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Friday, October 12, 2012

Gov. Brown Makes Wine Sweepstakes and Contests Legal in California

Governor Brown signed Senate Bill (SB) 778 into law creating two new Business and Professions (B&P) Code Sections (25600.1 and 25600.2) authorizing consumer contests and sweepstakes conducted by authorized California Department of Alcoholic Beverage Control (ABC) licensees. These statutes become effective January 1, 2013.

SB 778 contains significant restrictions, examples of which are described below. However, it does not contain the restrictive monetary provisions imposed by B&P section 25600 and ABC Rule 106 for “free goods” or “things of value” provided to the consumer. The most significant aspect of the new statutes is the absence of such monetary limits for prizes provided to the consumer in connection with these new marketing tools.

SB 778 addresses two major marketing concepts: contests (a game of skill) and sweepstakes (a game of chance), defined as follows:

B&P Section 25600.1 defines a contest as a game, contest, puzzle, or similar activity that holds out or offers to participants the opportunity to receive or compete for gifts, prizes, gratuities, or other things of value as determined by skill, knowledge, or ability rather than upon random selection.

B&P Section 25600.2 defines a sweepstakes as a procedure, activity, or event for the distribution of anything of value by lot, chance, or random selection where the odds for winning a prize are equal for each entry.

As for restrictions, one key restriction is that which identifies what industry members may participate in, or conduct contests and sweepstakes (referred to as “authorized licensees”).

Sections 25600.1 and 25600.2 both define “authorized licensees” as a  winegrower, beer and wine importer general, beer manufacturer, out-of-state beer manufacturer certificate holder, distilled spirits manufacturer, distilled spirits manufacturer's agent, distilled spirits importer general, distilled spirits general rectifier, rectifier, out-of-state distilled spirits shipper's certificate holder, brandy manufacturer, and brandy importer.

These authorized licensees may conduct these marketing activities regardless of whether the licensee holds any additional license in conjunction with those defined here.  It is imperative that one qualifies as an authorized licensee before entering the consumer contest or sweepstakes arena.

Note that an authorized licensee does not include a beer and wine wholesaler, a beer and wine importer general, or a distilled spirits importer general that only holds a wholesaler's or retailer's license as an additional license.

B&P Section 25600.1 restrictions (see below link to statute for additional restrictions and means of contest entry) include:

  • Entry into or participation in a contest shall be limited to persons 21 years of age or older.
  • Skill, knowledge, or ability does not include the consumption or use of alcoholic beverages.
  • Entry or extra chances in a contest shall not be made available via the purchase of an alcoholic beverage.
  • No contest shall involve consumption of alcoholic beverages by a participant.
  • A contest may not be conducted for the benefit of any permanent retail licensee.  
  • A contest shall not provide for the instant or immediate awarding of a prize or prizes. 
  • Instant or immediate notification to the consumer that he or she is a winner is permissible.
  • Except for providing a means of entry, a contest authorized by this section shall not be conducted at the premises of a retail licensee or the premises of a winegrower or beer manufacturer operating under a duplicate license for a branch office.
  • Alcoholic beverages or anything redeemable for alcoholic beverages shall not be awarded as a contest prize. This shall not prohibit a contest in which the prize is cash or cash equivalent or the awarding of cash or cash equivalent.
  • A retail licensee shall not serve as the agent of an authorized licensee by collecting or forwarding entries or awarding prizes to, or redeeming prizes for, a contest winner.
  • A licensee that is not an authorized licensee shall not directly or indirectly underwrite, share in, or contribute to, the costs of an authorized contest, or serve as the agent of an authorized licensee to collect or forward entries or to furnish any prize to a contest winner.

Section 25600.2 restrictions (see below link to statute for additional restrictions and means of sweepstakes entry) include:

  • No entry fee may be charged to participate in a sweepstakes.
  • Entry or extra chances in a sweepstakes shall not be made available via the purchase of an alcoholic beverage.
  • Entry into or participation in a sweepstakes shall be limited to persons 21 years of age or older and shall be open to all residents of California.
  • No sweepstakes shall involve consumption of alcoholic beverages by a participant.  
  • A sweepstakes may not be conducted for the benefit of any permanent retail license.

Under both statutes, an authorized licensee that violates any provision of sections 25600.1 or 25600.2 in addition to any other penalty imposed may be prohibited by the department from offering a contest or sweepstakes to California residents for a period of 12 months.

FINAL NOTE:  Now that these new tools are legal we envision many authorized licensees participating by offering consumer contests and sweepstakes as part of their marketing programs. With that said, be sure you understand the new privileges being given and the many limitations associated with them. We think it is safe to say that ABC as well as your competitors in the industry will be watching closely.  As in all cases if you are unsure of how to proceed seek guidance.  For more information contact Mike Mann at mmann@dpf-law.com

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