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Working With Government Agencies

Working With Government Agencies. Department of Alcoholic Beverage Control Jacob Appelsmith Director. The ABC: Your Friend. Department of Alcoholic Beverage Control Jacob Appelsmith Director/Pal. Historical Arcana. There was more beer on the Mayflower than water

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Working With Government Agencies

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  1. Working With Government Agencies Department of Alcoholic Beverage Control Jacob Appelsmith Director

  2. The ABC: Your Friend Department of Alcoholic Beverage Control Jacob Appelsmith Director/Pal

  3. Historical Arcana There was more beer on the Mayflower than water Why: because as we all know, beer is safer than water

  4. Personal Historical Arcana • In 1664 in Barnstable, Massachusetts, the Director’s 8th great-grandfather, Henry Cobb (1610 - 1679) was a tavern keeper and the excise-tax collector for alcohol – at the same time • From Colonial Massachusetts, to the Roaring Rock, to the Rubicon, to a lost business card, to this podium

  5. People Drank More Back Then • Per capita ethanol consumption: 1790: 5.8 gallons; 1830: 7.1 gallons; 2017: 2.9 gallons • It was not uncommon for people to drink at breakfast, lunch, and dinner • Drinking was part of daily life

  6. Pre-Prohibition • Mid-1800’s • Set the political stage • Saloons proliferated • Prohibition groups formed

  7. Prohibition • The “Noble Experiment” • 18th Amendment – 1919 • 1920-1933 – Alcohol was prohibited • Rationale for adopting Prohibition: • Reduce crime • Decrease poverty • Decrease death rate associated with alcoholic beverage use. • Increase quality of life • Positive aspects • Effects on industry • Negative events of the time

  8. Repeal of Prohibition • Same groups who supported Prohibition spoke out most for Repeal. • Rationale for initiating Repeal (same as rationale for initiating Prohibition): • Reduce crime. • Decrease poverty. • Decrease death rate associated with alcoholic beverage use. • Increase quality of life. • 21st Amendment – 1933 • Granted States Constitutional Authority to Regulate • California Constitution

  9. California’s Alcohol Landscape • CA population: 38.8 million • Alcoholic Beverage Licenses: • Total licenses: 92,000 • Retail Licenses • Number of Restaurants- 45,000 • Number of Bars/Clubs - 12,000 • Number of Markets - 28,000 • Non-Retail Licenses • Number of Wineries – 5,888 • Number of Breweries - 1,004 • Number of Distilleries - 166 • Number of Wholesalers/Distributors – 4,166

  10. Economic ImpactCraft Brewers • $4.7 billion (2012) • $7.3 billion (2015) • 850 breweries today 2010: 208

  11. ABC’s Operations • Approximately $64 million annual budget • Authorized Positions- 448 -200 sworn Agents -80 Licensing Representatives -70 Front Office Licensing Staff • 24 Field Offices statewide

  12. District/Branch Offices .

  13. Licensing • Approximately 13,000 applications filed each year • License application processing = 45-60 days (if no complications) • Common sources of delay/challenge (i.e., the complications): -Protest (citizens, police, etc.) -Holds for tax compliance -Local use permitting, etc. -Applicant qualification

  14. Who Enforces the ACT?Answer: ABC Agents • Agents are sworn peace officers with general police powers • Full inspection powers of licensed premises (ABC and local law enf.) • Criminal/Administrative violations • Undercover operations • Minor Decoy operations • Educational efforts (IMPACT program, etc.)

  15. Law Enforcement Principles • Public Safety Priorities • Industry Partners • Ongoing attention to local, state, and federal compliance related polices and issues. • Community relations

  16. Common ABC Investigations • Sales to minors • Sales to obviously intoxicated persons. • Condition violations • Disorderly premises • Narcotics • Gambling • Lewd conduct/prostitution • Restricted hours • Receiving/Buying stolen property • Tied-house laws/free goods • All crimes committed by licensees and/or at licensed location

  17. Hearings and Appeals • Applicants and licensees have the right to a hearing before an administrative law judge to appeal any denial of a license application or discipline of a licensee (e.g., suspension or revocation of a license) • The public has a right to a hearing on any protest the Department has overruled • The Department employs its own prosecutors and judges • The Director makes the final decision • The Director’s decision is appeal to the Alcoholic Beverage Control Appeals Board

  18. Trivia Question • The ABC today has 448 employees to interpret and implement an inch-thick set of laws in a state with nearly 40 million people and 92,000 licenses. • How many employees did the ABC have when it was founded in 1955, when California had 13.1 million people and 42,308 licenses? Answer: 445

  19. Regulatory Philosophy • Practical • Solutions are not found in rules • Solutions are figuring out what makes sense, and only then dealing with the rules

  20. Philosophy Applied Three Basic kinds of people in the alcohol business • 1. Responsible, upstanding citizens • 2. Knuckleheads • 3. Deadbeats

  21. Types of Regulators • Practical, proactive, and reasonable • Prisoners of laws and lawyers • Jerks

  22. Strong Public Support for Regulation • Recent poll by the Center for Alcohol Policy found among Americans: • 63% think the amount of regulation is about right • 15% think it is too restrictive • 9% think it is not restrictive enough

  23. Poll (cont.) The public believes the most important considerations for lawmakers in crafting alcohol regulations are: • 77% Reducing drunk driving • 70% Protecting health and public safety • 62% Reducing underage drinking • 52% Encouraging moderation • 48% Creating more jobs • 42% Increasing economic development • 28% Giving consumers more choices • 22% Lowering prices • 19% Allowing more businesses to produce and sell alcoholic products

  24. Generally there is Strong Industry Support for Regulation:Why? • It protects you from dangers: • Undue regulation and wild new laws • Taxation • Unfair competition

  25. Tied House Laws Purpose: to create a fair market place and prevent monopolies and predatory marketing practices by keeping the three industry tiers separate: • Manufacturers • Wholesalers (Distributors) • Retailers (Stores, Bars, and Restaurants)

  26. The Retail Digital Network Case • Pitted First Amendment commercial speech rights against the State’s 21st Amendment right to regulate alcohol • In exchange for TVs, a retailer would allow the marketer to display advertisements of alcohol suppliers’ products on the TVs. • The ABC said a supplier could not pay the marketer for advertising the supplier’s products on the TVs, citing the interests of temperance and unfair competition • The court rejected temperance • But the court found for the ABC on the grounds of promoting fair competition, saying the State’s rules prevent “manufacturers and wholesalers from exerting undue and undetectable influence over retailers”

  27. Tied House Challenges • Numerous, narrow exceptions have been enacted. • This has created confusion and complexity. • Some question if tied house laws are obsolete? • As a craft brewer, your answer is: • Why? NO! Because the tied house law is your friend

  28. Common Tied-House Violations • Illegal incentive or inducement • Equipment or goods • Advertising, promotional events, and social media • Credit extension, Illegal returns, exchanges, etc. • Bribery, extortion, and . . . .

  29. …M U R D E R ! ! !

  30. Recent Cases • Refrigerators: California distributor • Drink Coupons: California manufacturer • Massachusetts distributor penalty

  31. Unfair Competition Trends • Uninformed retailers • Giant retailers • Non-licensees • Increasing intentional, improper activity of large, sophisticated suppliers and wholesalers

  32. Future ABC Cases • Slotting fees • Tap handles • Demands for gratuities • We can’t make these cases without you • With you, we will

  33. Some Advice • When considering any new marketing strategy, changing business models, or engaging in any sort of relationship with a retailer: make sure it is legal • Have a detailed plan for what you want to do and how you want to do it • Consult this Association, an attorney, a consultant, the ABC • And of course . . . .

  34. New Laws Effective January 1st Responsible Beverage Service: requires all servers of alcohol to pass a certified training course Free Rides: a beer manufacture may provide a free or discounted ride as long as it is not conditioned upon the purchase of an alcoholic beverage, nor used to provide anything of value to a retail licensee Coupons: permits rebate promotions on behalf of beer manufacturers and winegrowers, provided that retailers do not facilitate the transaction

  35. Dept. of Alcoholic Beverage Control 3927 Lennane Drive, Suite 100 Sacramento, CA 95834 (916) 419-2510

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