Duncan Liquor Law – July 2018
Hospitality Law Update 2018, Vol. I
With the 2018 regular legislative session underway in Kentucky, there is certainly the potential for hospitality law to experience significant change as it has for the last several years. HB 136 is one of the pending bills that could have the biggest impact for at least one segment of the hospitality industry; It would relieve some administrative burden on the still rapidly expanding microbrewery industry. The biggest potential change, however, comes from a new proposed regulation by the Department of Alcoholic Beverage Control (“ABC”), 804 KAR 9:051, to repeal the regulations regarding quota retail licenses. The effort to repeal the quota licenses now has the interest of legislators, and that will likely see discussion in the General Assembly.
Let’s take a closer look.
HB 136
HB 136 seeks to benefit microbreweries, essentially unshackling them from the distribution tier of the three-tier system for their retail sales. Under the current scheme, microbrewers must contract with a distributor to collect reports and taxes, and distribute the microbrewery’s products to other retailers. That process was intended to preserve the middle tier role of the beer distributor with regard to microbreweries by involving distributors in the reporting and tax-collecting process. Distributors can deduct 1% of the wholesale tax collected from the microbrewery for the effort. HB 136 would eliminate the role of the distributor with regard to retail sales (only) made by the microbrewery itself, with all taxes reported and paid by the microbrewery. Additionally, the wholesale tax rate paid by microbreweries would drop from the current rate of 11% to 10.25%, then to a flat 10% on June 1, 2018. The effect of these provisions would be to ease an administrative burden on microbreweries while simultaneously reducing their wholesale tax burden.
UPDATE March 16, 2018: HB 136 passed and was signed into law by Gov. Matt Bevin.
804 KAR 9:051
This proposed regulation, published with little fanfare December 14, 2017, gets straight to the point, repealing 804 KAR 9:010, 804 KAR 9:040 and 804 KAR 9:050, all regulations establishing a quota system to limit the number of wine and spirits retail licenses that can be issued in the various cities and counties across the state. 804 KAR 9:010 sets limits for quota licenses for counties, while 804 KAR 9:040 and 804 KAR 9:050 concern quota licenses in cities for retail package sales and sales by the drink, respectively. This proposed regulation would effectively end the quota system in Kentucky, thereby permitting a theoretically unlimited number of drink and packages licenses to be issued. Notably, however, the proposed regulations do not affect the quota limitations in Louisville and Ashland, which have quota licensing schemes defined by statute. It will take an act of the legislature to eliminate those quotas.
A longtime concern of ABC is the potential for bias or undue influence in the application process, although critics have suggested that more standards and defined criteria or a lottery system in the application process could alleviate those concerns. This proposed regulation may find controversy among long-time holders of quota licenses facing new competition, as well as distributors, who will likely face the travails of having to sell and deliver a static quantity of product between multiple new retailers.
For an update on the issues raised by this proposed regulation, read Hospitality Law Update Vol. II.
Direct Shipping Allows Visitors to Send Home the Kentucky Bourbon Experience
It’s been an exciting week for Kentucky’s distillers with the passage of HB 400, legislation that allows distillery visitors to purchase alcohol and have it shipped to their homes. Visitors can also participate in “club” programs in which the distillery may ship products to users in regular intervals.
Today, The Bourbon Review features an update from McBrayer Member Stephen G. Amato on HB 400 and the passage of quota deregulation measure SB 110 under their section “Bourbon without Borders.” Read it here.
Commentary provided by
Stephen G. Amato focuses his practice in the areas of hospitality law, civil litigation, employment law, and administrative law, and is located in the firm’s Lexington office. He can be reached at samato@mmlk.com or (859) 231-8780, ext. 104.
Duncan Liquor Newsletter – June 2017
In This Month’s Edition:
- The New Common Consumption Area and other new laws [Kansas]
- A CASE WORTHY OF STUDY FOR ANYONEA CASE WORTHY OF STUDY FOR ANYONEHANDLING ADMINISTRATIVE APPEALS
- Hawaii: Group files suit over liquor rule changes
- Kansas woman seeking body-cam video of police shooting wins her appeal
- IN THE SUPERIOR COURT OF THE STATE OF DELAWAREIN THE SUPERIOR COURT OF THE STATE OF DELAWAREWORLD CLASS WHOLESALE, LLC, a Delaware Limited Liability Company, Plaintiff, V. STAR INDUSTRIES, INC., A Delaware Corporation, Defendant.
- Nevada: Liquor Industry Lawsuit May Sideline Nevada’s Cannabis Launch Date
- Utah: Liquor lobbying group declares war on UtahUtah: Liquor lobbying group declares war on Utahwith ad campaign in neighboring states over strict drunk driving law
- Impaired lawmakingImpaired lawmakingCommon sense goes tipsy with a new Utah drunken-driving statute
- Utah: Lawmakers Review New DUI Law but Won’t Budge on 0.05 Limit
- Trump Says D.C. Wine Bar Can’t Sue Him Over Unfair Competition
- ‘Drunk driver’ sues the bars that served him
- Washington: New Washington laws cover liquor samples,Washington: New Washington laws cover liquor samples,wine auctions, tasting rooms
- For Total Wine, it’s total war against alcohol regulation
- Five Guys’ Website Must Follow ADA Too, Blind Users Say
- Budweiser Uses Giveaway Fridges to Freeze Out Rivals, State Alleges
- Judge Likes Terminated WA Distribs’ Case Against Pabst
- A-B: DOJ Ain’t Balking, So Don’t Come a Knockin’
- SENATE BILL 378- THE PROPOSED DEMISE OF DUE PROCESS FOR ALCOHOL LICENSEES
- Grocery Wine Sales Bring Major ChangeGrocery Wine Sales Bring Major ChangeTo Pennsylvania Retail LandscapeMay 31, 2017
- Terroir Life’s Charles Banks Reaches Settlement With SECTerroir Life’s Charles Banks Reaches Settlement With SEC
- The Ban on Consignment Sales The Ban on Consignment Sales Texas Supreme Court Weighs In on Tied House
Duncan Liquor Law Letter
In this edition:
Court Finds State’s 3 Store ownership limit unconstitutional – Read
BevMo Complaint On Total Wine Is Referred To FTC, But Total Says It’s Without Merit – Read
Understanding the Three-Tier System: Its Impacts on U.S. Craft Beer and You – Read
Dan Aykroyd Breaks Down Booze Bottle Angles In IP Trial
ROUND TWO: KAH TEQUILA V. CRYSTAL HEAD VODKA – Read More
And for more news – go to Duncan Liquor Law Letter
THE STATE OF SOUTH CAROLINA In The Supreme Court Retail Services & Systems, Inc., d/b/a Total Wine & More, Appellant, v. South Carolina Department of Revenue and ABC Stores of South Carolina, Respondents. Appellate Case No. 2014-002728 Appeal From Aiken County Doyet A. Early III, Circuit Court Judge Opinion No. 27709 Heard November 5, 2015 – Filed March 29, 2017
COURT FINDS STATE’s 3 STORE OWNERSHIP LIMIT UNCONSTITUTIONAL.
http://www.sccourts.org/opinions/advSheets/no132017.pdf
Retail Services owns and operates three separate liquor store locations in Charleston, Greenville, and Columbia, South Carolina. SCDOR is charged with the administration of South Carolina’s statutes concerning the manufacturing, sale, and retail of alcoholic liquors. S.C. Code Ann. §§ 61-2-10 & -20. Retail Services petitioned SCDOR to open a fourth store in Aiken, however, SCDOR refused to grant Retail Services a fourth liquor license under sections 61-6-140 and -150 of the South Carolina Code,1 which limit a liquor-selling entity to three retail liquor licenses. Additionally, ABC Stores lobbies before the General Assembly on behalf of its members who are owners and holders of retail dealer licenses. Therefore, Retail Services brought this action against SCDOR and ABC Stores seeking a declaratory judgment that these provisions of the South Carolina Code are unconstitutional. Appellant argues that sections 61-6-140 and -150: (1) exceed the scope of the General Assembly’s police power provided for in article VIII-A of the South Carolina Constitution2 because the licensing limits do not promote the health, safety, or morals of the State, but merely provide economic protection for existing retail liquor store owners; (2) violate its rights to equal protection3 under the law by creating arbitrary distinctions, in that the three-store limit unfairly treats large retailers differently from small retailers and that section 61-6-150’s “grandfather clause,” unfairly discriminates against those that did not have an interest on or before July 1, 1978, and unfairly differentiates between owners of stores that sell liquor for on-site consumption and those that sell liquor for off-site consumption; and (4) violate its due process rights4 because they unfairly prevent Appellant from operating in its chosen field of business. The trial court found the provisions constitutional because (1) they are within the scope of the State’s police power; and (2) they satisfy the rational basis test, which, because they do not infringe on a fundamental right or implicate a suspect class, is all that is required. Therefore, the circuit court granted Respondents’ motions for summary judgment. Appellant appealed the circuit court’s decision. We now review the circuit court’s decision and reverse.
BevMo Complaint On Total Wine Is Referred To FTC, But Total Says It’s Without Merit
The National Advertising Division, an industry self-regulatory group, has referred a complaint by liquor retailer BevMo against rival Total Wine & More to the U.S. Federal Trade Commission (FTC).
The BevMo complaint disputes Total Wine’s advertising claims that its prices are lower than BevMo’s. Concord, California-based BevMo contends that Total Wine makes “unsupported price comparison claims using outdated BevMo prices and prices from BevMo stores that are well outside the geographically relevant market area.”
However, a Total Wine spokesman told SND that BevMo’s complaint is without merit. “Total Wine & More has been running ‘Paymo at Bevmo’ advertisements in California for a decade,” said the spokesman. “Our prices are simply lower than BevMo’s prices. It appears their newest management team objects to us recording the prices off their website, which is where we get them.”
The matter was referred to the FTC after Total Wine declined to participate in a proceeding before the NAD. The NAD is an ad industry self-regulating investigative unit that’s administered by the Council of Better Business Bureaus.