For many marketers getting to work on a beer commercial for the Super Bowl is a dream come true. The budgets are boundless. The ideas are big. The sky is the limit. But, it's a different world at the point of sale in the bars and liquor stores. Advertisers must navigate a confounding and constricting maze of laws and regulations and getting it wrong carries significant risks.
Due to new initiatives by the Alcohol and Tobacco Tax and Trade Bureau to forge partnerships with the states, this year's Super Bowl might prove to be a risky one for run-ins with regulators, a time when the regulators' senses are often already heightened because of the uptick in marketing and promotional activity.
Recently, the TTB joined forces with alcohol regulatory agencies in Illinois and Florida to ferret out "pay to play" schemes where manufacturers pay liquor stores and bars to stock their products. In fact, the TTB described a Miami sting as the "largest trade practice enforcement operation that TTB has initiated to date." The TTB couched their overall effort as a drive to "secure a level playing field nationwide for law-abiding businesses."
At issue are so-called "tied house laws," regulation as old as prohibition. The laws grew out of a desire to temper alcohol consumption and to make sure that historically large, powerful brewers and distillers were not unduly influencing the types of products sold at local saloons. For marketers in the 21st Century, it can sometimes be a challenge to comply with this somewhat antiquated legislation.
For example, federal tied house laws generally allow alcohol manufacturers to furnish product displays if those displays cost $300 or less, but in some states those limits can be far less. And, many state laws also restrict or prohibit the use of coupons for alcoholic beverages. Heineken recently settled with the California Department of Alcoholic Beverage Control (ABC) over a promotion on Facebook and Twitter where customers were able to download a coupon.
Indeed, what most marketers in any industry would consider savvy marketing could cause alcohol manufacturers and distributors to be hit with hefty penalties, the possibility of losing their license to sell alcohol—temporarily or permanently—and other criminal penalties if the violation is severe enough. Many types of point of sale materials and even a small gift to a bar or liquor store or its customers could be considered illegal depending on your location
But, like the laws in most other industries, tied house laws often struggle to keep pace with the ever-changing technology landscape. Something as simple as handing out USBs might be considered crossing the line in some places. Moreover, online platforms like Groupon and Ibotta were never dreamed of when many of these laws were written. Even things as simple as social media marketing are not allowed, or are greatly restricted, in some instances.
Last year, the California Alcoholic Beverage Commission issued one of the largest financial penalties in the agency's history—$400,000, to certain Anheuser-Busch wholesalers. The ABC's Trade Enforcement Unit alleged that the wholesalers supplied television sets, draught systems and other items to various Southern California retailers. In addition, approximately 34 retail licensees were sanctioned.
The vast majority of the time advertisers and marketers don't intend to break the law in this area. Violations are often born out of a lack of clarity in the law or a simple lack of knowledge. Additionally, the enforcement priorities of the regulatory agencies tasked with overseeing these laws can change with new administrations. The onus is on marketers to ensure they are following the rules of the game, regardless of how challenging it is.
Regulators are watching and getting caught up in an investigation can be costly and can have real consequences. To save yourself and your client from all of these problems, at the onset of planning, before budgets are set, it is important to make sure to get a sense of what types of promotions are permissible across the markets you're targeting, including social media.
Eric Anderson is a partner with InfoLawGroup, an advertising, marketing and privacy law firm.