Statutory vagueness leaves some room for interpretation of prohibitions and exemptions, but ultimately, if an inducement leads to lack of retailer independence or exclusion of brands as a result of illegal inducements, then the activity is likely an improper pay-to-play scheme. Even with better compliance guidance, today, tied house laws are often viewed as a relic of the past needing an aggressive remodel. If read literally, the black letter law of most trade practice and tied house regulations leaves little if any room for cooperative advertising or support between industry members that may be beneficial for product innovation and retailer growth. The legislators of the 1930's surely could not have imagined the diversity of brands and retail outlets and certainly not the explosion of social media and internet advertising. Many of the monetary restrictions on permissible "gifts" don't fit into our modern economy or the inflated costs of typically permissible products or advertising. Unfortunately, these restrictions leave alcohol products outside the typically permissible business negotiations common for gaining favorable shelf space for non-alcoholic products. At this point in history, other regulated product industries, such as the cannabis industry, enjoy a flexibility in joint tier efforts and advertising, even ownership, that is closed off for alcohol industry members. These factors, viewed collectively with our modern economy and age of social media and the expansion of other regulated products, screams for modernization of our trade practice and tied house laws. Of course, some regulation is undoubtedly needed to ensure the
industry remains diverse and accessible to smaller producers. The current system, however, has not been effective in its protection and efforts to level the playing field. Recent enforcement cases evidence a lack of interest in embracing the rules as the types of violations throughout the years seem repetitive, and violations are tied to all industry segments, including large suppliers and even craft producers. Instead of preventing the game, regulators and industry members can focus on development of more commercially reasonable rules that support legitimate business interests. Industry members can recognize the pros and cons to tied house regulations. But, if regulators could start from scratch, as other regulated product industries have done, would they regulate the alcohol industry under such an inflexible three tier segregation scheme? Our historic regulatory foundation should have enough flexibility to serve the modern commercial needs of our industry rather than frustrate collaboration and free economic choice while exhausting enforcement resources.
Marbet Lewis focuses her practice on the laws governing the alcohol industry and the manufacture, importation, and sale of alcohol beverage products. She represents clients in all aspects of alcohol business licensing, national alcohol licensee mergers and acquisitions, negotiation of asset purchase agreements and required alcohol use provisions, license transfers and licensing due diligence, trade practices, contracting between industry members, industry member relationships, alcohol product advertising and review of marketing agreements, importation agreements, label approvals, and regulatory compliance guidance.
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Published on Sep 19, 2017