Tied-House Tweets - California ABC Cautions Alcohol Industry Members

 

Two days till @SaveMart Grape Escape in Downtown #Sacramento!
Get tickets and info here.

    

This summer, a simple tweet, promoting the "Grape Escape" wine tasting in Sacramento, California, could have resulted in a ten-day license suspension for the winery that tweeted it.  

Revolution Wines, located in Sacramento, California, actually had re-tweeted this post from the Sacramento Convention and Visitors Bureau's Twitter Feed.   The problem is that Save Mart Supermarkets, which was hosting the "Grape Escape" wine tasting event on June 7, 2014, is a licensed retailer.  According to the California Department of Alcoholic Beverage Control, the tweet was a violation of the state’s tied-house evil law because it entailed a supplier conveying a benefit to a retailer.

By identifying the retailer in its tweet, Revolution Wines had violated California’s "tied-house" prohibition against wineries and wholesale distributors providing things of value to retailers.  Tied-house evil laws were promulgated in all 50 states, including California, shortly after the repeal of Prohibition to insulate retailers from the undue influence and manipulative control of upper-tier industry members – a problem that flourished during the bad, old days of the Saloon Era and helped contribute to the passage of the Eighteenth Amendment that created Prohibition. 

Codified in Sections 25500 - 25512 of the California Business and Professions Code related to the alcohol industry, California’s tied-house laws generally prohibit manufacturers, wholesalers and their respective agents from furnishing, giving or lending, directly or indirectly, anything of value.  While numerous exceptions have been legislated over the years, those tied-house laws still expressly prohibit producers from promoting particular retailers.

Historically, those prohibitions have prevented wineries from advertising in a way that identifies a particular retailer as opposed to an ad that identifies multiple retailers, so that no one licensee derives a special benefit. Likewise, tied-house laws typically prevent suppliers from engaging in marketing activities that focus on or benefit a single, specific retailer.

Reconciling tied-house rules in the Internet Era, however, is producing a new set of 21st Century challenges.  Social media platforms are becoming both ubiquitous and indispensable – not only for marketing and advertising, but even for simple communication. 

In the case of the Save Mart Grape Escape, Revolution Wines had a bona fide self-interest in promoting a wine-tasting event where Sacramento wineries like itself would be featured.  Yet, how do you tell your friends and followers about the Save Mart Grape Escape, taking place in downtown Sacramento, without conveying something of value to the retailer by identifying the event and its location?  Perhaps even more to the point: How do you quantify the value of a tweet?

The California ABC has an answer.  The regulators construed a tweet from a winery employee identifying a supermarket’s wine event as an alcohol supplier furnishing free advertising for the benefit of a retailer in contravention of the state’s tied-house laws. 

According to published reports over the incident, the ABC actually investigated eight local wineries and breweries for social media activity mentioning the Save Mart Grape Escape event. Each alcohol beverage manufacturer was required by the ABC to turn over all social media postings and emails related to the event.  The ABC also sent all eight suppliers letters threatening to suspend their licenses for ten days; alternatively, the businesses could admit to the offense and be placed on probation for one year.  Any further violations would cause the ten-day suspension to go into effect, a scenario that could cost an affected producer thousands of dollars in revenue.  Revolution Wines and the other Save Mart Grape Escape participants investigated by the ABC all avoided the ten-day suspension of their licenses by accepting a year's probation as a penalty. 

As it turns out, the manager of Revolution Wines was knowledgeable about California’s tied-house evil laws, and the general prohibition against promoting specific retailers.  The problem arose when a tasting room employee who was not as knowledgeable about tied-house laws resent the tweet. 

All of which further underscores the challenges associated with compliance and enforcement of  tied-house evil laws in the 21st Century.  Tweeting for many Millennials is the equivalent of personal speech.  If a tasting room employee sends an isolated tweet about a retailer, or a retailer event, is that a material violation warranting enforcement? 

While no specific guidelines have yet been established, a few solid industry "best practices" are worth noting:

  1. Upper-tier industry members should educate ALL employees about the tied-house laws and their enforcement;
  2. Expressly prohibit communications referencing any licensed retailer without prior approval from a representative of management;
  3. Mandate that personal tweets, Instgram postings, and other communications should be sent from personal accounts, and NOT from corporate accounts that could implicate the company.