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Know The Law: Adjustments at the SLA: Social Media, Enforcement, NYS Brewers Among the Changes Affected

Posted on  | May 2, 2012   Bookmark and Share
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Over recent months, the New York State Liquor Authority (“SLA”) has issued a number of declaratory rulings, notices and decisions of interest.

Groupons and Living Social

The Internet is changing the hospitality industry at the speed of clicks. Groupon and Living Social recently made separate requests to the SLA for declaratory rulings. In both cases, the SLA authorized the proposed business model. Groupon and Living Social are third party providers. Each enters into agreements with on-premise licensees in New York.

Groupon sells coupons at a reduced price. For instance, Groupon might sell a coupon for $50 which can be redeemed at a named restaurant for food and beverages with a menu price of $100.

The Internet is changing the hospitality industry at the speed of clicks. Groupon and Living Social recently made separate requests to the SLA for declaratory rulings. In both cases, the SLA authorized the proposed business model. Groupon and Living Social are third party providers. Each enters into agreements with on-premise licensees in New York.

Groupon sells coupons at a reduced price. For instance, Groupon might sell a coupon for $50 which can be redeemed at a named restaurant for food and beverages with a menu price of $100.

Living Social maintains a large database of subscribers. Those subscribers regularly visit a variety of web-based marketing platforms hosted by Living Social in search of interesting offers. Licensees pay a marketing fee to Living Social for advertising and to develop offers that will appeal to subscribers. Because the plan offered by it was more flexible than that offered by Groupon, the restrictions placed upon Living Social more fully set forth the SLA’s position in connection with this type of offer. They are:

1. Offers may not include unlimited alcoholic drinks and alcoholic drinks may not be discounted more than 50%.

2. Offers may not be exclusively for alcoholic beverages.

3. The licensee at all times remains responsible for the service and sale of alcohol in accordance with the Alcoholic Beverage Control Law ( “ABCL”), and can always refuse service or sale in accordance with the law.

4. Each licensee at all times remains solely responsible for holding the appropriate license for sale of alcohol and remaining in good standing with the Authority.

5. Living Social will not have any interest in the ownership, management or business operations of a licensee.

6. Licensees can pay a reasonable marketing fee to Living Social for its services.

7. Licensees must keep records of all payments made to Living Social and such records of payment must be made available to the Authority on request.

8. No licensee may pay Living Social more than 10% of their revenues annually.

9. No licensee may enter into an agreement with Living Social wherein Living Social is entitled to receive a percentage of the licensee’s revenues (other than a percentage fee per offer sold based on the value of the offer).

Enforcement of Laws Related to Sales to Minors

The SLA works with local police and other enforcement agencies to combat sale of beverage alcohol to minors. One of the tools used in connection with these investigations has been the use of underage high school and college students as investigative agents. In the past, these underage agents were instructed to give a truthful answer, if asked their age at the point of purchase. This is no longer the case. Now, if a retail licensee asks an investigative agent his or age, the agent is instructed to claim to be over 21. The Authority believes that a real underage purchaser would give a similar answer if asked. New York’s underage sale law (Section 65-b of the ABCL) imposes strict liability upon a licensee. The only excuse which can be offered is that the purchaser presented acceptable proof which appeared to be genuine on its face. The statute lists the only acceptable proof:

(i) a valid driver’s license or non-driver identification card issued in the U.S. or Canada; within the United States or a provincial government, or (ii) a valid passport issued by the United States government or any other country; or (iii) an identification card issued by the armed forces of the United States.
Do not just ask; proof!

Brewers Brand Label Fee Exception Unconstitutional
Under section 107-a (4)(g) of the ABC Law, New York State brewers, producing beer in batches of 1,500 barrels or less, were exempt from paying the brand label registration fee. This provision has been declared to be unconstitutional in that it gave a preference to in-state brewers. The SLA will be charging all brewers the same label registration fee.

Kudos to the SLA

New York Law requires that a supplier obtain approval of labels for beer, spirits, wine products and low alcohol wine. At one time the label approval processes took so long that the industry relied heavily upon a provision in the ABCL which allowed the supplier to consider an application approved if sent to the Liquor Authority via certified or registered mail or overnight carrier and not acted upon within 30 days. Today, the backlog is gone and the turnaround time for label approval is one or two weeks. Congratulations to the men and women at the Liquor Authority!


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