1. Kristen Techel kristen@strikeandtechel.com strikeandtechel.com Licensing and Regulating Internet Retailing: Perspective of the Unlicensed Marketer

2. One type of “TPP”: unlicensed marketer

3. Granholm starts to quickly open new sales opportunities, but wineries need help. TPPs start modest and quickly become full-service. Create a website for a winery Consult on strategy for winery website, including featured products and pricing promotions Host a website for a winery and manage payment processing on behalf winery Host a stand-alone website that combines offers from more than one winery, but links out to winery websites Host a stand-alone website that combines offers from more than one winery and manages all payments Where Did TPPs Come From? Bridging Direct Shippers and E-Commerce

4. Why use a Full-Service TPP? Data indicates direct to consumer sales are increasing TPPs can connect sellers to customers they wouldn’t otherwise reach TPPs can make the transaction easy. + Ecommerce issues (merchant account rates, fraud protection, privacy) + Technology to Manage complexities (interface with compliance software, reporting tax collection) TPP as a modern form of advertising?

5. 1. You need a license to sell alcohol 2. An alcoholic beverage license is a personal right (no “availing”) 3. Licensees have to know the rules and comply with them 4. Lack of familiarity with ecommerce Topics from Regulators on TPPs

6. Regulatory Topic: Licensing You need a license to sell alcohol State definition of sale Types of licenses: Home state, direct shipper, delivery-related, internet marketing portal (VA) TPP Approaches: TPP restricts activity to avoid making sale, as defined in state TPP makes sure there is a licensee who is authorized to make sale Sellers select states Sellers verify licenses TPP checks licenses

7. Regulatory Topic: Availing A license is a personal right TPP Approaches: CONTROL for licensee TPP Compensation Flow of Funds No “blinds”

8. Regulatory Topic: Compliance There are many state-specific rules to manage TPP approaches: Learn rules, interface with compliance programs and professionals, give licensee control and help them stay compliant Licensing Volume caps Production requirements Package markings Discounting/Promotions Signature Collection Reporting

9. Licensees Must Know and Follow Rules of MY STATE Oregon No Production specification No more than two 9L cases per month to a resident Retailers can also direct ship TPPs? Illinois “Wine made by licensee” 12 cases per year to a resident TPPs? Colorado “Produced or bottled by permittee” Register labels No volume limit TPPs? Iowa “Fermented on winery premises” No volume limit TPPs?

10. Regulatory Topic: Understanding Ecommerce I sense that TPPs are doing too much and licensees too little There are too many models to investigate them all This feels too virtual The landscape is changing too quickly to keep up What exactly is happening here? I have no jurisdiction over unlicensed parties- how do I stop bad actors? How do we regulate this? Do we need to regulate it at all?

11. Best Practices for TPPs Only work with compliant licensed sellers with the right license to make a sale Learn the rules, help your sellers comply Leave control with the seller, especially the ability to reject an order Find a way to give the seller control over the funds Ensure fees are reasonable given the services provided, be thoughtful with % fees Don’t act as a go-between for suppliers and retailers Have a contract that your sellers can provide to a liquor regulator without putting their license in danger Don’t be a bad actor. Anyone can start a TPP with very little start-up capital. If you have no license in a state, it isn’t easy for the state alcohol regulators to stop you. Resist the temptation to act without understanding the legal positioning for your action. Taking uneducated risks will tighten the market for everyone else.

12. Questions? Kristen Techel kristen@strikeandtechel.com strikeandtechel.com Disclaimer: This presentation is provided for educational and informational purposes only and is not intended and should not be construed as legal advice.