Tied House Advertising Exceptions Remain Subject to Specific Statutory Conditions
This Industry Advisory is intended to raise awareness that tied house exceptions allowing supplier advertisements and sponsorships at qualifying venues may occur only in compliance with state and federal law.
Disclaimer: The Alcoholic Beverage Control regularly archives industry advisories for transparency and historical reference. However, the advisories may not necessarily reflect the current state of the discussed statute or regulation. Please consult the statute, regulation, and/or an attorney before taking any action to ensure compliance with the law.
This advisory is a reminder to ABC licensees that they must comply with all state and federal laws regarding business practices, including those related to antitrust protections under tied house laws. Tied house law is one of the foundations of the three-tier system in the ABC Act and broadly prohibits licensees from vertical integration between suppliers and retailers as well as unlawful inducements by or for either a retailer or a supplier, even if those retailers are temporarily licensed or operate in a location that have been granted a limited advertising exception.
Business and Professions Code sections 25500 and 25502 prohibit all suppliers from giving things of value, which include joint advertising and sponsorships not otherwise specifically authorized, to any retail license. These sections also prohibit suppliers from furnishing, giving, or lending money to a retailer. These prohibitions extend to retailers holding permanent licenses as well as temporary licenses or permits, such as for festivals or special events like FIFA World Cup or the Olympics, even if the venues they occur in have some sort of exception. Requiring sponsorship or some joint advertising at an event to have product sold there is a violation of the ABC Act.
Although there are many exceptions for suppliers purchasing advertising space at specific exempted locations such as stadiums and other large public venues, any requirement to purchase advertising and sponsorships should in no way be tied to the purchase and sale of the supplier’s product at the retail location, whether permanent or temporary. This is a type of “pay for play” agreement that continues to be prohibited under California law, including to the limited number of retail venues that qualify for advertising exceptions. The law also requires that locations with tied-house exemptions carry competitors’ products of any supplier that purchases advertising and sponsorships under the exceptions.
The Department’s mission includes promoting a fair and equitable alcoholic beverage market, protecting consumers from aggressive or unsafe sales practices in the alcoholic beverage industry, and ensuring minors and those obviously intoxicated are not served alcohol. Ensuring compliance with the three-tier system, promoted by tied house laws, and the prohibition on licensees giving any premium, gift, or free goods in connection with the sale or distribution of alcohol are foundational to these aspects of the mission of the California ABC.
Frequently Asked Questions
How do I find which locations have tied house advertising exceptions?
There are many stadiums, public event spaces, and specific locations that allow suppliers to purchase advertising space or sponsor an event. All of them are in general or specific statutes found in Business and Professions Code section 25503 through 25503.45, inclusive.
What happens when a special event is in an exempted venue?
Any retail license in operation at an exempted venue, whether a permanent or temporary license, can take advantage of the specific tied house joint advertising and sponsorship exemptions. However, they must comply with all of the requirements including not basing access to the event upon a requirement to purchase sponsorship or joint advertising, and having competitors’ products to sponsors and joint advertisers for sale at the location.
Does the Department enforce these laws?
The Department is increasingly looking at these types of dealings between tiers through statutorily sanctioned tied-house exceptions where the requirements for implementation of the exceptions seem to be disregarded. ABC will investigate complaints that it receives to determine if a violation occurred and if exceptions are being used improperly, such as requiring “pay for play” or an exempted venue not treating suppliers equally regardless of whether they participate in sponsorship or joint advertising.
What if a retailer is making the serving of a manufacturer’s alcohol contingent upon the manufacturer purchasing an advertising or sponsorship package?
This would constitute a violation of the ABC Act. Declining to purchase advertising space shall not influence the retailer’s decision to serve the particular brand of alcohol.
Where can I report being solicited for this type of agreement?
The Department accepts complaints, even if submitted anonymously, for tied-house violations at its Trade Enforcement Unit email: [email protected]. You can also contact the unit by phone at (916) 313-7799.
May I report anonymously?
ABC accepts anonymous complaints and if requested will protect the anonymity of the complainant. However, on-record testimony from a licensee bolsters the ability of ABC to successfully make a case.
What about a third-party marketing company?
No privileges of an alcoholic beverage license, including marketing, advertising, or sponsorships, can be effectuated without an ABC license. If a licensee chooses to hire a third-party company to perform any of these functions on their behalf, the licensee will be responsible for any third-party actions that would constitute a violation of the ABC Act.
What are the basic elements of Tied House Law?
The Department recently issued a reminder for tied-house practices and pay-for-play practices generally which can be found here: Tied House Reminder: Payments Between Retailers and Suppliers | Alcoholic Beverage Control
Contact
Additional information may be obtained by contacting:
Alcoholic Beverage Control
3927 Lennane Drive, Suite 100
Sacramento, CA 95834
Email us at [email protected]
Call (916) 419-2500
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