ALCOHOL ADVERTISING William D. Ellerman Partner Jackson Walker L.L.P. 901 Main Street, Suite 6000 Dallas, Texas

INTRODUCTION

The Three-Tier System Manufacturers or “producers” Distributors Retailers – On Premise – Off Premise – Beer, Wine and/or Liquor

The Three-Tier System (cont’d) Each tier is subject to different regulations, but there is overlap There are different advertising rules for each tier The “tiers” are designed to prevent vertical and horizontal monopolies

The Texas Alcoholic Beverage Code Creates the Texas Alcoholic Beverage Commission (“TABC”) Regulates all aspects of the alcoholic beverage industry in Texas Generally coextensive with Federal laws Has NO enforcement authority over the broadcast media Broadcasters can help customers by knowing the general rules

General Categories of Rules Rules that apply to certain types of permits Rules that apply to certain types of alcoholic beverages Rules that apply regardless of the type of permit or beverage Miscellaneous rules

RULES THAT APPLY TO CERTAIN PERMITS

Types of Permits There are 50 different types of permits and licenses in the TABC “On-premise” and “off-premise” permits Typical on-premise permit holders: – Restaurants and bars – Private clubs Typical off-premise permit holders: – Package stores – Other retail stores

Types of Permits (cont’d) Typical categories of permits include: – Off-premise permits for beer, beer & wine, liquor – On-premise permits for beer, beer & wine, liquor – Package stores – Private clubs Unusual categories of permits include: – Hotel minibar permits – Medicinal alcohol permits

The General Rule A permit holder may advertise what he or she may legally sell Examples: – A package store may not advertise liquor by the drink – A bar may not advertise drinks “to go”

Outdoor Signage Allowed signage depends on type of permit A beer retailer may have ONE sign reading “Beer” or “Beer To Go” A wine and beer retailer may have one sign reading “Beer,” “Beer and Wine,” or “Beer, Wine, and Ale.” Only an off-premise permit holder may advertise “to go”

Outdoor Signage (cont’d) A licensed package store may have one sign that reads: – “Package Store” – “Liquors”; or – “Wines and Liquors” – The words “to go” may be added as long as there is no on-premise license

Private Clubs Many “bars” are actually permitted private clubs Private clubs may sell alcoholic beverages even in dry areas Any advertisements must state that alcoholic beverages are only available to club members

Price Advertising Generally, businesses that do not sell to the public cannot advertise prices Manufacturers and distributors may not advertise prices Prohibitions on vertical monopolies Are price advertising restrictions constitutional?

Price Advertising (cont’d) On-premise retailers may not advertise prices if the advertisement includes a brand name (i.e., “Coors Longnecks for $1.00”) On-premise retailers may advertise prices if the advertisement does not include a brand name (i.e., “Longnecks for $1.00”) Off-premise retailers must advertise brand names if prices are advertised

RULES THAT APPLY TO TYPES OF BEVERAGES

General Rules An advertisement may include any item that is not specifically prohibited from being advertised An advertisement must contain certain items Any item that must be contained in an advertisement must be conspicuous

Ads for Distilled Spirits Must Contain The name and city of the permittee The class and type of beverage The alcohol content by proof or percentage For any permittee other than a retailer, the percentage of “neutral spirits” and the commodity from which they were distilled

Ads for Distilled Spirits Must Not Contain A false, deceptive, misleading, indecent, or obscene statement A statement disparaging of a competitor A statement that the spirit complies with any governmental authorization A statement implying a higher alcoholic content than normal

Ads for Distilled Spirits Must Not Contain (cont’d) A statement that the spirit is “pure,” unless that word is part of the permittee’s name A statement that the product has therapeutic or curative effects Flags, seals, insignias, coats of arms, etc., suggesting government affiliation Anything contrary to information required to be on the product’s label

Ads for Wine Must Contain The name and city of the permittee If the ad includes price, it must also include the brand name and class and type of product If the class and type are included, a complete description must be provided

Ads for Wine Must Not Contain A false, deceptive, misleading, indecent, or obscene statement A statement that disparages a competitor A statement that the wine complies with any government authorization A statement that indicates that the intoxicating quality has been increased The alcoholic content (Is this constitutional?)

Ads for Beer Must Not Contain A false, deceptive, misleading, indecent, or obscene statement A statement that disparages a competitor A statement that the beer complies with any government authorization A statement that the beer has therapeutic or curative effects Indicia of government affiliation

Advertising Alcohol Content for Beer Cannot be called “beer” if contains less than 0.5% alcohol Cannot be called “malt liquor” if it contains less than 4.0% alcohol Cannot state alcohol content, “strong,” or “high proof” (Is this constitutional?) May be called “low alcohol” or “reduced alcohol” if less than 2.5% alcohol

Advertisements for Mixed Drinks No specific rules Ads should not include a statement of alcohol content Ads should not indicate the intoxicating quality of the drink

GENERAL ADVERTISING RULES

Stamps and Coupons No stamps or other inducements allowed No coupons or rebates for purchase or discounts, except: – Coupons for purchase of non-alcoholic products if not tied to purchase of alcohol – Discount or single complimentary drink tied to a meal, hotel package, or airline program – One free drink to customers for special events

Happy Hours and Drink Specials Permissible, but subject to strict regulations Advertising is permissible, but should follow the regulations TABC prohibits advertising practices that are “reasonably calculated to result in excessive consumption of alcohol”

Prohibited Drink Specials “Two for the price of one” Increased alcohol without increased price More than one free drink per day “All you can drink” Reduced price tied to a fixed “buy-in” price Price based on the amount consumed No reduced prices after 11:00 p.m.

Prohibited Drink Specials (cont’d) More than two drinks to a customer at a time An entry fee or cover charge in exchange for reduced drink prices Contests that are determined by the amount consumed Contests where alcohol is given as a prize

Permitted Drink Specials Free or reduced-price food, if not tied to the purchase of alcohol Free or reduced-price alcohol if part of a meal or hotel package Sale of a bottle of wine during a meal Reduced price pitchers or buckets to two or more consumers at a time

Gifts, Contests, and Promotions Severely restricted and generally prohibited Some exceptions: – Sweepstakes – Gifts – Lottery – Co-sponsorship of events – Tastings

Sweepstakes The only contests that are permitted for the manufacturing tier Must be random, with no purchase necessary Must not favor one retailer over another Prizes may not be awarded at retail locations Entry forms may be advertised as available at retail locations NO ALCOHOL MAY BE AWARDED AS A PRIZE

Sweepstakes (cont’d) A member of the retail tier may offer a contest based on skill or creativity – Logo or slogan contests – Very fact-specific inquiry – Obtain pre-approval from the TABC

Promotional Gifts Manufacturers and distributors may give consumers items worth less than $1.00 each Promotional items bearing a manufacturer’s logo may be sold to retailers Manufacturers and distributors of wine and liquor may give items of low value to consumers to promote specific brands Manufacturers and distributors may give advertising specials to retailers no more than $101 per brand, per year

State Lottery On-premise retailers can only sell lottery tickets if they only sell beer Private clubs cannot sell lottery tickets Off-premise retailers can sell lottery tickets regardless of their inventory

Implications for Broadcasters The above rules would apply to promotions co-sponsored by broadcasters and permittees A giveaway of alcoholic beverages is not allowed unless the broadcaster purchases the product If the promotion is advertised, a brand name may not be mentioned if the permittee pays for the ad.

Tastings A tasting permit is required Wineries can only advertise tastings in on-site communication or by direct mail Package stores can advertise tastings on-site, by direct mail, by , and on the store’s website

Broadcast Remotes A broadcaster can do a remote from a permit holder’s place of business The permit holder may not pay for the remote Ensure that the remote does not give the impression of encouraging intoxication

Events and Concerts Manufacturers and distributors may sponsor and advertise events, but beverages must be sold by independent concessionaire Advertising materials may be placed in service areas TABC specifically defines “public entertainment facilities”

Events and Concerts (cont’d) Public entertainment facilities does not include facilities at which the primary purpose is the sale of food or alcoholic beverages A manufacturer or distributor may not sponsor an event or concert at a retailer’s location Only a manufacturer may advertise in association with horse racing No advertising permitted for Bingo

Events and Concerts (cont’d) Sponsorship of unlicensed civic, religious, or charitable events – Manufacturers and distributors may donate money, services, or other items of value – May not donate alcoholic beverages – Alcohol may be sold by an independent retailer – The charitable organization must receive equal or greater billing – Avoidance of “hidden sales”

Cooperative Advertising Raises vertical and horizontal monopoly issues – Permit holders, regardless of tier, cannot share advertising – There is a small exception for promotions held on a retailer’s premises Permit holders may share advertising with broadcasters or other non-permittees

Signs and Billboards A distributor may give a retailer one sign per brand to display inside the retailer’s premises Different products from the same manufacturer may be different “brands” Billboards must be at least 200 feet from where product is sold

MISCELLANEOUS

Dry Areas No public use of alcoholic beverages is allowed in dry areas Broadcast advertising is permissible Outdoor advertising is impermissible

Age Limits Disclosure of legal age limits in advertising is not required TABC appreciates ads encouraging responsible drinking “BYOB” events sponsored by non-permittees need not be restricted by age

Depictions of Alcohol Use TABC does not prohibit depictions of use in advertisements Federal law restricts use of athletes – Should not be shown drinking – Should not suggest that drinking enhances athletic ability

Conclusion TABC only governs permit holders, not members of the broadcast media In general, permit holders may advertise what they can legally sell Promotions, giveaways, and specials are severely restricted When in doubt, contact the TABC for pre- approval