Attorney: Liquor Control Board opinion not consumer-friendly

By Robert Lawson | Nov 17, 2016

HARRISBURG — The Pennsylvania Liquor Control Board in October issued a legal advisory opinion about the ability of breweries, wineries and distilleries to purchase and sell limited winery and distillery products carried in state stores and whether they may be eligible for wholesale discount.

Matthew Andersen, an attorney with Norris McLaughlin & Marcus, P.A., says the advisory places a burden on these businesses at the expense of consumers. Anderson characterized the rule as not consumer-friendly, which the PLCB says is a mischaracterization.

"The no-discount rule isn't consistent with consumer friendliness because it kind of dilutes the market for these products with uncertainty about cost and availability," Anderson said.

"The issue with this legislation is that breweries don't get the same benefits of restaurants, clubs and hotels in the state. The state issues the licenses. Clubs can buy at a discount for wholesale.

They have declined to do so for breweries, wineries and distilleries even though under Act 39 they're allowed to sell from their own licensed premises directly to consumers. If it's sold in stores, they can't get the discount. The state store gets a monopoly over the pricing in their stores."

Anderson identified this as a conflict with consumer friendliness in a state where all liquor stores are state-operated. Anderson said many choose not to sell the products in the state stores, but this puts them at a disadvantage with non-local competitors and creates a void of availability of their products in the market.

"At no point do they have to put their products in the state store system," Anderson said. "They can sell them on their own. That's the way a lot of them choose to do it."

Since they must sell to retail licensees to get their products into state stores, how much of the cost burden will fall to consumers? Is it significant? What will be the likely outcome for the industry in the state?

Elizabeth Brassell, a PLCB spokesperson, said the agency is just doing its job and avoided the question of consumer friendliness posed by Anderson.

"We're simply administering state law," Brassell said in an email to the Pennsylvania Record.

"Wineries and distilleries have no obligation to sell their products through Fine Wine & Good Spirits stores, though many do to take advantage of the additional exposure and sales opportunity to build their brands.

"We have prominent sections in our stores dedicated to Pennsylvania products, and we're proud to have helped Pennsylvania producers like Maggie's Farm, Wigle Whiskey and Dad's Hat build their brands and achieve national acclaim. More information about our PA Proud program is here."

Brassell added a caveat.

"Having said that, as a privilege of their licenses, limited distilleries and limited wineries can choose to sell only from their licensed premises directly to consumers, and limited wineries that obtain direct wine shipper licenses can also sell and ship wine directly to Pennsylvania residents' homes," she said. "Limited distilleries can also ship directly to consumers as a privilege of their license."

Brassell said producers may sell through their own licensed facilities and/or through state stores.

"There is no requirement for them to sell to 'retail licensees.' The producers establish the prices for their products, although if a distillery sells a product through our stores, by law it may not sell the same product at a price lower than the PLCB shelf price at any of its own licensed facilities," Brassell said.

"The only exception is that retail licensees (most commonly bars and restaurants) may purchase at a 10 percent discount from the PLCB shelf price, whether they purchase from the distiller or a Fine Wine & Good Spirits store."

There seems to be contention between the opinion of Anderson and the PLCB on the issue of consumer friendliness and the role of the PLCB in price, convenience and availability to consumers.

"Again, our role is to administer current law, and the opinion Mr. Anderson opines on is a reflection of our obligation," Brassell said. "Further, regarding the Board's position regarding who gets the 10 percent licensee discount when purchasing from our stores, the law clearly spells it out:

"Every Pennsylvania Liquor Store shall sell liquors at wholesale to hotels, restaurants, clubs, and railroad, Pullman and steamship companies licensed under this act; and, under the regulations of the board, to pharmacists duly licensed and registered under the laws of the Commonwealth, and to manufacturing pharmacists, and to reputable hospitals approved by the board, or chemists. Sales to licensees shall be made at a price that includes a discount of ten per centum from the retail price; except that special order sales to licensees authorized in subsection (a) shall not be subject to the ten per centum discount.

"The section then goes on to say that all other sales are at retail."

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