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Understanding the Regulatory System for Alcohol Beverages: Three Tier & Tied House Evil

Understanding the Regulatory System for Alcohol Beverages: Three Tier & Tied House Evil. Responsible Retailing Forum Las Vegas, March 11, 2004 Mitchell Rubin Florida Beer Wholesalers Association. Why should you care about Three Tier & Tied House Evil?. Pricing

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Understanding the Regulatory System for Alcohol Beverages: Three Tier & Tied House Evil

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  1. Understanding the Regulatory System for Alcohol Beverages: Three Tier & Tied House Evil Responsible Retailing Forum Las Vegas, March 11, 2004 Mitchell Rubin Florida Beer Wholesalers Association

  2. Why should you care about Three Tier & Tied House Evil? • Pricing • Gifts & loans allow artificially reduced prices • Promotion • Gifts & loans pay for promotions that vendor would not otherwise provide • Financially Responsible Vendors • Gifts & loans support vendors who would not otherwise be financially viable

  3. Two Systems of Regulation • Control Model • License Model 18 control states 32 competitive states

  4. Control Model • State Owned Retail Outlets • Beauracracy • Fewer Outlets • No Entrepreneurial Opportunities • No Competition – State Monopoly • Increase State Revenue by Raising Prices, Not Taxes

  5. License Model Manufacturer Distributor Retailer consumer Protecting consumers by promoting fair competition

  6. License Model’s Regulatory Mechanisms • State Criminal Laws: DUI, Underage Possession • Licensing – Good Character • Local Control of Zoning, Hours of Operation, & Adult Entertainment • State Taxes & Fees • Three Tier & Tied House Evil

  7. Tied House Evil Prohibitions Similar to Anti-trust laws promoting a level playing field among retailers and preventing theelimination of competition and over promotion of alcohol by prohibiting:

  8. Tied House Evil Prohibitions Include: • Purchasing shelf space • Purchasing exclusivity • Furnishing equipment • Indebting retailer • Discriminatory promotional practices or pricing; must price post discounts!

  9. Tied House Evil Exceptions & Conditions Include: • Durable specialty advertising items (neons)may be loaned • In-store servicing, shelf sets & schematics • Point of sale displays • Hats, t-shirts to consumers • New product samples

  10. Tied House Evil Prohibitions Include: • Beer lists (spirits & wine permitted) • Hats, shirts, cork screws • Insurance or Indemnity Agreements • Draft & dispensing equipment (cleaning & minor parts permitted) • Consignment, credit, product damaged by retailer

  11. Tied House Evil Prohibitions Include: • Outdoor Signs (Given or Sold by Distributor/Manufacturer or Displayed by Vendor) • One brand neon per window only! • Cups, coasters at cost • Off-premise beer tastings • Cooperative advertising

  12. License Model & Tied House Evil • Competition Among Retailers Leads to Overly Aggressive Pricing & Promotions • Requires Sound Regulatory System & Enforcement • Less Control Over Product than Control Model Offers

  13. Why should you care about Three Tier & Tied House Evil? • Pricing • Gifts & loans allow artificially reduced prices • Promotion • Gifts & loans pay for promotions that vendor would not otherwise provide • Financially Responsible Vendors • Gifts & loans support vendors who would not otherwise be financially viable

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