Duncan Liquor Law – July 2018
Duncan Liquid Law Letter – May 2017
In This Edition…In This Edition…
In this Issue:
KANSAS LEGISLATURE PASSES AND GOVERNOR APPROVES BILL TO LET GROCERY AND C-STORE TO SELL BEER NOT TO EXCEED 6% BEGINING APRIL 1, 2019
SOUTH CAROLINA LAWMAKERS DELAY SUPREME COURT DECISION ON LIQUOR LICENSE CAPS
Widow Jane Pushes Back Against Acquisition
TEXAS SENATE VOTES TO ELIMINATE LIQUOR LICENSE LOOPHOLE
A-B Disapproves MegaMerger in Southeast
WHISTLEPIG AND CHATHAM BUTT HEADS OVER USE OF “CROP” TERM
Carrabba’s Italian Grill Hit With Nationwide Overtime Suit Legal,
Political and Practical Challenges in Regulating Recreational Marijuana
BY ARTHUR J. DECELLE ON APRIL 5, 2017 POSTED IN ADVERTISING AND MARKETING, DISTRIBUTION, FOOD SAFETY AND FDA, GENERAL INTEREST,IMPORT/EXPORT, TRADE PRACTICES, TRANSACTIONS
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.
Duncan Liquor Law Letter
In this edition:
- EN BANC REVIEW OF RETAIL DIGITAL NETWORK CASE IS UNDERWAY – Read
- Missouri Broadcasters Association Wins Appeal of Lawsuit Challenging the State’s Restrictive Alcohol Advertising Statute and Regulations – Read
- US appeals court reinstates suit over Missouri alcohol ads – Read…
And more for more news – go to Duncan Liquor Law Letter
EN BANC REVIEW OF RETAIL DIGITAL NETWORK CASE IS UNDERWAY
All 11 judges from the 9th Circuit gathered in San Francisco this past week to hear oral arguments on the Retail Digital Network appeal, per Alcohol Law Review blog. This step marks the beginning of the “en banc” review of the case.
The blog gave us a brief summary of what took place last week saying, the “judges did seem to struggle with the specific details of the law in question [tied-house laws] and how it works in the marketplace” and the panel also had plenty of “questions on the state of commercial free speech law in the United States Supreme Court.”
The blog didn’t offer up its guess on the final outcome as it is a “terribly imprecise science,” but it did say, “with additional cases on commercial free speech pending before the Supreme Court, the Ninth Circuit may take awhile to issue a decision.”
JEFFERSON CITY, MO, January 20, 2017 – Yesterday the U.S. Circuit Court of Appeals for the Eighth Circuit unanimously revived our lawsuit that challenges a Missouri statute and two Missouri regulations that we believe illegally limit alcohol advertising.
These Missouri laws prevent consumers from receiving truthful information in advertising. Specifically, although retailers can offer price discounts and promotions on alcoholic beverages, these laws keep citizens from learning about those discounts in advance, through radio, television, and newspaper ads.
Our radio and television stations are key sources of information for Missourians. Just as with news, listeners and viewers learn about the availability of goods and services through radio and TV advertising, and a restriction on advertising truthful information only keeps relevant and useful information from consumers. That’s why the MBA and several other entities challenged these laws under the First Amendment, and its guarantee of commercial free speech.
The antiquated Missouri laws at issue prohibit our advertisers from being able to advertise alcohol discounts, even though those discounts can be advertised on premise. The state contends that the restrictions are intended to discourage binge drinking, but binge drinking is more likely to be encouraged by promotions inside a bar than from media advertisements heard or seen in one’s living room.
The MBA is pleased that the appeals court pointed out the many inconsistencies in the regulations, which we believe demonstrate their unconstitutionality. The Supreme Court’s precedents protecting truthful commercial speech permit restrictions on commercial speech only if they are closely tailored to the state’s needs, and we believe the many inconsistencies in Missouri alcohol advertising regulations show that these laws are not so limited.
Additionally, because advertising of special pricing is allowed in all our bordering states, we believe that these laws create an unfair competitive disadvantage to Missouri businesses.
The laws are also ill-suited for the era social media, which college students in a bar can use to instantly publicize alcohol discounts, and to today’s world of ubiquitous and growing microbreweries and wineries, which have special exemptions from some of the restrictions.
If these laws are found unconstitutional, or removed by legislative and regulatory action, price-conscious consumers will have better information and be able to make better alcoholic beverage purchasing choices.
The immediate effect of the Eighth Circuit decision is to send the case back to the U.S. District Court for the Western District of Missouri. MBA and its co-plaintiffs intend to vigorously pursue their claims in that court, particularly in light of the Eighth Circuit’s legal analysis which is highly favorable to the strength and validity of these claims.
For more information contact: Mark Gordon, President/CEO Missouri Broadcasters Association 573-636-6692
US appeals court reinstates suit over Missouri alcohol ads
By JIM SUHR Associated Press Updated Jan 19, 2017
KANSAS CITY, Mo. (AP) – A federal appeals court on Thursday revived a lawsuit challenging Missouri regulations that broadcasters and others say illegally limit how they can market alcohol.
In reinstating the case, which was tossed out last year by U.S. District Judge Fernando Gaitan Jr. at the state’s behest, an 8th U.S. Circuit Court of Appeals panel unanimously ruled the plaintiffs “plausibly stated a claim upon which relief could be granted.”
The 8th Circuit noted the state’s justification that the restrictions are in the public interest by trying to blunt irresponsible alcohol use and underage drinking. But the appellate court cited inconsistencies in the application of the regulations, which permit advertising such generic things as “Happy Hour” and “Ladies Night” – as well as marketing all sales, promotions and discounts – on the retailer’s premises.
The defendants “apparently are not as concerned with retailers baiting consumers to drink excessively once they arrive,” Chief Judge William Jay Riley wrote for the three-judge panel.
In their 2013 lawsuit, the Missouri Broadcasters Association, Zimmer Radio group, Springfield winemaker Meyer Farms and Uncle D’s Sports Bar & Grill in St. Joseph challenged, among other things, the state’s Discount Advertising Prohibition Regulation. That rule makes it illegal for an alcohol advertisement to mention prices, rebates or discounts, essentially barring references to such things as two-for-one beer specials, a wine shop’s going-out-of-business sale or a restaurant special offer of a free drink with a meal purchase.
Calling such regulations an unconstitutional and “chilling” infringement of free speech, broadcasters pressing the lawsuit have said the restrictions have cost them immeasurable potential advertising money.
On Thursday, the St. Louis-based 8th Circuit declared that those suing over the regulations have “included sufficient allegations that the challenged provisions did not directly advance the substantial interest of promoting responsible drinking.”
“A theoretical increase in demand for alcohol based on a lower price does not necessarily mean any consumption of that alcohol is irresponsible,” Riley wrote, adding that “the multiple inconsistencies within the regulations poke obvious holes in any potential advancement of the interest in promoting responsible drinking.”
Duncan Liquor Law Letter
Longtime bev alc attorney Marc Sorini of McDermott Will & Emery lead the Brewers Association Power Hour yesterday, giving a 50,000 foot view of trade practice law in the beer business.
Marc kicked things off with a thorough rundown of the ins and outs of the federal and state laws, which we plan to report on later. But for now we’re going to jump to the end of Marc’s presentation where he discussed some of the current legal issues percolating in the industry. First up was category management.
You may recall that this decades-old concept came under fire last year when Kroger proposed to place alcoholic beverages in a single category under the watch of a single nationwide captain (Southern Wine & Spirits).
WHAT THE TTB’S RULING MEANS. Shortly after Kroger’s proposal, the TTB published Ruling 2016-1. The ruling says essentially all category management practices are inducements, that includes providing scan data or even following up to monitor or revise the schematic.
“Another interesting part of the ruling,” Marc said, “is it doesn’t really spell out what constitutes exclusion.” Generally, exclusion is defined as doing something that threatens the retailer’s independence, Marc said. “But these programs are initiated by the retailer, and in today’s economy the large chain retailer has the most economic leverage.” So the TTB has “left us all guessing” on that one, Marc said.
He then noted an interesting observation from a number of brewers that have told him “it’s actually kind of comforting that instead of having an Anheuser-Busch or a MillerCoors being the category captain, you would have Southern in charge, which frankly we don’t do business with.” So he’s heard some people question whether Kroger’s program was the one that bothered TTB the most, but he doesn’t agree with that view. He thinks everybody paying one 3rd party made it materially different.
Before moving on to the next current development, Marc presented one final argument on the TTB ruling: “If you’re bringing data to a retailer to help them decide on how to set up their shelf sets, isn’t that truthful non-misleading speech?”
SPEAKING OF THE 1st AMENDMENT. That argument segues right into the next current development – the Retail Digital Network case – which challenges tied-house laws as a violation of the First Amendment.
For those of you who don’t know, Retail Digital Network (RDN) is a third-party company that puts video ads in retailers and takes money from bev-alc producers/distributors to do it. But when RDN went shopping around for business, the suppliers and distributors said “no thanks” out of fear that they were indirectly paying a retailer to advertise and therefore violating the state’s tied house law.
RDN finally got tired of suppliers/distributors telling them “we would, but we can’t” and they brought suit to challenge the ban on paying a retailer for advertising, arguing that this is truthful non-misleading commercial speech.
9th CIRCUIT SET TO RE-HEAR THE APPEAL THIS MONTH. The District Court dismissed RDN’s challenge relying on the 1986 Stroh case. But a 9th Circuit panel surprisingly sent the case back to the lower District Court (remanded) and instructed them to apply heightened judicial scrutiny to restraints on commercial speech. But the decision is not up to the lower court anymore, as a few months ago the 9th Circuit Court granted an “en banc” review meaning the entire 9th Circuit would re-hear the appeal. The appeal is now set for oral argument in a few weeks to decide whether the entire 9th circuit agrees with that panel, Marc said.
THE LATEST ON THE CRAFT BREWERS GUILD CASE. Then we have the case surrounding the Sheehan’s Craft Beer Guild in Massachusetts. As you know, CBG currently has a lawsuit pending challenging the ABCC’s legal position towards CBG’s payments to retailer affiliates.
THEY’VE GOT SOME “PRETTY INTERESTING” ARGUMENTS. Marc says they have some “pretty interesting” arguments. One of them is that apparently the “thing of value prohibition” is not in the Massachusetts statute. The prohibition was actually repealed in the ’70’s. The ABCC has since passed a regulation that in effect continued the ban, Marc said. But CBG argues that if legislators pulled the law from the books then the regulators (who are subordinate to the legislature) can’t reinstate it, Marc says.
Another one of their arguments is that the anti-discrimination prohibition are all tied to post-and-hold as well as price affirmation schemes, which were struck down many years ago as a violation of the Sherman Antitrust Act. “So the vestiges of this, which is the general non-discrimination rule, are all tied to this illegal and unenforceable scheme and should be equally unenforceable,” says Marc.