NY Nails Retailer With $50,000 Fine For Third-Party Internet Sales

The New York State Liquor Authority (NYSLA) levied a $50,000 fine March 12 against Upstate retailer Shermer Specialities of Carmel, NY for engaging in third-party Internet sales.

A video of the full board meeting can be found by clicking on the image to the left, or here: Item 2013-00643: Connoisseur Encounters Inc/Schermer Specialties. (An agenda will pop-up as well. )

Wine Industry Insight (WII) has not had time to view the video, because we wanted to get this news to you as quickly as possible.

No written statement has been made by the NYSLA nor has WII been able to find any written response from any of the parties other than a New York association that represents state package stores (see below).

SUMMARY FROM ASSOCIATION THAT OPPOSED THIRD-PARTY INTERNET SALES

The following comes to us by way of the New York-based Metropolitan Package Store Association, an association which is opposing third-party Internet sales.

All text in burgundy are direct quotes.

The NYS Liquor Authority held a Full Board Meeting today (March 12).

Third Party Internet Sales.

Item #643 on the agenda: Shermer Specialities, a licensed retailer whose husband is President of Lionstone International (a wholesaler). The retailer was working with Lionstone to provide internet sales of wine, which violates the three tier system. As you may recall, the issue of third party sales was discussed at a recent SLA Board meeting in January because a company, ShipCompliant requested a Declaratory Ruling from the SLA seeking approval from the SLA to conduct third party internet sales and advertising in New York, based on its business model.

Arguably, since these third party companies are not licensed to sell alcohol, they are violating the three tier system. Additionally, by participating in this arrangement, retailers could be construed as “availing” their license and sharing their profits with these companies, all of which weaken the system and do not conform to the rules and regulations that govern sales of alcohol. However, currently companies such as the Wall Street Journal, Zagat and Lot 18 work through retailers to sell wine to residents in New York through “wine clubs”, using a licensed retailer to provide the product.

The penalty imposed on Shermer Specialities was $50,000 and came with a promise from the Chairman to finalize the Authority’s position on Third Party Internet Sales.

This should serve as a reminder to all stores that these types of activities are not allowed.

As retailers, we are often approached by companies asking us to buy their product or service. It is up to us as retailers to know what we can or cannot do because it is our license on the line. In addition to third party internet sales and co-op buying, please keep the following in mind as you build your business relationships with outside companies.

Groupon / Living Social. Package stores are not allowed to use this form of marketing. It is illegal for package stores to participate in any promotion involving marketing fees that gives an unlicensed third party company a share in our profits.

No Charge for Wine Tastings. It is illegal to charge a fee or make a profit from wine tastings and wine education classes. This is considered engaging in a second business under the Alcohol Beverage Control Law. In addition, liquor stores may not conduct a spirits tasting on its own. Read more on rules surrounding tastings from this June 2012 article by Keven Danow in Beverage Media.

If you are approached by companies asking you to participate in any of these activities, call Metro at 866.989.9006 and we will verify the legality of it for you.