PA 81 — Revised Marketing Restrictions
As promised, we’re back with the first in a series of legislative analyses for this year’s liquor legislation. PA 81 (SB 667) was the first enacted piece of liquor legislation this year and it amends the Liquor Code in primarily four ways.
Approved Secondary Use List
Under the Liquor Code, except for orders approved for specific sponsorships or festivals, a manufacturer, mixed spirit drink manufacturer, warehouser, wholesaler, outstate seller of beer, outstate seller of wine, outstate seller of mixed spirit drink, or vendor of spirits may provide goods and services to another licensee that were approved by the commission. This list is fairly exhaustive and includes items such as calendars, matchbooks, cooler stickers, mirrors, etc.
PA 81 amends this list to include suction cups, cooler attachments, and tear pad holders. We here at Stariha & Brower support these inclusions as it provides additional avenues of approved advertisement for manufacturers to promote their products. Due to Michigan’s strict oversight of anything alcoholic, amendments like this are necessary every year or so to keep with the steady growth of the industry.
Branded Logo Merchandise
PA 81 allows a manufacturer, outstate seller, or vendor of spirits to provide brand logoed merchandise to an on or off premises retailer to promote the brand and price of its products if certain conditions are met. This change is a statutory codification of a Liquor Control Administrative Order from 1999. It largely sought to distill the language used in the order, however, it did substantively raise the value of the branded logo merchandise from $100 to $200 per item. This can likely be attributed to (over) adjusting for inflation ($144 would an accurate adjustment) as well as assisting manufacturer’s in increasing the merchandises quality.
This change will be a positive one for those manufacturers who can afford to purchase and distribute these items. This addition will help manufacturers increase their presence across the state — something we wholeheartedly support..
Beer Package Pricing & Filing Requirements
Liquor Control Rules historically provided a 120 period for manufacturers or wholesalers to file with the Commission a beer package price reduction for its market area. The filing must occur at least 120 days before the price reductions’ effective date and must continue for at least 120 days after that effective date. Similar to the above change, PA 81 codifies a Liquor Control Rule in statute with some alterations.
PA 81 reduces the 120 day period to 90 days to provide more price flexibility for manufacturers and wholesalers. Further, the Commission must periodically compare the manufacturers and wholesalers’ changes. Interestingly the Act also includes language exempting these net cash price changes or beer package reductions from disclosure under the Freedom of Information Act, until one year after it was filed.
The goal of this rule turned statute is to prevent rapid price fluctuations. We here at Stariha & Brower are in favor of the reduction to 90 days as it provides increased flexibility for manufacturers and wholesalers without significantly impacting consumers. We expect this change will be positive for the industry — though it may create a larger burden on the Commission by increasing the volume of price changes coupled with the now statutory mandate to periodically review this increased volume of changes. Given the Commission’s neutral stance on the bill it appears they are ready for a potential shift in volume.
Promotional Drink Purchases
PA 81 codifies another rule, allowing vendor representatives or salespersons of spirits or wine to, for promotional purposes, purchase one drink for each customer of an on-premises licensee. Records must be maintained for four years, a total spending limit of $100 per day is imposed, and a representative cannot purchase a drink for customers more than twice a month at the same on-premise location. A drink purchased under this statute must be of the brand represented by the vendor representative or salesperson. A licensee employed to deliver alcoholic liquor could not purchase a drink of alcoholic liquor for a retail licensee while on duty or in the course of employment.
The most significant change to this codification is an increase from the $50 per day limit previously imposed by the Commission. This change will allow more on-premise customers an opportunity to sample a greater array of products. The cost for each promotional drink will be paid for by the wholesaler or manufacturer.
In codifying the status quo, the Legislature simultaneously made it more difficult for the Commission to adapt to the ever increasing needs of a booming Michigan industry in favor of the national control. While these particular changes are not excessively detrimental to the growing number of alcohol manufacturers in Michigan, this Act is symptomatic of a national influence dominating the direction of the Michigan alcohol industry. It is our concern that if/when national manufacturers are met with resistance by the Commission, they will turn to the Legislature to push their goals through anyway and at the expense of smaller Michigan manufacturers.
PA 81 passed 37-0 in the Senate and 105-4 in the House. It went into effect April 12, 2016.
*This information and thoughts herein are provided by the Liquor Lawyers at Stariha & Brower, PLC. As always, we remind readers that the materials on this site are provided purely for informational purposes and are not legal advice. These materials are intended, but not promised or guaranteed, to be correct, complete, and current. This blog is not intended to be a source of legal advice. Therefore, the reader should not consider this information an invitation for an attorney-client relationship. Readers should always seek the advice of competent counsel.