New 2020 Law: Okay for Brewers Give Glassware to Retailers

By

Ralph Barat Saltsman, Stephen Warren Solomon, Stephen Allen Jamieson,
R. Bruce Evans, Ryan Kroll, Jennifer L. Oden

Historically, the Tied-House provisions of the ABC Act have prohibited retail licensees from accepting things of value from alcohol manufacturers, distributors and wholesalers. Business and Professions Code § 25600 begins:

(a)(1) No licensee shall, directly or indirectly, give any premium, gift, or free goods in connection with the sale or distribution of any alcoholic beverage, except as provided by rules that shall be adopted by the department to implement this section or as authorized by this division.

There are limits and exceptions that have been added since the statute’s adoption effective 1953.

CCR § 106 (Rule 106) similarly provides:

(a)   Free Goods. No licensee shall, directly or indirectly, give any premium, gift, free goods, or other thing of value in connection with the sale, distribution, or sale and distribution of alcoholic beverages, and no retailer shall, directly or indirectly, receive any premium, gift, free goods or other thing of value from a supplier of alcoholic beverages, except as authorized by this rule or the Alcoholic Beverage Control Act.

Similar to 25600, Rule 106 provides definitions, permissions, exceptions, limitations and circumstances. The Department itself added its own interpretations.

Tradition has defined the dance between basic Tied-House prohibitions, and interaction between the three tiers in the alcoholic beverage industry. In 2019 the legislature introduced new legislation that affects this industry relationship.

In a minor erosion to the “free goods” prohibition that disallows alcohol manufacturers, distributors, and wholesalers from giving things of value to retailers, the legislature has enacted Business and Professions Code § 25600.05. The new law allows beer manufacturers (Type 01 and Type 23) out of state beer manufacturers (Type 26) and the beer and wine importers (Type 10) to provide up to 5 cases of retail advertising glassware to on-sale licensees per each licensed location per calendar year.

The statute has limits, definitions and requirements:

1)      A case is up to 24 pieces of glassware

2)      Glasses are single service holding a maximum of 23 ounces to be used for service of beer

3)      The “Retail Advertising Glassware” must have conspicuous advertising of beer

These “gifts” must not be conditioned on the purchase of any product (including beer manufactured by the provider.)

The glassware must be delivered by said manufacturer directly to the licensed premises (and not in large quantity to the licensee for distribution by the licensee to said licensed premises.)

The beer manufacturer must itself deliver the glassware. The 5 cases constitute the total that a beer manufacturer can distribute to any licensed premises (per year.)

Any given retailer can accept a maximum of 10 cases per location per calendar year. Beer manufacturers must file records of each such delivery to the ABC within 30 days of the delivery. This report must contain detailed information and will be submitted on a report template or electronic file. Such records must be kept for a three-year period.

Note, if the quantity of glassware exceeds the statutory maximum, it is the retailer’s responsibility to refuse acceptance of the retailer glassware.

Sections (c), (d), (e), and (f) delineate the statutory restrictions.

​(c) A beer wholesaler shall not directly or indirectly underwrite, share in, or contribute to the costs of glassware or any costs of transportation or shipping or serve as the agent of the beer manufacturer to deliver, stock, or store glassware for an on-sale retailer.

(d) A licensee authorized to give retail advertising glassware pursuant to this section shall not be precluded from doing so on the basis of having an interest in any other type of alcoholic beverage license within or outside of the state.

(e) A beer manufacturer shall file with the department, in a manner prescribed by the department, records related to glassware provided to an on-sale retail licensee pursuant to this section within 30 days of the delivery of the glassware. In addition, a beer manufacturer shall keep and maintain records for a three-year period of all glassware given pursuant to this section.

(f) An on-sale retail licensee shall keep and maintain records for a three-year period of all glassware received pursuant to this section and of all other retail advertising glassware purchased or otherwise received. Such records shall be maintained by the on-sale retail licensee at the licensed premises to which the beer manufacturer delivers the glassware authorized by this section. The on-sale retail licensee shall produce records to the department promptly upon request. (See Business and Professions Code § 25600.05, effective January 1, 2020)

This statue shall remain effective only until January 1, 2023 at which time it is repealed.