Insights
Publications

California ABC Issues Industry Advisory on Outsourcing Marketing, Compliance and Logistics

6/18/2009 Articles

California ABC recently issued an advisory to respond generally to the explosion of service providers that enable wineries to outsource one or more components of their D2C and D2T channels.  Click here to read the advisory.

Activities Requiring Licenses:  The Department describes when third party providers require a license.  In California a license is required when a business sells (transfers title), solicits a sale or delivers alcohol pursuant to an order. (B&P Code 23025)  If interpreted according to its plain language, the definition of sale would require the following types of businesses to obtain licenses to sell wine:  delivery companies, credit card companies that offer wine to certain cardholders, banks with loyalty programs, florists that offer wine through retail partners, airlines, and many more.  To avoid opening Pandora's box, ABC offers some exceptions.  ABC allows a delivery company under the express direction of a licensee to operate without a license.  The Advisory does not offer the same exception for a website that makes an offer to sell at the direction of a licensee.  However, if a website merely publishes an offer made by a winery this would not be a solicitation by the web provider. If ABC were to hold otherwise, every media publication in California accepting winery advertisements would require a license.  The Advisory does make clear that when selecting a marketing service provider, the winery or licensee must retain control of business decisions and core operations such as pricing, making offers, transferring title and directing delivery.

Tied House Risks:  Beyond the cautions on unlicensed sales, ABC reminds wineries that they cannot pay retailers for advertising.  Wineries cannot pay online storefronts licensed to sell as retailers for  loading content, posting any material, or any advertising whatsoever.  The retailer only can receive money from its markup and sale of the wine products.  In some instances, the winery can pay for additional services such as age verification and compliance services.

Nothing is Free:  ABC reminds industry that no free goods or premiums may be provided in connection with the marketing and sale of alcoholic beverages.  This includes free shipping.  Shipping may be included the price but it cannot be offered as free shipping.

Consignment Sales:  Federal and state beverage alcohol laws prohibit consignment sales.  Attempts to improve inventory management through just in time logistics can be problematic for innovative service companies.  A licensee must sell alcoholic beverages to which they have title.  Inventory cannot be returned if unsold.  Any just in time delivery solutions should be carefully examined to ensure that the transaction is not a disguised consignment sale.

The web of federal and California law is full of traps for the unwary.  ABC's advisory identifies many of the traps without offering solutions.  Businesses must examine the totality of the circumstances and ensure that the essential elements of each transaction and control of these elements rest with licensees. 

Resources

Firm Highlights

News

Katherine Philippakis Named Among the Top Women Lawyers in California by Daily Journal

Farella Braun + Martel is proud to announce the selection of partner Katherine Philippakis to the Daily Journal ’s 2022 list of California’s "Top Women Lawyers." The annual list honors the achievements of leading...

Read More
Publication

Preparing Your Wine Business for California's New 2022 Employment Laws

Farella employment lawyers Chandra Andrade and Rebecca Stephens discuss California's new employment laws affecting wine businesses, what to look for, and what to do next, including: Template employment document updates in light of amendments to...

Read More
Publication

Mitigating the Uncertainty of Smoke Taint in Wine Grapes

Smoke taint has dominated the worries of the California wine industry recent years. With unsettled climate conditions and continued droughts, there is no reason to think that smoke taint will not continue to be...

Read More
Publication

Navigating the Wine Industry’s Property Insurance Conundrum

Property insurance is both a prudent choice by a business, as well as, in certain circumstances, a requirement, such as when a winery borrows money from a bank or commercial lender. If and when...

Read More
News

Website lawsuits, events regulations, environmental rules: What’s new in California wine business law

Katherine Philippakis submitted commentary for the North Bay Business Journal article, "Website lawsuits, events regulations, environmental rules: What’s new in California wine business law." Read the full article here .

Read More
Publication

Disaster Matters: Property Insurance and the Wine Industry

Farella's Alexis Sinclair with guest speakers: Marc Levine from California's 10th Assembly District, Michael Miiller from California Association of Winegrape Growers, Mike Ryan from InterWest, and Jed Taborski from Silicon Valley Bank, discuss "Disaster Matters...

Read More
News

Farella Represents Miller Family on Sale of The Silverado Vineyards

Wine Grapevine Image
Read More
Publication

Napa County Land Use Update: What You Should Know About Developments in the Local and State Regulatory Arena (Webinar)

Speakers, Katherine Philippakis, Rick Tooker, and Rachel Lenihan discuss "Napa County Land Use Update: What You Should Know About Developments in the Local and State Regulatory Arena." As property owners plan new or expanded...

Read More