[caption id="attachment_44898" align="alignright" width="350" caption="Dickenson Peatman & Fogarty attorneys (clockwise from top left) Tom Carey, Jennifer Phillips, Bahaneh Hobel and Michael Mann"][/caption]
Important laws and regulations affecting members of the California wine and alcohol beverage industry in 2012 include clarification on third-party marketing and promotions, a new direct-to-consumer wine retail license, permission for on-premise infusion of wine and spirits with flavors, a change in the definition of "distilled spirits" for taxation purposes, new state Russian River frost-protection water rules and agricultural union elections law changes.Clarification on third-party marketing, promotions
On Nov. 1, the California Department of Alcoholic Beverage Control (ABC) issued a new industry advisory regarding third-party providers (TPPs) to address industry confusion. "Unlicensed entities that are involved with the promotion, marketing and facilitation of sales of alcoholic beverages by licensees over the Internet" can facilitate the sale of wine over the Internet, provided the benefited alcoholic beverage licensee at all times retains control over all sales transactions, including all decisions regarding pricing, selection, shipping and fulfillment, according to the advisory.
A TPP would be permitted to place advertising for an alcoholic beverage at the direction of a licensee, make buying recommendations to a consumer, direct consumers to specific licensees, receive orders and pass them on to the licensee for acceptance and fulfillment, process payments -- the licensee ultimately must control the funds and the flow of funds -- and assist with shipping arrangements. TPPs may be compensated for their services, so long as the compensation is reasonable and does not result in any "actual or de facto control" over the licensee by the TPP.
TPPs and the licensees with whom they work continue to be subject ABC's prohibition on the giving of "free goods," which includes no free shipping. While the ABC still retains a great deal of discretion in reviewing relationships between TPPs and industry members, the TPP Advisory has clarified the scope of permissible activities for TPPs and has provided industry members some much needed guidance with respect to their relationships with TPPs. --Bahaneh Hobel and Michael MannNew direct-to-consumer off-sale retail license
Effective Jan. 1, a new ABC type 85 limited off-sale retail wine license will be available in California. Previously, any licensees that were interested in selling wine to consumers by Internet, phone or mail order (without a retail storefront), were required to obtain two licenses -- a type 17 wine and beer wholesalers license and a type 20 off-sale beer and wine license. Such operations were permitted via direct mail, telephone or the Internet so long as the licensee also made sales to a licensed retailer (as opposed to a consumer) at least every 45 days.
Now, the holder of a new type 85 license may make direct sales to consumers without also being required to make sales to licensed retailers at the wholesale level. Current type 17/20 licensees could therefore transition to the new license and conduct consumer-only sales.
However, a type 85 licensee is still only permitted to solicit and accept sales via direct mail, telephone or the Internet. No sales from a retail premises open to the public (i.e., from a "storefront") are permitted. --Bahaneh Hobel and Michael MannRestaurants, other on-sale licensees can infuse spirits, wine
Section 23016 of the California Business and Professions Code was recently amended to allow on-sale licensees, including restaurants, to infuse spirits and wine with flavors or blending processes. Previously, the practice of infusing spirits and wines with fruits or flavoring, often done by restaurants throughout California, was prohibited.