Posted on | December 4, 2013
Written by | Keven Danow and Arielle Albert
On November 6th, 2013, the New York State Liquor Authority denied a liquor license for a package store to Fresh Direct LLC (“Fresh Direct”). Fresh Direct is an online grocer that delivers to customers in the New York metropolitan area. Recently it filed an application seeking a liquor license for a 100-square-foot package store to be located in one of its warehouse facilities. The warehouse is located in a remote area adjacent to Newtown Creek in Brooklyn. Although Fresh Direct represented that consumers would be permitted to purchase wine and spirits at the store, it admitted it intended that 90% or more of the product sold from this location would be sold over the internet.
In recent years, The Retailers Alliance has led a consistent battle against those seeking to expand the definition of package store to include virtual stores. As a part of that effort, The Retailers Alliance opposed Fresh Direct’s application. It used the remote location and the small size of the proposed store as evidence of Fresh Direct’s intention to operate a store which would almost never be visited by a consumer. It then argued that it is a basic tenet of New York Alcohol Beverage Control Law that a license only be granted to a bona fide retail store open to the general public.
New York’s statutory scheme is based upon the concept that the individuals operating a package store should be members of the local community. Local responsibility fosters temperance. The idea of a virtual store is inconsistent with that concept. While technology has evolved and internet sales have grown exponentially, the requirement for a bona fide store operating out of a brick and mortar location remains a central part of New York’s legal scheme.
In denying Fresh Direct’s application, Chairman Rosen reiterated that maintaining a “level playing field” remains a primary goal of the Agency. Package store owners have been operating under a legal paradigm that requires them to operate out of a brick and mortar store, open to the general public and located in a place which serves the public convenience and advantage.
Avoiding a Virtual Precedent
Approval of Fresh Direct’s application would have represented the Authority’s acquiescence to the concept of the virtual store. Thereafter, companies would be permitted to create small package stores in remote areas as a way to symbolically comply with the law, while in reality all sales would take place over the internet. The operating cost of the virtual stores would be much less than that of a true bona fide store. Approval of such a business model would create a significant inequality among industry members.
The Chairman expressed admiration for Fresh Direct. However, he noted that approval of the license would constitute a great departure from the method of operation historically approved in New York. Chairman Rosen and Commissioner Greene expressed the Authority’s opinion that such a change must be addressed legislatively.
The Authority has sent a clear message to the Industry: Off-premise licensees must operate a bona fide package store, open to the public. Any attempt to create a “symbolic” store as a way of circumventing this requirement will be rejected. Any existing off-premise licensee that is not operating such a store will be subject to non-bona fide charge.
Out With the Old Form, In With the New
The New York State Liquor Authority has revised the form and instructions for its application for retail licenses. Look for the new form on the SLA website. The Authority will accept applications filed with the older version of the retail application only until November 30th, 2