ABCC Clarifies “Store Limit” Procedure

On January 1, 2016, the number of off-premises (or “package store”) liquor licenses any person or combination of persons will be authorized to legally hold in Massachusetts, directly or indirectly, will increase from five (5) to seven (7). While the increase will go into effect as of New Year’s Day, there was some confusion as to the mechanics to be used to go about getting a 6th or 7th license.

Normally, any prospective liquor licensee files an application with the local licensing authorities. Notice of the application is then published and abutters are notified of the application, a public hearing is held at the local level, and then the application is forwarded to the state Alcoholic Beverages Control Commission (“ABCC”) for their consideration and approval as well. Generally, at best, there is a two to three month lag between the initial filing of an application and actually receiving issuance of a license. Accordingly, in order to receive a license as soon after January 1 as possible, some prospective multiple licensees had filed applications with local licensing authorities in 2015, hoping to gain approvals in advance of January 1 and be ready to open as soon after January 1, 2016 as possible.

However, the ABCC recently issued an Advisory clarifying the procedures to be followed. In the Advisory, the ABCC basically said, “Not so fast!” The ABCC says that any person seeking a 6th or 7th liquor license cannot file an application before January 1, 2016. Since January 4 is the first business day in 2016, don’t look for companies that already hold 5 licenses to be open for business in additional locations until later in January or, more likely, February of the new year.

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Bob Hurwitz Named Super Lawyer

Wayne, Richard & Hurwitz LLP is pleased to announce that Bob Hurwitz has been named a Massachusetts and New England Super Lawyer for the twelfth consecutive year in the field of construction law.  The Super Lawyers list appears in Boston Magazine as well as the publication New England Super Lawyers, and recognizes the top five percent of attorneys in New England.

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Powdered Alcohol In Massachusetts

The federal Alcohol and Tobacco Tax and Trade Bureau (“TTB”) recently approved the sale of four powdered alcohol products.  This follows the approval and later rescission of approval by TTB of seven powdered alcohol products in 2014.

Although this time it appears the TTB approval will stand, the Massachusetts Alcoholic Beverages Control Commission (“ABCC”) quickly issued an advisory ruling essentially stating “NOT IN MY COMMONWEALTH!”  Two days after the TTB approval, the ABCC Advisory stated that Massachusetts laws prohibit the importation, sale, and manufacturing of powdered alcohol in Massachusetts.

The ABCC reasoned that:

1.  M.G.L. Chapter 138 regulates both alcoholic beverages and alcohol;

2. Powdered alcohol is not a “liquid”, and thus not an “alcoholic beverage”; and

3.  Existing liquor licenses for wholesalers, manufacturers and retailers only authorize the sale of alcoholic beverages – and thus, not alcohol in powdered, non-liquid form.

Some wags were heard to wonder if the ABCC were called only the Massachusetts Alcohol Control Commission whether the Advisory would have come out the other way.  California, for example, took a much more welcoming approach to powders years ago in Regulation 2557.

The company that came up with “Palcohol” extols its convenience, portability and flexibility, noting that hikers for example would be able to enjoy an alcoholic beverage by a stream in the woods after a long day on the trail, without having had to carry the beverage part of their beverage all day long.

Opponents note the same convenience, portability and flexibility of Palcohol might prove irresistible to minors and other mischief-minded or just careless individuals.

Next up? How the state will regulate different forms of marijuana if legalized.

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Possible New Tax On Alcohol Sales In Boston

The Boston Globe reported today that two Boston city councilors have filed a “home rule petition” seeking approval of a 1 to 2 percent sales tax on all retail sales of alcoholic beverages within Boston (whether in restaurants, bars, supermarkets or package stores).  The substantial revenues that would be collected – expected to reach millions of dollars annually – would be earmarked exclusively for support of substance abuse prevention and treatment programs.

The proposal was offered by City Council President Bill Linehan and City Councilor Frank Baker.  In order to go into effect, it would need to first be passed by both the Boston City Council and the State Legislature.  The Globe reported that Mayor Walsh released a statement sympathetic with the goals of treatment programs, but was non-committal regarding passage of the proposed tax.  Alcoholic beverages are already subject to an excise tax, and a state-wide sales tax at the retail level passed by the Legislature in 2009 was repealed by voters in a statewide referendum in 2010.

The Globe also reported that the proposal for a new tax on alcohol sales was quickly opposed by several industry groups.

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Summary of ABCC Actions – January 2015

Summary of ABCC Actions

 

Eight recently published ABCC decisions decided cases dealing with gambling devices on licensed premises, sales of alcohol to a minor and intoxicated persons, and purchase of alcohol by a restaurant from a non-wholesaler.

The non-permitted gambling devices cases involved the Billerica Elks Lodge, American Legion Post in Kingston, and the Malden Elks and Moose Lodges.  In the former three cases, the ABCC suspended the clubs licenses for five days, two days to be served and three to be held in abeyance for two years provided no further violations occurred.  The ABCC also stipulated that each licensee not possess in or on the licensed premises any automatic amusement device or video poker machine.  The Billerica Elks Lodge received only a three day suspension, with all three days to be held in abeyance for 2 years pending any further violation.  However, the Lodge had also not filed required annual reports with the ABCC with the names and addresses of corporate officers and the compensation paid to employees, so the ABCC added a separate 3 day suspension for this, with those 3 days also to be held in abeyance for 2 years (the suspensions to run concurrently).  Also, the ABCC directed the Lodge to file annual reports for the years 2003 to 2014 within one week of receiving their decision, or face “indefinite suspension” of their license.

GPS Wine & Spirits in Brookline was found to have made a sale to a minor, and was given an eight day suspension, with one day to be served and seven to be held in abeyance for two years.  Interestingly, the business had an Advanced ID Detection Scan machine, but when the ABCC investigator passed the fraudulent ID used by the minor in question through the scanner, it was not approved.

The ABCC ordered a four day suspension (2 to be served and 2 to be held in abeyance for 2 years) for the Sinnis Pub in Dudley, after they were found to have provided several “shots” of alcohol to an intoxicated patron. An ABCC investigator on hand saw the patron, determined he was intoxicated, and then viewed sales of several shots to the patron thereafter within a relatively brief period.  When asked for identification by the investigator, the intoxicated patron responded with a succinct “verbal salute” (set out in quotes in the ABCC decision) which evidenced truculence if not intoxication!

The Singapore Restaurant in Fitchburg also was found to have made a sale to an intoxicated person, as was given a six day suspension, two to be served and four to be held in abeyance for two years

Finally, the Kathmandu Spice Restaurant in Arlington was found to have repeatedly purchased alcohol from a package store rather than a wholesaler, and was given a thirty day suspension and ordered to destroy the alcoholic beverages in question.  The restaurant was also given a warning for failure to post required notices of penalties.

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New Legislation May Change Wine Shipper License

Before the new direct wine shipper license will go into effect Beacon Hill has already started to tinker with the statutory limits of the license. This week Rep. John Sciback a Democrat from South Hadley and the House Chair of the Joint Committee on Consumer Protection and Professional Licensure introduced a bill that would amend the s. 19F license to allow for direct shipments to re-sellers, and not just consumers. This change may create an end-run around wholesalers for manufacturers looking to move product into the hands of retailers. See the full text below.

Section 19F of chapter 138 of the General Laws, inserted by section 162 of chapter 165 of the acts of 2014, is hereby amended by striking out subsection (b) and inserting in place thereof the following subsection:-

(b) Under this section, a direct wine shipper licensee may make sales and delivery of wine: (1) at retail directly to residents of the commonwealth who are 21 years of age or older, for personal use and not for resale; (2) at wholesale in kegs, casks, barrels or bottles to a person licensed pursuant to section 12, 13 or 14; provided, however, that all direct deliveries of wine from a winery to a licensee pursuant to section 12, 13, or 14 shall not exceed 250 cases of wine annually; (3) at wholesale for the sole purpose of resale in containers in which wine was delivered to any person licensed pursuant to section 15; provided, however, that all direct deliveries of wine from a winery to a section 15 licensee shall not exceed 250 cases of wine annually; (4) at wholesale to a person licensed pursuant to section 18, 19 or 19B; (5) at wholesale to churches and religious societies, educational institutions, incorporated hospitals, homes for the aged, manufacturers of food products and manufacturers of drugs and chemicals pursuant to section 28; or (6) at wholesale to a registered pharmacist holding a certificate of fitness pursuant to section 30.

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Wine Industry Preparing For Changes In The New Year

Starting January 1, 2015 wineries, vineyards, and other wine manufacturers can begin the process of becoming licensed to directly ship wine to Massachusetts consumers. This change in M.G.L. c. 138 was included in the FY 2015 Budget signed into law by Governor Deval Patrick.

According to the Boston Globe at least 91 wineries have already applied for the new license. Because both manufacturers and the trucks used for transporting wine are  regulated by the state FedEx has also applied for an additional 700 licenses to transport.

Massachusetts is one of the leading states in the nation in per capita wine consumption and the new direct wine shipper license will open a new avenue for out of state wine manufacturers.

The new license will allow manufacturers to deliver directly to consumers, but not allow sales to Massachusetts retailers. The ABCC issued an advisory on direct wine shipping that will help guide the wine industry in interpreting the new changes. This advisory includes who qualifies for the new license and how to comply with reporting obligations as well as licensing fees.

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Budweiser Pivot More Evidence Of Craft Beer Surge

To improve Budweiser’s appeal to a new younger crowd Anheuser-Busch InBev has decided to drop the famous Clydesdales from their future marketing campaigns. In “Bud Crowded Out by Craft Beer Craze” the Wall Street Journal reports on a growing trend that we have covered on this blog that points to a surge in popularity for smaller, local based, and smaller batch craft beers. This trend is starting to siphon away the popularity of larger brewers. This niche has now grown to the point that the large brewers are changing their game plan.

In 2013 craft beer represented 8% of the market compared with 2.6% in 1998. Massachusetts has seen success with craft beer, including craft beer’s first billionaire, but it may surprise you that Massachusetts is not among the leaders in the industry. Massachusetts’ 57 craft breweries ranks only 16th in the country, and it’s per capita ranking is only 24th. But those numbers are surging, like in all states.

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Others Call For Increased Investigation Into Pay-to-Play

In a follow up to the first article regarding the ABCC investigating pay-to-play, Dan Adams of the Boston Globe reports that legislators, including Governor-elect Charle Baker, believe the state should “beef up its oversight of the liquor industry” if the ABCC finds the industry is engaging in illegal trade practices.

Currently, the ABCC’s enforcement budget is less than half of what it was seven years ago.

This issue is a great example of the difference between the alcoholic beverage industry and other food or beverage industries, particularly in Massachusetts. Because of the regulations on alcoholic beverages, some that date back to Prohibition, small local breweries face greater government restrictions to get to end users as compared with other products that may be stocked by bars, restaurants, or retailers. Local and small brewers have fewer options and a higher barrier to entry into the marketplace.

There are a few different Massachusetts regulations that prohibit this practice known as pay-to-play. A regulation against “inducements” states that no licensee “shall give or permit to be given money or any other thing of substantial value in any effort to induce any person to persuade or influence any other person to purchase…a particular brand of…beverage.” This is used to prevent one business in the industry from offering anything outside of the product itself to persuade another to commit to their product.

Massachusetts regulations also prohibit selling or offering to sell any beverage at  price less than invoiced cost. A situation which may occur if a retailer or bar is receiving a discount on products under a pay-to-play scenario.

Suppliers are also prohibited from offering inducements through price discrimination as outlawed by M.G.L. c. 138 s. 25A.

Craft breweries in Massachusetts are still soaring. In a recent article by James Fallows regarding Jim Koch, of Sam Adams beer, some startling facts are used to show the growth of the industry:

  • In 1971 there were less than 150 breweries, of any size, in the country.
  • That number went down by almost 50 breweries by 1984.
  • Now that number is over 3,000 and there are new breweries constantly being born across the country.
In the article Koch says the spread of craft beer is good for America, and Fallows agrees noting a link he has seen between a city’s craft beer scene and a young and entrepreneurial spirit. 
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ABCC Investigates Pay-to-Play

According to the Boston Globe the Alcoholic Beverages Control Commission (“ABCC”) has issued subpoenas to breweries, distributors, and retailers as part of an investigation  into whether breweries or distributors have made payments to retailers for shelf and tap space, a practice known as pay-to-play. This practice is illegal under both state and federal law

Examples the Globe gives for what may constitute pay-to-play includes salesman offering a retailer a cut of the commission or marketing budget, a brewer offering to donate additional beer to a restaurant, a bar demanding a rebate for stocking company’s beer, or a distributor giving free equipment.

The Globe article mentions that the ABCC has not sanctioned a a business for pay-to-play in at least 18 years. This coupled with the fact that the number of investigators in the agency is in decline and the number of craft breweries in the state is growing creates an environment where there is more competition for shelf space and less of an opportunity for oversight.

 

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