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Arizona Issues Three Wholesaler Trade Practice Advisories

The Arizona Department of Liquor Licenses and Control (“DLLC”) issued three Industry Advisories in the last month addressing wholesaler industry practices. The advisories come in the wake of a September 19, 2012wholesaler licensee meeting, which “was held so that laws, rules and industry practices would be reviewed to ensure an open and competitive market in Arizona where no advantage is given to one liquor-licensed business over another.”

On November 6, 2012, the DLLC issued the first advisory, Wholesale Licensee Industry Practices, which provides clarification on numerous trade practices. The advisory is quite detailed, but key points include:

- Channel pricing can be for on-premise or off-premise, but no sub-categories of liquor pricing are permissible.

- Cumulative quantity discounts are prohibited.

- Promotional item limit is $500 per wholesaler per retailer, not per brand or per producer represented by a wholesaler.

- Items useful to the retailer in the conduct of business cannot be provided to retailers under the $500 allowance, even if rendered unusable (e.g. patio umbrellas).

- Third party promotional companies can’t be used to provide items to retailers that the licensee cannot provide directly.

- The advisory also addresses shelf space, product displays, buy backs, signage, and equipment.

The DLLC’s November 30, 2012 advisory, Removal of Unauthorized Signs, sets a deadline of February 1, 2013 for wholesalers to remove unauthorized signs from retail premises. The advisory provides that an authorized sign is one that:

- The wholesale licensee LENDS to the retailer,

- Has a value that does not exceed $400,

- Has no utilitarian value; and,

- Doesn’t mention a particular retailer (e.g. Joe’s Bar) or directional information (e.g. Enter Here).

The DLLC’s most recent advisory, the December 4th Wholesale Licensee Industry Practices #2, addresses three wholesaler practices not covered in the earlier advisories. Specifically,

- Glassware: may be provided to on-sale retailers as part of $500 promotional item allowance and must be supplier-branded.

- Energy drinks may only be sold to retailers at or above the wholesaler’s cost, and may not be given to retailers.

- Inventory for sampling events must be supplied by an off-sale retail licensee for a sampling conducted by that retail licensee, and must be provided by a wholesaler or producer for a sampling conducted by a producer or wholesaler at an off-sale retailer.

Given the breadth of the guidance contained in the advisories, the DLLC will likely be on the lookout for compliance in the coming months.


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