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Summary of ABCC Actions – January 2015

Summary of ABCC Actions

 

Eight recently published ABCC decisions decided cases dealing with gambling devices on licensed premises, sales of alcohol to a minor and intoxicated persons, and purchase of alcohol by a restaurant from a non-wholesaler.

The non-permitted gambling devices cases involved the Billerica Elks Lodge, American Legion Post in Kingston, and the Malden Elks and Moose Lodges.  In the former three cases, the ABCC suspended the clubs licenses for five days, two days to be served and three to be held in abeyance for two years provided no further violations occurred.  The ABCC also stipulated that each licensee not possess in or on the licensed premises any automatic amusement device or video poker machine.  The Billerica Elks Lodge received only a three day suspension, with all three days to be held in abeyance for 2 years pending any further violation.  However, the Lodge had also not filed required annual reports with the ABCC with the names and addresses of corporate officers and the compensation paid to employees, so the ABCC added a separate 3 day suspension for this, with those 3 days also to be held in abeyance for 2 years (the suspensions to run concurrently).  Also, the ABCC directed the Lodge to file annual reports for the years 2003 to 2014 within one week of receiving their decision, or face “indefinite suspension” of their license.

GPS Wine & Spirits in Brookline was found to have made a sale to a minor, and was given an eight day suspension, with one day to be served and seven to be held in abeyance for two years.  Interestingly, the business had an Advanced ID Detection Scan machine, but when the ABCC investigator passed the fraudulent ID used by the minor in question through the scanner, it was not approved.

The ABCC ordered a four day suspension (2 to be served and 2 to be held in abeyance for 2 years) for the Sinnis Pub in Dudley, after they were found to have provided several “shots” of alcohol to an intoxicated patron. An ABCC investigator on hand saw the patron, determined he was intoxicated, and then viewed sales of several shots to the patron thereafter within a relatively brief period.  When asked for identification by the investigator, the intoxicated patron responded with a succinct “verbal salute” (set out in quotes in the ABCC decision) which evidenced truculence if not intoxication!

The Singapore Restaurant in Fitchburg also was found to have made a sale to an intoxicated person, as was given a six day suspension, two to be served and four to be held in abeyance for two years

Finally, the Kathmandu Spice Restaurant in Arlington was found to have repeatedly purchased alcohol from a package store rather than a wholesaler, and was given a thirty day suspension and ordered to destroy the alcoholic beverages in question.  The restaurant was also given a warning for failure to post required notices of penalties.

New Legislation May Change Wine Shipper License

Before the new direct wine shipper license will go into effect Beacon Hill has already started to tinker with the statutory limits of the license. This week Rep. John Sciback a Democrat from South Hadley and the House Chair of the Joint Committee on Consumer Protection and Professional Licensure introduced a bill that would amend the s. 19F license to allow for direct shipments to re-sellers, and not just consumers. This change may create an end-run around wholesalers for manufacturers looking to move product into the hands of retailers. See the full text below.

Section 19F of chapter 138 of the General Laws, inserted by section 162 of chapter 165 of the acts of 2014, is hereby amended by striking out subsection (b) and inserting in place thereof the following subsection:-

(b) Under this section, a direct wine shipper licensee may make sales and delivery of wine: (1) at retail directly to residents of the commonwealth who are 21 years of age or older, for personal use and not for resale; (2) at wholesale in kegs, casks, barrels or bottles to a person licensed pursuant to section 12, 13 or 14; provided, however, that all direct deliveries of wine from a winery to a licensee pursuant to section 12, 13, or 14 shall not exceed 250 cases of wine annually; (3) at wholesale for the sole purpose of resale in containers in which wine was delivered to any person licensed pursuant to section 15; provided, however, that all direct deliveries of wine from a winery to a section 15 licensee shall not exceed 250 cases of wine annually; (4) at wholesale to a person licensed pursuant to section 18, 19 or 19B; (5) at wholesale to churches and religious societies, educational institutions, incorporated hospitals, homes for the aged, manufacturers of food products and manufacturers of drugs and chemicals pursuant to section 28; or (6) at wholesale to a registered pharmacist holding a certificate of fitness pursuant to section 30.

Wine Industry Preparing For Changes In The New Year

Starting January 1, 2015 wineries, vineyards, and other wine manufacturers can begin the process of becoming licensed to directly ship wine to Massachusetts consumers. This change in M.G.L. c. 138 was included in the FY 2015 Budget signed into law by Governor Deval Patrick.

According to the Boston Globe at least 91 wineries have already applied for the new license. Because both manufacturers and the trucks used for transporting wine are  regulated by the state FedEx has also applied for an additional 700 licenses to transport.

Massachusetts is one of the leading states in the nation in per capita wine consumption and the new direct wine shipper license will open a new avenue for out of state wine manufacturers.

The new license will allow manufacturers to deliver directly to consumers, but not allow sales to Massachusetts retailers. The ABCC issued an advisory on direct wine shipping that will help guide the wine industry in interpreting the new changes. This advisory includes who qualifies for the new license and how to comply with reporting obligations as well as licensing fees.

Budweiser Pivot More Evidence Of Craft Beer Surge

To improve Budweiser’s appeal to a new younger crowd Anheuser-Busch InBev has decided to drop the famous Clydesdales from their future marketing campaigns. In “Bud Crowded Out by Craft Beer Craze” the Wall Street Journal reports on a growing trend that we have covered on this blog that points to a surge in popularity for smaller, local based, and smaller batch craft beers. This trend is starting to siphon away the popularity of larger brewers. This niche has now grown to the point that the large brewers are changing their game plan.

In 2013 craft beer represented 8% of the market compared with 2.6% in 1998. Massachusetts has seen success with craft beer, including craft beer’s first billionaire, but it may surprise you that Massachusetts is not among the leaders in the industry. Massachusetts’ 57 craft breweries ranks only 16th in the country, and it’s per capita ranking is only 24th. But those numbers are surging, like in all states.

Others Call For Increased Investigation Into Pay-to-Play

In a follow up to the first article regarding the ABCC investigating pay-to-play, Dan Adams of the Boston Globe reports that legislators, including Governor-elect Charle Baker, believe the state should “beef up its oversight of the liquor industry” if the ABCC finds the industry is engaging in illegal trade practices.

Currently, the ABCC’s enforcement budget is less than half of what it was seven years ago.

This issue is a great example of the difference between the alcoholic beverage industry and other food or beverage industries, particularly in Massachusetts. Because of the regulations on alcoholic beverages, some that date back to Prohibition, small local breweries face greater government restrictions to get to end users as compared with other products that may be stocked by bars, restaurants, or retailers. Local and small brewers have fewer options and a higher barrier to entry into the marketplace.

There are a few different Massachusetts regulations that prohibit this practice known as pay-to-play. A regulation against “inducements” states that no licensee “shall give or permit to be given money or any other thing of substantial value in any effort to induce any person to persuade or influence any other person to purchase…a particular brand of…beverage.” This is used to prevent one business in the industry from offering anything outside of the product itself to persuade another to commit to their product.

Massachusetts regulations also prohibit selling or offering to sell any beverage at  price less than invoiced cost. A situation which may occur if a retailer or bar is receiving a discount on products under a pay-to-play scenario.

Suppliers are also prohibited from offering inducements through price discrimination as outlawed by M.G.L. c. 138 s. 25A.

Craft breweries in Massachusetts are still soaring. In a recent article by James Fallows regarding Jim Koch, of Sam Adams beer, some startling facts are used to show the growth of the industry:

  • In 1971 there were less than 150 breweries, of any size, in the country.
  • That number went down by almost 50 breweries by 1984.
  • Now that number is over 3,000 and there are new breweries constantly being born across the country.
In the article Koch says the spread of craft beer is good for America, and Fallows agrees noting a link he has seen between a city’s craft beer scene and a young and entrepreneurial spirit. 

ABCC Investigates Pay-to-Play

According to the Boston Globe the Alcoholic Beverages Control Commission (“ABCC”) has issued subpoenas to breweries, distributors, and retailers as part of an investigation  into whether breweries or distributors have made payments to retailers for shelf and tap space, a practice known as pay-to-play. This practice is illegal under both state and federal law

Examples the Globe gives for what may constitute pay-to-play includes salesman offering a retailer a cut of the commission or marketing budget, a brewer offering to donate additional beer to a restaurant, a bar demanding a rebate for stocking company’s beer, or a distributor giving free equipment.

The Globe article mentions that the ABCC has not sanctioned a a business for pay-to-play in at least 18 years. This coupled with the fact that the number of investigators in the agency is in decline and the number of craft breweries in the state is growing creates an environment where there is more competition for shelf space and less of an opportunity for oversight.

 

Summary of ABCC Actions – November 2014

The Massachusetts Alcoholic Beverages Control Commission (“ABCC” or “Commission”) recently published five new decisions:

First, the ABCC ruled on an appeal from a Chicopee decision to deny a §15 all alcohol license transfer. In the appeal the appellant, Mormax Corporation d/b/a BJ’s Wholesalers, argued that the town’s decision to deny a license transferred from Winn Liquors, Inc. was arbitrary and capricious.

After a Local Board hearing on May 17, 2012, Chicopee cited two reasons for denying the transfer application: 1) the lack of public need or interest for another liquor license in the immediate area; and 2) an overflow crowd of individuals expressing opposition to the transfer at the public hearing.

The Commission found as the appellant argued that the decision from the local board was inadequate as it lacked legally sufficient ground by not setting forth anything other than insignificant general findings. The Commission noted that at least six residents who spoke in opposition were owners of competing package stores and two others were current or past employees of competing package stores. In doing so the Commission  restated in the decision that competition should not be considered when determining whether a license should be granted or transferred.

Further, the appellant argued, and the Commission agreed, that the Local Board failed to consider the “preferred zone” where the new licensee would be located which is separate from residential areas, close to where the original licensee operated, and in a commercial district with a portion of the residents coming from outside of the community.

The matter was remanded back to the local board with the recommendation that the license transfer be granted.

The Commission also held a hearing regarding a violation of 204 CMR 2.05 at Pier 37 Boathouse in Falmouth. After an investigation it was found that the licensee had failed to complete the fire and building safety checklist as prescribed by the Fire Marshal prior to each opening. The licensee stipulated to the violation and the Commission suspended the license for 16 days of which nine days were held in abeyance for a period of two years.

In April, the Commission held a hearing regarding licensee Ancient Marinere in Foxborough. Investigators allegedly discovered fruit flies in multiple liquor bottles during an investigation on August 23, 2013. Citing a violation of 204 CMR 2.05(2) to wit: M.G.L. c. 94 § 186, the ABCC suspended the license for two days with the full suspension in abeyance for a period of two years.

The Commission heard an appeal from a Grafton decision to revoke a §15 wine and malt beverage license from Village Dairy after a sting operation allegedly caught the licensee selling alcoholic beverages to a person under 21 in violation of M.G.L. c. 138 § 34. The Commission found that the penalty by the board was unreasonable as the Commission has consistently held that the policy behind a sting operation should be the education of licensees in the risks associated with selling alcoholic beverages without requesting proof age.

The Commission remanded to the Local Board with the recommendation the license be suspended for 20 days and that the licensee submit an application for a change of manager.

Finally, the Commission held a hearing regarding an alleged violation at East Side Athletic Assn. of Malden. There investigators found three devices in the club characterized as gambling devices. After finding there was a violation of 204 CMR 2.05(i) the Commission suspended the license for 20 days with 5 days held in abeyance. The devices were removed and the licensee was ordered not to possess any automatic amusement devices or video poker machines.

Legal Advisory: New Massachusetts Retainage Law for Private Construction Projects

NEW MASSACHUSETTS RETAINAGE LAW (M.G.L. c. 149, §29F)

TO GOVERN PRIVATE CONSTRUCTION PROJECTS

EFFECTIVE – NOVEMBER 6, 2014

Q. What private construction projects does the new Massachusetts Retainage Law affect?

A.  The law applies to all private construction projects in which the prime contract exceeds
$3 million (except those involving 1-4 unit residential projects).

Q. What are the main elements of the new Massachusetts Retainage Law?

A. The main elements include:

  • Limits retainage on periodic payments to no more than 5%
  • Requires Prime Contractor to submit notice of substantial completion to Owner within 14 days of substantial completion
  • Owner to accept or reject notice of substantial completion within 14 days of receipt of notice
  • Defines substantial completion as date the work is sufficiently complete so that Owner may occupy or utilize project for its intended use.
  • Requires party withholding retainage to first provide written notice describing incomplete or defective work and deliverables
  • Requires Owner to furnish Prime Contractor with written punch list, including deliverables, within 14 days after acceptance of notice of substantial completion
  • Requires Prime Contractor to furnish subcontractors with written punch list, including deliverables, within 21 days after Owner’s acceptance of notice of substantial completion
  • Requires good faith certifications to be made
  • Allows for electronic communications
  • Any contract provision that “purports to waive, limit or subvert” the Retainage Law or “redefine or expand the conditions for achievement of substantial completion for payment of retainage” will be void and unenforceable

ABCC Issues Advisory On New Sunday Opening Time

This month the ABCC released an advisory  highlighting and explaining the new changes to Sunday opening times for off-premise licensees.

Effective on October 23, 2014 off-premise licensees may sell alcoholic beverages beginning at 10:00 a.m on Sundays. However, this new opening time does not come without certain actions that must be taken by the licensee.

In the advisory the ABCC writes, “Although under the law, these licensees are entitled as a matter of right to open at 10:00 a.m. and as such do not need the approval of the Local Licensing Authorities, licensees must notify the Local Licensing Authorities about the change of hours.”

This step should not be an overwhelming deterrence to the new early opening times as it can be completed by following the the change of hours process found on the ABCC’s website. Through this process licensees will be able to notify their local licensing authority of their new opening time. Since the law does not go into effect for another twenty days this gives licensees plenty of time to complete this process in time for early opening.

If a licensees fails to follow this process the licensee will be prohibited from making sales at the earlier time.

Bottle-Keep Service Comes to Boston

A new restaurant will soon be opening in Downtown Crossing and with a unique service that will set it apart from other options in the city. Mast’ Restaurant located at 145 Province Street will have a bottle-keep service, which according to general manager Nicholas Garoufalis does not exist anywhere else in the city.

A bottle-keep service allows patrons to store unfinished bottles of liquor at the restaurant in their name for future use. The bottle will be kept in the name of the purchaser at the restaurant and can also be gifted to other friends. This service is seen in other parts of the country and is popular oversees in places like Japan.

204 C.M.R. 2.18 allows a section 12 licensee to reseal a bottle of wine for a purchaser to take off the premises. The regulation does not address liquors, or resealing to keep at the licensed premises.

204-4.03 prohibits certain practices which are close to the bottle-keep service but are factually different. These include:

(a) offer or deliver any free drinks to any person or group of persons;

(b) deliver more than two drinks to one person at one time;

(c) sell, offer to sell or deliver to any person or group of persons any
drinks at a price less than the price regularly charged for such drinks
during the same calendar week, except at private functions not open to
the public;

(d) sell, offer to sell or deliver to any person an unlimited number of
drinks during any set period of time for a fixed price, except at private
functions not open to the public;

(e) sell, offer to sell or deliver drinks to any person or group of
persons on any one day at prices less than those charged the general
public on that day, except at private functions not open to the public;

(f) sell, offer to sell or deliver malt beverages or mixed drinks by the
pitcher except to two or more persons at any one time;

(g) increase the volume of alcoholic beverages contained in a drink
without increasing proportionately the price regularly charged for such
drink during the same calendar week;

(h) encourage or permit, on the licensed premises, any game or contest
which involves drinking or the awarding of drinks as prizes.

The difference is that Mast’ will likely keep a regular price list for the bottle, only provide one drink from the bottle at a time, and possibly keep the price per drink in proportion to the single drink prices. Because this service differs slightly from bottle service it may cause change to how the licensing board views these services and how restaurants offer them.

The novelty of the service, and potentially the popularity of it, will determine whether it catches on at other Boston restaurants.