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NALCP Conference: Growler/Crowler Session Was a Hit!

NALCP Conference: Growler/Crowler Session Was a Hit!

Our session on growlers and crowlers was a big hit in New Orleans.  Speaking to nearly a full room, our speakers hit it out of the park.  Attendees were engaged, asking questions, and busily taking notes.

Thank you so much!

Attendees learned about the difference between growlers and crowlers, the regulatory issues presented by selling them, the scope and nature of the license privileges related to growlers and crowlers, the varied regulatory landscape across jurisdictions, the public safety issues presented by growlers, and best practices in setting up a growler/crowler business.

Another big thank you to Jeremy and Meg and Oskar Blues for bringing a crowler machine to the conference and demoing it with hundreds of cans with the NALCP logo at the trade show.

Oregon and Washington continue to be pioneers in the growler and crowler arena.  This success has been driven in part by the OLCC and WSLCB, thoughtful laws and rules, engaged industry groups and members, and the innovative alcohol beverage businesses in the Pacific Northwest.

Looking forward to next year’s conference in San Diego!

NALCP Conference in New Orleans: Great First Day

NALCP Conference in New Orleans: Great First Day

We just wrapped up the first day of the educational programing for the National Association of Licensing and Compliance Professionals (“NALCP”) Conference in New Orleans!  Who dat?

The first day’s agenda was packed with interesting content.  Most notably for the Pacific Northwest, Rick Garza–the director of the Washington State Liquor and Cannabis Board–discussed trade practice issues that have recently come to light in Washington.  He described the Board’s renewed focus on trade practice issues in Washington resulting from both recent occurrences in Washington and trends nationwide.

In short, licensees at all three tiers in Washington should consider themselves on notice that the Board will be investigating how they interact in marketing and promoting their alcohol beverage products.  For example, Washington retailers should be wary of receiving money or money’s worth from suppliers or distributors unless clearly covered by a statutory exception, or letting suppliers or distributors take a material role in determining the marketing or arranging of alcohol inventory at their location.  These are just two examples of potential trade practice related issues.

After focusing on the role out of cannabis in Washington for the last several years, Washington licensees should be prepared for a renewed focus by the Board on alcohol regulatory compliance issues.

Now, the conference turns toward its social agenda for the evening.  Northwest Alcohol Law is the proud sponsor of Colin Lake–the musical entertainer for tonight’s meet and greet.  We’re then heading to John Besh‘s Borgne for dinner followed by a night cap at Legacy Kitchen.  Let me know if anyone has a suggestion for late night entertainment in NOLA.




Multnomah County Tobacco Retailers License Applications Begin July 1

If your business is located in Multnomah County and sells tobacco or vaping products, you should be aware of a 2015 Multnomah County ordinance and the related Multnomah County Health Department rules that will become effective in July 2016.

Beginning on July 1, 2016, any retailer who sells tobacco, electronic cigarettes or vaping products in Multnomah County must obtain an annual license.  The license requirement applies to any person or business that sells those products, including but not limited to convenience stores, gas stations, bars, hotels, restaurants and music venues.

The Multnomah County Board of Commissioners passed the ordinance in November 2015 in an effort to reduce minors’ illegal access to tobacco and nicotine products.  The ordinance amends existing Multnomah County law that governs the licensing of tobacco retailers.  The new law includes tobacco, electronic cigarette and vaping retailers, and requires them to obtain an annual tobacco retail license in order to sell “tobacco products,” which are defined to include electronic cigarettes or vaping products that contain or deliver nicotine.  A retailer may only make tobacco products available to people who are the minimum age for tobacco sales and possession – that’s still 18 years old, in Oregon.  Retailers will continue to be required to examine a person’s ID if he or she appears to be under 27 years old.  Failure to check ID will result in sanctions.  Additionally, the ordinance provides that a violation of any tobacco control law – federal, state or local – is a violation of the tobacco retail licensing laws that may result in fines, civil penalties and license suspension.

In this era of food trucks, you should also know that the ordinance prohibits mobile tobacco product sales.  (Just in case you were thinking that a vape-truck was going to be the next big thing. Answer: No.)

A tobacco retail license is required for each address at which tobacco products are available from a retailer.  So, for example, if you have three gas stations, you’ll need a license for each location.  The license fee is $580 and each license will be valid for one year from the date that it is issued.  Like a liquor license, it must be displayed in a prominent and conspicuous place at the licensed premises and it can’t be transferred between people or premises.

Each business that has obtained a tobacco retailer license will be subject to at least one unannounced site-visit per year.  Enforcement is expected to begin in January 2017.  The fines and penalties increase progressively depending on the number of violations.  The first violation will result in a $500 fine and mandatory training.  Subsequent violations within a 60-month period will result in increased fines and license suspension of specified durations.

If your business also sells alcohol, be aware that violations of the tobacco retailer ordinance may be taken into account in liquor license enforcement.  The Multnomah County Department of Health, which will be administering the tobacco retail licensing program, intends to provide education and assistance to retailers to help them comply with the law.

You can find more information about the Multnomah County Tobacco Retail License, including the Tobacco Retail License Ordinance, the Multnomah County Health Department Tobacco Retail License Rules and the license application at  Businesses will be able to apply for a tobacco retail license beginning on July 1, 2016.

Alcohol and Marijuana Go Together Like . . . Oil and Water: They Don’t Mix

Alcohol and Marijuana Go Together Like . . . Oil and Water: They Don’t Mix

The OLCC recently issued formal guidance on recreational marijuana.  In sum, the use of recreational marijuana is not allowed in a public place.  While this may not be a surprise to some, it’s still a secret to many.  Or, more likely, it’s simply widely disregarded.  For those of us living in Portland, it’s not uncommon to see or smell public marijuana use.  Strict enforcement of this prohibition is obviously a tremendous challenge to law enforcement and simply may not be a top priority.  (Hmm . . .what to pursue?  Violent crime or marijuana smokers?)

It’s an entirely different story for businesses with liquor licenses.  Businesses with liquor licenses are considered “public places” and the OLCC is (and has been) making this prohibition a top enforcement priority.

If you operate a licensed business in Oregon, you must be extremely careful when it comes to recreational marijuana.  Oregon law absolutely prohibits the following conduct at licensed businesses:

  1. Using recreational marijuana;
  2. Selling recreational marijuana; or,
  3. Distributing recreational marijuana.
  4. You get the idea: a liquor license means NO RECREATIONAL MARIJUANA!

Even if a licensed business is not currently selling alcohol, it’s still considered a licensed business.  A liquor license applies to the business 24 hours a day, 7 days a week, 365 days a year.  No exceptions.

And, it should go without saying that the prohibitions against recreational marijuana use also apply to illegal recreational drugs too.

The public’s rapidly changing perception about the use, sale and distribution of recreational marijuana poses a significant challenge to licensed businesses.  The public—particularly young people who tend to frequent bars more often—is increasingly coming to accept the public use of marijuana.  They also are more willing to disregard what they perceive to be outdated social conventions about when and where marijuana can be used, even if those social conventions still happen to be supported by current law.  Further, the public is generally neither aware of, nor concerned about, the consequences of their actions on your liquor license.

The practical take away for Oregon licensees is simple: Keep recreational marijuana out of your licensed business!  It is ultimately your responsibility to comply with Oregon law.  Licensed businesses that fail to heed the OLCC’s repeated public pronouncements that marijuana use at licensed premises is a top enforcement priority may find their liquor license in serious jeopardy.

UO Annual Law of Beer & Wine Event

UO Annual Law of Beer & Wine Event

I had the pleasure of sharing my knowledge of beer and wine law with a fantastic group of UO law students last night.  We had an engaging discussion of the practice of law in this space, common legal concerns of businesses in this space, and current issues of interest.

I’d like to thank my co-panelists for their contributions to the success of the event:

I also enjoyed sticking around for the next panel and appreciated the experience and hard earned wisdom shared by Mark Williams—the owner of Oregon Wine Lab—and Edward Fus—owner of Angel Vine.  After listening to Mark and Ed, I’ll be stopping by their tasting rooms soon and recommend you do the same!

I hope that the students got as much out of the presentations and Q&A sessions as I did.

Cautionary Tales for Suppliers and Distributors Playing Fast and Loose with Trade Practice Laws.

Cautionary Tales for Suppliers and Distributors Playing Fast and Loose with Trade Practice Laws.

Spoiler alert. Violating trade practice laws can be expensive, both at the federal and state level. Suppliers and distributors should be cautious in the pushing the boundary in their business practices and promotional efforts. Just because everyone else seems to be doing it won’t be a defense when you are the company that is the subject of an investigation.

Both suppliers and distributors have been in the news recently for alleged trade practice violations. What’s eye catching are the large dollar amounts involved in the settlements: $300,000 and approximately $2.6 million. Amounts that make paying attention to what sometimes can appear to be laxly enforced and esoteric trade practice regulations matter. Interestingly, one settlement is at the federal level and the other at the state level.

The first example centers around the US’s largest brewery—Anheuser-Busch InBev (“InBev”) and reflects action at the federal level.

The Alcohol and Tobacco Tax and Trade Bureau (the “TTB”) recently accepted a $300,000 offer in compromise from InBev. The settlement stemmed from allegations that the company violated Federal Alcohol Administration Consignment Sales provisions under FAA Act 27 USC Section 205(d).  The prohibition is drafted expansively.

More specifically, the TTB alleged that InBev violated the prohibition on alcohol suppliers and distributors from selling their products with the ability of the retailer to later return them. In the TTB’s summary of the offer in compromise, the TTB claimed that violations stemmed from A-B’s Shock Top Lemon Shandy and Shock Top Pumpkin Wheat Ale “end of season buy-back co-op programs.” The program resulted in nearly 541,000 cases being sold to wholesalers last year.  For the math challenged, that breaks down to a fine of about 55 cents a case.

The second cautionary tale comes from Massachusetts.

The largest distributor of craft beers in Massachusetts entered into a settlement and will pay a fine of 2.6 million dollars to avoid a 90-day suspension of its liquor license. Such a sanction will be a record-setting penalty in the state. The basis for the sanction was that the company was caught paying retailers to stock its alcoholic beverage products.

An investigation by the Massachusetts Alcoholic Beverages Control Commission found that the distributor—Craft Brewers Guild of Everett—ran a “pay-to-play” scheme in violation of state alcohol laws for years. Its sales representatives and managers routinely gave retailers in the Boston area thousands of dollars in exchange for stocking beers from Craft Brewers Guild and keeping out products from competing wholesalers.

The company had the option of either serving a 90-day license suspension or paying a fine instead. The sanction was reportedly in the ballpark of $2.6 million.  The Company is likely holding its breath for a call from the TTB.

Long story short here, while enforcement of certain trade practice prohibitions can appear to be uncommon and, thus, unlikely, the magnitude of the repercussion should be front and center when considering entering a grey area, or even a not so grey area. Further, what appears not to be an enforcement priority today can quickly become tomorrow’s top enforcement priority. Staying in compliance with state and federal law is the best practice.

The TTB Issued New Guidance on Kombucha

The TTB Issued New Guidance on Kombucha

The TTB continues to be interested in kombucha.  The federal agency recently published new guidance.  The term “kombucha” refers to a fermented beverage produced from a mixture of steeped tea and sugar, combined with a culture of yeast strains and bacteria.  Some kombucha products also have fruit juice or other flavors added during production.  The combination of sugar and yeast triggers fermentation, which may produce a kombucha with an alcohol content of 0.5% or more alcohol by volume. The TTB is the federal agency that regulates alcohol in the United States and it’s that last issue that has garnered the TTB’s attention.

Kombucha is increasingly popular and hitting more shelves everyday. Manufacturers are lining up to take advantage of the opportunity, but must be mindful of the special regulations that apply to beverages that contain alcohol, or may contain alcohol at some point. The way in which kombucha is made naturally produces alcohol and sometimes in amounts that rise above the 0.5% threshold that triggers regulatory requirements. In such cases, the manufacturer must have the appropriate state and federal permits in order to make and sell the kombucha.

Kombucha can be classified as a beer or wine depending on the primary fermentable ingredient. It would be classified as beer if the predominant fermentable material is sugar or a similar sweetener. It would be classified as wine if the predominant fermentable material is fruit or fruit juice as the fermentable material. Both beer and wine products must also comply with the TTB’s and FDA’s labeling requirements.

The following TTB chart highlights the analysis that each kombucha manufacturer must go through to determine if their kombucha is actually an alcoholic beverage.

Kombucha is AT OR ABOVE 0.5% alcohol by volume at any time

Correct TTB Regulations

Kombucha is NEVER at or above 0.5% alcohol by volume during production, at time of bottling, or after bottling

Correct TTB Regulations

Of course, it’s not so simple because even if the product leaves the manufacturer under the 0.5% limit, the threshold can still be met if the kombucha continues to ferment in the bottle.

In short, a manufacturer must have the appropriate federal and state permits before producing kombucha that contains more than 0.5% alcohol. At the federal level, such a manufacturer would need a Brewer’s Notice if the kombucha is classified as a beer or a Winery Basic Permit if the kombucha is classified as a wine. The manufacturer will need the corresponding state permit also—typically a brewery or winery liquor license respectively.

In addition to the new permitting and labeling requirements, the status of a kombucha product as an alcoholic beverage will also change how the product is distributed and sold at retail.  Navigating the alcohol regulatory environment is truly an adventure.

NCSLA — Central/Western Regional Conference in Seattle

NCSLA — Central/Western Regional Conference in Seattle

Had a great time in Seattle, Washington–meeting great people, learning about new trends, and connecting with state and federal regulators.

We learned about the history of why alcohol is treated differently; technology trends and implications for alcohol; craft breweries, wineries, and distilleries; millennials and alcohol; social responsibility and alcohol; economic development and regulation; and innovation trends in alcohol and regulation.

Looking forward to the upcoming NALCP conference in Austin, Texas October 14-16.

The OLCC Rulemaking Process

The OLCC Rulemaking Process

You can propose changes to the regulations that govern the OLCC.  The regulations that govern the OLCC are found here: OAR 845.  The process of developing or modifying regulations is called rulemaking.  Although rulemaking is often initiated by OLCC staff, individuals or groups may also petition the agency to develop, change, or rescind one of its rules.  In other words, you can potentially change OLCC regulations.  Here’s how … 

Rulemaking by state agencies (including petitions by individuals or groups) is governed by the Administrative Procedures Act (ORS Chapter 183) and the Attorney General’s administrative rules (OAR 137-001-0007 through OAR 137-001-0100).

1) Rulemaking petition filed with agency.
To be accepted, the petition must contain certain legally required sections.  See ORS 183.390 & OAR 137-001-0070. Some of these include the facts and arguments supporting the rule proposal, comments on the complexity of the rule, how technology and economic factors may have changed, and a draft of the proposed rule language.

2) The OLCC accepts and initiates rulemaking, or denies the petition.
Within 90 days of the OLCC’s receipt of the petition, the agency must either accept or deny it. This includes a public notice and comment period, with a report on the petition presented at an upcoming Commission meeting. If Commissioners vote to accept a rulemaking petition, then the normal rulemaking process begins.  The process typically takes six months. The Commission is not bound to the originally proposed language or to making any rule changes once the rulemaking process is complete.  In other words, your proposal could be changed during the rulemaking process.

3) Advisory Committee.
A group of stakeholders representing industry, public safety, and others meet to discuss the initial rule draft(s), give suggestions, and assist with writing a Fiscal Impact Statement.

4) Final rule proposal.
OLCC technical and executive staff take stakeholder input into account and decide on a “Final Staff Draft” of the proposed rule language.

5) Public notice and comment period. 

A notice of proposed rulemaking is filed with the Secretary of State (published in the Oregon Bulletin), a public notice is sent to the OLCC rulemaking notice list, a public hearing is held, and a written comment period is established.  Anyone can submit comments, but comments are typically submitted by various stakeholders.  You can also participate in the rulemaking process generally by submitting comments.

6) Commissioners vote on final action.
The rules coordinator gathers oral and written comments and presents a report to the Commissioners. The Commissioners vote at a Commission meeting on whether or not to adopt the proposed rule amendments. If adopted, the changes are usually effective the first of the month following the meeting.

The rulemaking progress is a great opportunity for you to be involved with how the OLCC regulates licensed businesses in Oregon.

Liquor Liability Insurance: Proposed Rulemaking

Liquor Liability Insurance: Proposed Rulemaking

On April 25, 2014, The OLCC voted to initiate action to amend OAR 845-005-0400.  The rule governs the OLCC’s requirements for certain on-premises licensees to maintain liquor liability insurance.  The existing rule is excerpted below.

The primary changes proposed by the initial rulemaking include the following:

  1. Revised Penalty Schedule for Failing to Maintain Liquor Liability Insurance (“LLI”).  The biggest proposed change is a shift in the proposed sanctions for failing to maintain LLI.  Currently, failing to maintain LLI constitutes a category I violation.  The proposed change shifts this violation off of the existing OLCC penalty schedule entirely.  The current proposed penalty is license cancellation.  In its place, the rulemaking establishes an independent penalty schedule for this violation based on the length of the lapse in LLI.  The proposed penalty schedule is as follows:
    1. If the lapse in coverage is no more than 30 days, the sanction is $1,650 or a 10 day license suspension;
    2. If the lapse in coverage is 31 days, but no more than 60 days, the sanction is $4,950 or a 30 day license suspension;
    3. If the lapse in coverage is 61 days, but no more than 90 days, the sanction is $4,950 AND a 90 day license suspension;
    4. If the lapse in coverage is no more than 91 days, the sanction is license cancellation.
  2. Requirement that Proof of LLI is Posted or Otherwise Made Available for Immediate Inspection.  The proposed rulemaking would create a new affirmative requirement for licensees to post proof of their LLI or otherwise make the proof available for immediate inspection upon request by an OLCC employee.  Failure to do so would be a category V violation.  If verifying that this requirement was met became a regular part of OLCC premises visits, it’s likely that this would be a fairly common violation.  Posting the LLI would greatly reduce the probability of a violation.
  3. Affidavit Requirement for Manufacturers.  Currently, winery, brewery and distillery licensees are only required to provide verification of LLI if they have been approved to engage in on-premises sales.  The proposed change would require such manufacturing licensees to now affirmatively provide an affidavit stating that consumption of alcoholic beverages will not occur on the licensed premises.
  4. Bond Option.  The proposed changes highlight that applicants/licensees may fulfill this requirement by putting a corporate surety into place for the minimum amount.
  5. No Change to $300,000 Minimum.  This is probably the biggest surprise.  The rulemaking is not proposing to raise the $300,000 minimum, which has been in place for a considerable period of time.

845-005-0400  Liquor Liability Insurance or Bond Requirement

(1) ORS 471.313(4)(i) requires applicants for a liquor license to demonstrate financial responsibility sufficient to adequately meet the requirements of the business proposed to be licensed. ORS 471.313(2) requires applicants listed in 471.168 to maintain liquor liability insurance or bond. In addition to other requirements, the Commission has determined that licensees listed in 471.168 must demonstrate financial responsibility for licensees’ liability for damages to third parties caused by patrons off the licensed premises by meeting the requirements in section (1)(a) or (b) of this rule. ORS 471.168 requires certain licensees to provide coverage for injuries suffered because of the conduct of visibly intoxicated persons who were served in licensed premises by:

(a) Maintaining liquor liability insurance of not less than $300,000; or

(b) Maintaining a bond with a corporate surety authorized to transact business in this state in the amount of not less than $300,000.

(2) The requirement applies to the covered licenses issued or renewed on or after March 15, 1998.

(3) ORS 471.168 also requires licensees subject to the requirement to supply proof of compliance at the time the license is issued or renewed. For insurance, licensees must provide proof by naming the Commission as Certificate Holder on the policy and giving the Commission a copy of the certificate. For a bond, proof may be satisfied by identifying the name of the surety and providing the bond identification number.

(4) Failure to maintain insurance or a bond as required is a Category I violation and the Commission may cancel the license.