California Grocers Association v. ABC, Part 1: California Appeals Court Prohibits Alcohol Sales at Self-Check Out Stands

Beginning October 18th, 2013, California law will prohibit grocery and liquor store customers from purchasing alcoholic beverages at self-checkout stands.  Retail stores with self-checkout stands that currently permit customers to purchase alcoholic beverages from these stands (even those that currently require employee face-to-face ID verification prior to purchase), will be required to send customers with alcohol to traditional checkout stands operated by cashiers. This is the result of a case decided on September 19th by the California District Court of Appeal (DCA), which ruled that sales of alcoholic beverages could not be made from any checkout stands operated by customers, even if the stands featured a lock on alcohol purchases until a clerk completed a face-to-face verification of identification and released the transaction with an employee code.  See Cal. Grocers Ass'n v. Dep't of Alcoholic Beverage Control, C070375, 2013 WL 5278729 (Sept. 19, 2013).

The case arose from the California Grocers Association’s (CGA) challenge to the CA ABC Trade Advisory interpreting Business and Professions Code Section 23394.7, passed by the legislature in 2011, effective January 1, 2012.  Section 23394.7 provides: "No privileges under an off­sale license shall be exercised by the licensee at any customer­operated checkout stand located on the licensee's physical premises." The industry advisory interpreted the section to mean that no alcohol could be sold through any checkout stand that the customer operated at any point during the check-out process. The CGA maintained that if the checkout stand was locked upon the scan of an alcoholic beverage and required an employee to check ID and release the transaction, then it was no longer a customer-controlled checkout stand and therefore complied with the statute; an entirely reasonable conclusion in the view of most industry members.

The DCA, however, found the CGA argument unpersuasive, and used the plain text and legislative history of the statute to find that alcohol sales may not be completed at any customer-operated stand because “[t]he phrase ‘customer­operated checkout stand’ thus describes the kind of checkout stand ‘at’ which the sale of alcoholic beverages is prohibited.”  Cal. Grocers Ass’n, 2013 WL 5278729, at *2.  While finding that the Department correctly interpreted the statute, the court also found the Trade Advisory was invalid and violated the APA’s rulemaking requirement for public notice and comment, because “the interpretation is more than a simple paraphrase of section 23394.7.” Id. at *7.

Regardless, one result of this case is clear: alcohol transactions will need to take place at employee-operated stands, so that purchases are made “through a face-to-face transaction from beginning to end, [and] the state of California can ensure that the necessary age verification steps are being taken to keep alcohol out of the hands of minors.Id. at *4

While the case may be appealed to the California Supreme Court by the CGA or the CA ABC, we are nonetheless advising our clients to take all necessary steps to comply with Section 23394.7 in time for the October 18th, 2013 effective date of compliance and deadline for appeal.

Hinman & Carmichael LLP lawyers are available should you need assistance complying with Section 23394.7 or with any ABC Trade Advisory.

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