No. 27028 (Amendment): R81-1-21. Beer Advertising in Event Venues

DAR File No.: 27028
Filed: 04/01/2004, 09:48
Received by: NL

 

RULE ANALYSIS

Purpose of the rule or reason for the change:

The Utah Administrative Rulemaking Act was amended in 2003 to provide that an agency's written statements that restrict the legal rights of a public class of persons or another agency must be in rule and go through the rulemaking process. These provisions were originally adopted as an internal department policy, but are now being proposed as an amendment to the department's administrative rules to conform with the Rulemaking Act. (DAR NOTE: The Utah Administrative Rulemaking Act was amended by S.B. 30 (2003), which is found at UT L 2003 Ch 197, and was effective May 5, 2003.)

 

Summary of the rule or change:

This proposed amendment to Rule R81-1 establishes a "safe harbor" from administrative action being taken against beer manufacturers and retailers who choose to purchase advertising space and/or time at large facilities such as sports arenas, ballparks, raceways, fairgrounds, equestrian facilities, etc. The provisions of this proposed rule outline circumstances and conditions when this type of advertising does not violate the "tied-house" provisions of Section 32A-12-603.

 

State statutory or constitutional authorization for this rule:

Section 32A-1-107 and Subsection 32A-12-401(4)

 

Anticipated cost or savings to:

the state budget:

None--This proposed rule amendment does not affect a cost or savings to the state budget. It only establishes guidelines for beer manufacturers and retailers when advertising beer products at large facilities.

 

local governments:

None--Though some large facilities are owned and operated by local governments, this proposed amendment will not affect a cost or savings to local governments. The amendment is proposed to establish guidelines for advertising by beer manufacturers at these facilities.

 

other persons:

None--This proposed rule amendment does not provide a cost or savings to other persons. It only establishes "safe harbor" guidelines and limitations for the advertising of beer products by manufacturers and retailers at large facilities.

 

Compliance costs for affected persons:

Both beer manufacturers and retailers have an interest in advertising beer products in large facilities. Such advertising may have the appearance of being in violation of "tied-house" laws. This proposed rule amendment will not result in additional compliance costs for the affected persons, but will establish guidelines to keep those affected persons from potential administrative action for violating "tied-house" laws.

 

Comments by the department head on the fiscal impact the rule may have on businesses:

This proposed rule should not fiscally impact the businesses involved. In fact, adherence to the provisions of this proposed rule amendment may potentially save businesses money in that they will not be at risk of violating "tied-house" laws and, therefore, be subject to facing possible fines.

 

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Alcoholic Beverage Control
Administration
1625 S 900 W
SALT LAKE CITY UT 84104-1630

 

Direct questions regarding this rule to:

Sharon Mackay at the above address, by phone at 801-977-6800, by FAX at 801-977-6889, or by Internet E-mail at [e-mail]

 

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

05/17/2004

 

This rule may become effective on:

05/18/2004

 

Authorized by:

Kenneth F. Wynn, Director

 

 

RULE TEXT

R81. Alcoholic Beverage Control, Administration.

R81-1. Scope, Definitions, and General Provisions.

R81-1-21. Beer Advertising in Event Venues.

(1) Authority. This rule is pursuant to the commission's powers and duties as the plenary policymaking body on the subject of alcoholic beverage control under 32A-1-107, and its authority to establish guidelines for the advertising of alcoholic beverages under 32A-12-401(4).

(2) Purpose.

(a) This rule establishes a "safe harbor" from administrative action being taken against beer manufacturers and retailers under the circumstances and conditions below. This rule is necessary to allow certain advertising relations to occur even though they have the appearance of violating the "tied-house" provisions of 32A-12-603, but where the reasons and purposes for the "tied-house" provisions do not apply.

(b) "Tied-house" provisions have been enacted at both the federal and state level in response to historical forces and concerns. The thrust of the laws is to prevent two particular dangers: the ability and potential ability of large firms to dominate local markets through vertical and horizontal integration, and excessive sales of alcoholic beverages produced by overly aggressive marketing techniques. The principle method used to avoid these developments was the establishment of a triple-tiered distribution system and licensing scheme where separate and distinct business enterprises engaged in the production, handling, and final sale of alcoholic beverages. The laws also prohibited certain economic arrangements and agreements between each of the three tiers of the distribution system.

(c) Utah's "tied-house" and trade practice laws prohibit a beer industry member, directly or indirectly or through an affiliate, from inducing any beer retailer to purchase alcoholic beverages from the industry member to the exclusion in whole or in part of any of those products sold or offered for sale by other persons by furnishing the retailer signs, money or other things of value except to the extent allowed under 32A-12-603. The laws prohibit a beer industry member, directly or indirectly or through an affiliate, from paying or crediting a beer retailer for any advertising, display, or distribution service. 32A-12-603(5). This includes the purchase, by an industry member, of advertising on signs, scoreboards, programs, scorecards, and the like at ballparks, racetracks or stadiums, from the retail concessionaire. See 27 C.F.R. Sec. 6.53 as referenced in 32A-12-603(5)(a). The laws also prohibit an industry member from making payments for advertising to a retailer association or a display company where the resulting benefits flow to the individual retailers. 32A-12-603(3)(b)(i)(A).

(d) Throughout the state, there are a number of large facilities which put on or allow events to occur on their premises. This includes sports arenas, ballparks, raceways, fairgrounds, equestrian facilities and the like. These facilities have a recognized area of advertising for sale in connection with the events and which is standard for their events, e.g., fence signage at ballparks. Many of these facilities are or have associated with their on-premise beer retailer, either on an annual basis, or as a temporary event permit holder. The issue is thus raised as to the legality of the advertising of beer products as part of the general advertising where other items are advertised and the facility is or has within it an on-premise beer retailer.

(3) Application of the Rule. If the conditions listed below are met, the reasons and purposes behind the "tied-house" provisions restricting relations between manufacturers and retailers do no apply or are not significantly impacted. In addition, an event facility may be unduly restricted in its ability to sell advertising and be competitive. This is based upon the facilities's primary purpose being other than the sale of food and beverages, that advertising is a normal and accepted part of the business of the facility and the events that occur at the facility, that beer advertisers would be on equal footing with other advertisers, and that there is little, if any, likelihood of the purchasing of advertising space or time either having an impact on the beer retailing decisions of the retailer or of allowing the manufacturer to obtain or assert control over the retailer. Therefore, if the following conditions are met, the sale of advertising space or time to a beer manufacturer for display at the facility does not constitute the payment to a retailer for advertising, display or distribution service, and does not otherwise constitute the furnishing of any signs, money, or other things of value to a retailer in violation of the "tied-house" provisions of 32A-12-603:

(a) The primary purpose of the facility is the hosting or putting on events, and not the sale or service of food and beverages, including alcoholic beverages;

(b) The retail licensee operates with a fixed seating capacity of more than 2,000 persons;

(c) The advertising space or time is purchased only in connection with events to be held on the premises, and not as point-of-sale advertising. The advertising space or time is not located near the beer concession area and does not reference the on-premise retailer or the availability of beer;

(d) Sales of event advertising space or time and retail beer sales are handled by different entities or divisions, that are separate and do not influence each other, and no preference in terms of beer sales or facilities are extended to a beer advertiser;

(e) The retail licensee serves other brands of malt beverages or beer than the brand manufactured or sold by the manufacturer purchasing advertising space or time. Unless demonstrated for sound business reasons unrelated to "tied-house" laws, the number of taps in a facility may not exceed by 10% the actual volume of sales, by brand, in that facility or the community in the previous year;

(f) The advertising space or time is available to all types of advertisers, is not limited to any type of product, such as beer, is pursuant to an established rate card that sets forth the advertising rates equally available to any other industry member or (and at rates substantially similar for any) non-industry advertiser, and the advertising agreement does not provide for an exclusive right to an advertiser or a right to exclude other advertisers;

(g) The industry member may not share in the costs or contribute to the costs of the advertising or promotion of the beer retailer or the facility, or obtain or have any interest in the retailer or the facility; and

(h) The purchase of advertising space or time is by written agreement, a copy of which shall be provided to the department as a confidential business document, non-public, and only to be used for enforcement purposes, and the term of the agreement may not be for a period in excess of three years, including any right of renewal.

(4) This "safe harbor" is limited to its express terms, does not undermine or infringe upon general "tied-house" prohibitions, and shall be strictly construed against its applicability. This "safe harbor" also does not limit or abrogate any exception to "tied-house" prohibitions.

 

KEY: alcoholic beverages

[August 1, 2003]2004

Notice of Continuation December 26, 2001

32A-1-107

32A-1-119(5)(c)

32A-3-103(1)(a)

32A-4-103(1)(a)

32A-4-203(1)(a)

32A-5-103(3)(c)

32A-6-103(2)(a)

32A-7-103(2)(a)

32A-8-103(1)(a)

32A-9-103(1)(a)

32A-10-203(1)(a)

32A-11-103(1)(a)