BY: Gillian Garrett and the Hinman & Carmichael LLP Team
On April 2, 2020, the ABC issued further guidance to licensees about temporary measures to relax alcohol regulatory requirements during the COVID-19 crisis, including regulations related to licensees’ charitable giving.
You can read the full text from the ABC here: https://www.abc.ca.gov/second-notice-of-regulatory-relief/. For a limited time, these changes open areas of promotional and sales activity historically prohibited in California. Licensees at all levels of the three-tier system are being given a temporary pass by the ABC when they use these regulatory waivers to keep their businesses active, their employees working, and their customers engaged.
The ABC Temporarily Suspended Enforcement Activities in Four (4) Additional Categories
In the first round, the ABC temporarily suspended enforcement of eight (8) categories of legal prohibitions:
1. Returns of alcoholic beverages – now allowed
2. Retail-to-Retail transactions – now allowed
3. Extension of credit – now liberalized
4. On-Sale retailers exercising off-sale privileges – now allowed
5. Sales of alcoholic beverages to go – now allowed by on-sale licensees
6. Drive-Thru windows for off-sale transactions – now allowed
7. Hours of operation for on-sale premises – now extended to legal limits (2 am)
8. Deliveries to consumers – now permitted.
You can read our blog on the FAQ clarifying the first round of changes here: https://www.beveragelaw.com/booze-rules/2020/3/30abcenf8ikjaul69
The ABC has now added four (4) more categories of relief:
1. Relief from Section 25600 “Free Goods” for Advertising “Free” Delivery – The ABC temporarily suspended enforcement of prohibitions against licensees delivering alcoholic beverages, whether by the licensee, by third-party services, or by mail services, without charge to the consumer; this is the prohibition on using the term “free delivery” in advertising. This means the ABC temporarily will not charge a licensee with a violation for advertising free delivery in violation of Business and Professions Code section 25600 (a $3,000 fine for a retail licensee and a $10,000 fine for a supplier level licensee).
2. Extension of Wholesaler Delivery Hours to Midnight – the ABC extended permissible hours for alcohol deliveries from wholesalers and manufacturers to retailers from 3am to 8pm, Monday through Saturday (no Sunday deliveries) to 3am to midnight, Monday through Saturday (still no Sunday deliveries). In other words, wholesalers and suppliers temporarily may deliver between 8pm and midnight, Monday through Saturday.
3. Tolerance for Distilled Spirits Manufacturers Providing High Proof Spirits for Disinfection Purposes – The ABC will not object to production of denatured high proof spirits by licensed distilled spirits manufacturers (Type 04) and craft distillers (Type 74) if the distilled spirits are produced in accordance with guidance from the FDA. (https://www.fda.gov/media/136118/download) The ABC also does not object to such spirits being provided for free, “if they are not used to promote the manufacturer’s alcoholic beverage products and are not provided in exchange for an agreement to purchase anything produced or distributed by the manufacturer.”
The production of hand sanitizers by distilled spirits producers is caught up in a dispute between the FDA and the TTB over the FDA requirement that all pure alcohol used for this purpose be “denatured;” which means rendered undrinkable by introduction of a substance into the equipment used to produce the hand sanitizer that renders the resulting product unfit for consumption. That requirement, however, makes the use of the same equipment for the distiller’s regular products difficult because of the potential presence of the substance in the equipment even after cleaning.
4. Charitable Promotions & Sales – the ABC temporarily suspended enforcement of prohibitions against “things of value” and “free goods” as applied to “promotional donations in which a manufacturer, wholesaler, or other supplier-type licensee advertises that a portion of the purchase price of the alcoholic beverages will be donated to a specific charitable organization,” so long as:
a. The donation and promotion involve a bona fide charitable organization providing relief related to COVID-19;
b. The promotion is in connection with the sale of sealed containers and does not encourage or promote the consumption of alcoholic beverages; and
c. The donation and promotion do not identify, advertise, or otherwise promote or involve any specific retail licensee.
(Business & Professions Code §§ 25500, 25502, 25600.) The three limitations mean licensees must be very cautious about how they structure any promotional donations based on alcohol purchases, which arguably promotes the consumption of alcohol.
Additional Requests or Suggestions for Regulatory Relief?
If you would like to see the ABC make additional changes, then contact the ABC with your suggestions or contact us. The ABC’s effort to address the evolving COVID-19 situation appears to be ongoing and the Department is making good-faith attempts to address licensees’ questions and concerns.
Significant Limitations on Relief
Be careful! The ABC emphasized these policies are temporary. They may be withdrawn on 10-days’ notice or less, and licensees must ensure they are acting responsibly.
The ABC stated: “[t]he relief provided by this and the prior notice is temporary and may be withdrawn by the Department at any time. The Department intends to provide a 10-day notice of the termination of any such relief, although such relief may be withdrawn immediately should the needs of public safety dictate. In addition, licensees are directed to use the relief provided by this notice responsibly and without compromising the public’s health, safety or welfare. Notwithstanding any other provision of law, if the Department determines that any licensee is found to be abusing the relief provided by this notice, or if the licensee’s actions jeopardize public health, safety, or welfare, the Department may summarily rescind the relief as to that licensee at any time. Until the Department rescinds any of these temporary relief measures, whether as to all licensees or a particular licensee, any licensee adhering to the terms of this notice, and other applicable laws, may rely on this notice to utilize the privileges described without risk of enforcement by the Department against its license for actions taken up until the time of the rescission.”
Licensees acting in reliance on the ABC’s temporary policies should subscribe to the ABC’s notices: https://www.abc.ca.gov/contact/subscribe/.
If you have questions about the ABC’s policies, please contact the ABC, or contact us.