Cal ABC Advisory- Interpretation
Here’s the caveat- I am not a lawyer, have no legal authority, and am not in any way trying to give advice. I am sharing an interpretation of the Advisory.
The California Department of Alcoholic Beverage Control (Cal ABC) has put forth a set of guidelines to try and help Licensees and Third Party Providers understand what is permissible.
As always, one should consult with a lawyer before taking any action that is regulated by the government.
(Seriously, people… talk to a lawyer… the following is an opinion from one person)
First, some definitions:
- Licensee: In this context, think of it has a winery or a retailer (that sells wine)
- Third Party Provider (TPP): An Unlicensed entity trying to aid a Licensee in the course of doing business… particularly, but not limited to, those that help Licensees sell wine over the Internet.
Guidelines :
- Don’t do anything illegal! This applies to the Licensees and TPPs (and to citizens in general. Which should have been obvious, but thought I’d throw that in)
- Licensees are responsible for their TPPs. This means that, ultimately, the Licensee must determine what the correct course of action is, given the constraints of its license. The TPP ought to be as transparent in its activities as possible in order to facilitate the Licensee’s decision making process
What’s new: This is a guideline many would consider to be ‘new’. Previously, it was, at best, unclear if a TPP could actually facilitate a Licensee selling its wine.
- TPPs cannot give away ‘free goods’. This is a complicated, nuanced idea that centers around Business and Professions Code section 25600 . The net is that a TPP can’t provide a consumer a thing of value that a Licensee could not provide itself. Sound complex? It is. Guiding principle- a TPP cannot help a Licensee circumvent the constraints of its license.
- And unlicensed entity cannot ship wine.
- A TPP can ‘solicit’ a sale but cannot ‘complete’ a sale. The difference comes down to the idea of control. A Licensee must formally accept each and every sale and have total control over all funds resulting from that sale. This makes sense in the context of a Licensee being responsible for its TPPs, the guidelines of generally complying with the law, and making sure that TPPs do not help a Licensee circumvent the rules.
Think of it as a ‘control’ clause. A TPP can be out in the world advertising, it can be the one that charges the consumer’s credit card, but the Licensee must ultimately be in control. A real world, but hypothetical example: Just because Mastercard might facilitate a sale through its credit card (physical piece of plastic, financial processing systems, etc), the Licensee still has to decide if it will accept the sale. The Licensee is responsible for ensuring that the end consumer is of legal age and procuring the wine in a generally allowable manner.
Since the Licensee is the ultimate ‘responsible’ party, it cannot enter into any agreement where it cedes control to an unlicensed entity. That applies to how sales are ultimately finalized, how TPPs are compensated (a TPPs compensation cannot put it in effective control over the Licensee’s business).
What’s new: This guideline is a massive clarification on prior guidelines. Without it, there was not a clear set of principles under which a third party (unlicensed) entity could sell wine on the Internet. Yes, there have been, and currently are a number of, websites that sell wine on the Internet. The difference between today and ‘yesterday’ is that there are now guidelines from the California Alcoholic Beverage Commission on how a TPP can do while still adhering to best practices, regulations, and the law.
This will have the downstream impact of bringing new, sophisticated eCommerce players into the industry. The benefits are massive:
- For Consumers: Better information, transparent pricing, ease of transaction, and connections with the artisanal producers (wineries)
- For Wineries: Ability to use commercially standard tools – online advertising, marketplace/affiliate type partnerships online and in mobile commerce, etc – to enhance its business, general sales expansion, an ability to connect and communicate with a larger pool of consumers