplaces or comply with alcohol guidance?
  21. Alcohol Marketplaces 2.0 Part 1: Solicitation of sales by unlicensed third-party providers
  22. Federal Cannabis Legalization Fortune-Telling
  23. BOOZE RULES – THE DIRECT SHIPPING WARS
  24. California ABC provides additional Covid guidance on virtual events and charitable promotions
  25. Hot Topics for Alcohol Delivery 2020
  26. California Reopening Roadmap is Now a Blueprint for a Safer Economy
  27. The Hospitality Reopening Roadmap to Success
  28. Salads Not A Meal in California, Says ABC
  29. Delivery Personnel Beware – The ABC is Coming for You and for the Licensees Hiring You to Deliver Alcoholic Beverages - This Time Its Justified
  30. Licensees Beware – the Harsh New ABC Enforcement Rules Are Effective Right Now
  31. Part 2: LEGAL FAQS ON REOPENING CA RESTAURANTS, BREWPUBS, BARS AND TASTING ROOMS
  32. John Hinman’s May 22, 2020 interview with Wine Industry Advisor on the ABC COVID-19 Regulatory Relief initiatives and the ABC “emergency rule” proposals
  33. Booze Rules May 21 - The Latest on the ABC Emergency Rules
  34. Part 1: Legal FAQs on Reopening CA Restaurants, Brewpubs, Bars and Tasting Rooms
  35. The ABC’s Fourth Round of Regulatory Relief - Expanded License Footprints Through Temporary COVID-19 Catering Authorizations, and Expanded Privileges for Club Licensees
  36. BOOZE RULES – May 17, 2020 Special Edition
  37. ABC ENFORCEMENT - ALIVE, ACTIVE AND OUT IN THE COMMUNITY
  38. Frequently Asked Questions about ABC’s Guidance on Virtual Wine Tastings
  39. ABC Keeps California Hospitality Industry Essential
  40. ABC REGULATORY RELIEF – ROUND TWO – WHAT IT MEANS
  41. Essential Businesses Corona Virus Signage Requirement Every Essential Business in San Francisco Must Post Sign by Friday, April 3rd
  42. Promotions Compliance: Balancing Risk and Reward
  43. The March 25, 2020 ABC Guidance: Enforcement Continues; Charitable Giving Remains Subject to ABC Rules; and More – What Does it all Mean?
  44. Restaurant and Bar Best Practices – Surviving Covid 19, Stay at Home and Shelter in Place Under the New ABC Waivers
  45. Economically Surviving the Covid Crisis and the Shelter in Place Orders: A Primer on Regulatory interpretations and Options
  46. Booze Rules – Hinman & Carmichael LLP and the Corona Virus
  47. Booze Rules: 2020 and the Decade to Come – Great Expectations (with apologies to Charles Dickens)
  48. The RBS Chronicles: If Your Business serves Alcoholic Beverages YOU NEED TO READ THIS AND TAKE ACTION!
  49. RESPONSIBLE BEVERAGE SERVICE ACT HEARING – OCTOBER 11TH IN SACRAMENTO – BE THERE!
  50. WHEN THE INVESTIGATOR COMES CALLING – BEST PRACTICES.
  51. RESPONSIBLE BEVERAGE SERVICE ACT PROPOSED ABC RULES 160 TO 173 – WHY THE RUSH?
  52. The TTB Crusade Against Small Producers and the “Consignment Sale” Business Model
  53. TTB Protocols, Procedures, and Investigations
  54. Wine in a 250 ML can – the Mystery of the TTB packaging Regulations and Solving the Problem by Amending the Regulations
  55. The Passing of John Manfreda of the TTB: a Tragedy for his family and a Tragedy for the Industry he so Faithfully Served for so Long.
  56. Pride in a Job Well-done, or Blood Money? The Cost of Learning the Truth from the TTB about the Benefits to Investigators from Making Cases Against Industry Members
  57. How ADA Website Compliance Works – The Steps You Can Take to Protect Yourself, Your Website and Your Social Media from Liability
  58. Supplier and Distributor Promotional “Banks,” Third Party Promotion Companies and Inconsistent TTB Enforcement, Oh My!
  59. “A Wrong Without a Remedy – Not in My America” – The TTB Death Penalty for Not Reporting Deaths
  60. Is a 1935 Alcohol Beverage Federal Trade Practice Law Stifling Innovation?
  61. Decoding the BCC’s Guidance on Commercial Cannabis Activity.
  62. Prop 65 - Escaping a "Notice of Violation"
  63. TTB Consignment Sales Investigations - What is Behind the Curtain of the TTB Press Releases?
  64. Heads Up! The ABC Is Stepping Up Enforcement Against Licensees Located Near Universities
  65. Coming Soon: New Mandatory Training Requirements for over One Million “Alcohol Servers” In California – September 1, 2021 will be here quickly
  66. 2019 Legislative Changes for California Alcohol Producers – a Blessing or a Curse?
  67. A Picture (On Instagram) Is Worth A Thousand Words
  68. Playing by the Rules: California Cannabis Final Regulations Takeaways
  69. Hinman & Carmichael LLP Names Erin Kelleher Partner and Welcomes Gillian Garrett and Tsion “Sunshine” Lencho to the Firm
  70. Congress Makes History and Changes the CBD Game for Good
  71. Pernicious Practices (stuff we see that will get folks in trouble!) Today’s Rant – Bill & Hold
  72. CBD: An Exciting New Fall Schedule… or Not?
  73. MISSISSIPPI RISING - A VICTORY FOR LEGAL RETAILER TO CONSUMER SALES, AND PASSAGE OF TITLE UNDER THE UNIFORM COMMERCIAL CODE
  74. California ABC's Cannabis Advisory - Not Just for Stoners
  75. NEW CALIFORNIA WARNINGS FOR ALCOHOLIC BEVERAGES AND CANNABIS PRODUCTS TAKE EFFECT AUGUST 30, 2018, NOW INCLUDING ADDENDUM REGARDING 2014 CONSENT AGREEMENT PARTIES AND PARTICIPANTS
  76. National Conference of State Liquor Administrators – The Alcohol Industry gathers in Hawaii to figure out how to enforce the US “Highly Archaic Regulatory Scheme.”
  77. Founder John Hinman Honored with the Raphael House Community Impact Award
  78. ROUTE TO MARKET AND MARKETING RESTRICTIONS - NAVIGATING REGULATORY SYSTEM CONSTRAINTS
  79. Alcohol and Cannabis Ventures: Top 5 Legal Considerations
  80. ATF and TTB: Is Another Divorce on the Horizon? What’s Going on with the Agency?
  81. STRIKE 3 - YOU REALLY ARE OUT! THE ABC'S STRICT APPLICATION OF PENALTIES FOR SALES TO MINORS
  82. TTB Temporarily Fixes Problem with Fulfillment Warehouse Tax Credits - an “Alternate Procedure” for Paying Taxes & Reporting
  83. CUSTOMERS WHO HAVE HAD ONE TOO MANY - THE FREE TRANSPORTATION DILEMMA
  84. The Renaissance of Federal Unfair Trade Practices - Current Issues and Strategies
  85. ‘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
  86. Big Bottles, Caviar and a CA Wine Strong Silent Auction for the Holidays!
  87. The FDA and the Wine and Spirits Industry – Surprise inspections anyone?
  88. NORTHERN CALIFORNIA WILDFIRES: UPDATED REGULATORY AGENCY DISASTER RELIEF RESOURCES AT A GLANCE
  89. NORTHERN CALIFORNIA WILDFIRES: REGULATORY AGENCY DISASTER RELIEF RESOURCES AT A GLANCE
  90. Soon to come to your Local Supermarket– Instant Redeemable Coupons of the digital age!
  91. The License Piggyback Dilemma – If it Sounds Too Good to be True, it Probably is
  92. A timely message from our Florida colleagues on the tied house laws, the three-tier system and the need for reform
  93. ABC Declaratory Rulings – A Modest Proposal Whose Time has Come
  94. More on FDA Inspections - Breweries, Distilleries and Questions
  95. WHY THE FDA IS INSPECTING WINERIES
  96. Senate Bill 378—The Proposed Demise of Due Process for Alcohol Licensees
  97. ABC Enforcement - Trends and Predictions
  98. The Corruption Chronicles – Volume One: A New Hope
  99. New Alcohol Delivery Oversight on the Horizon
  100. Michigan: Canary in the DtC Coal Mine?