gerald a. dinallo, jr. senior managing director nabca 16 th annual symposium on alcohol beverage law...
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Gerald A. Dinallo, Jr.Gerald A. Dinallo, Jr.Senior Managing DirectorSenior Managing Director
NABCANABCA1616thth Annual Symposium on Alcohol Annual Symposium on Alcohol
Beverage Law & RegulationBeverage Law & Regulation
“Who’s Tied to the House?”“Who’s Tied to the House?”
March 9 – 11, 2009March 9 – 11, 2009
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium“Who’s Tied to the House?”“Who’s Tied to the House?”
Gerald A. Dinallo, Jr.
Jerry R. Jolly
William D. O’Donaghue
Morton Siegel
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium““Who’s Tied to the House?”Who’s Tied to the House?”
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium “Who’s Tied to the House?” “Who’s Tied to the House?”
• Suppliers :
– 387 suppliers of alcohol the top 10 suppliers account for 73% of volume (NABCA)
– $7.1 billion in CY 2008 sold through the control states
• Wholesalers:
– 86 spirits distributors/brokers in the US (DISCUS)
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium “Who’s Tied to the House?” “Who’s Tied to the House?”
• Retail licensees:
– 82,674 Off Premise Liquor License Outlets
– 190,000 On Premise Liquor License Outlets
• “Big Box” alcohol retailers (50K+ annual cases and chains):
– 64 retailers, thousands of outlets; approximately one third of major suppliers’ sales
– Approximately 50 million cases of spirits annually
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium “Who’s Tied to the House?” “Who’s Tied to the House?”
• 1984: 3,911 people for every liquor store (as measured by number of off-premise distilled spirits licenses).
–2007 there were 4,810.
• 23% more people served by a single outlet in 2007
–Larger population equals the opportunity to grow and supply a wider variety of services
–Fewer stores per person indicates larger stores; therefore, a trend toward larger retail entities
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• Wholesaler consolidation continues to accelerate
– Top wholesalers larger than most suppliers, with multi-state operations
• A “pull” versus “push” market: retailers large/demanding
– Marketplace dynamics have changed since the 1930s
– Historical basis for three-tier system: protect retailers from supplier’s monopoly power and exclusive ties (“tied houses”)
– “Big box” retailers now have “tied-house” power
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium “Who’s Tied to the House?” “Who’s Tied to the House?”
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium“Who’s Tied to the House?”“Who’s Tied to the House?”
Regulators’ Point of ViewRegulators’ Point of View
• Public policy rationale for tied-house laws:
– promote the state’s interest in an orderly market place
– to prohibit vertical integration and dominance by a single producer in the market place, commercial bribery and predatory marketing practices
–to prevent the intemperate use of alcoholic beverages.
• To prevent overly aggressive marketing practices, laws were passed to prohibit giving gifts, premiums, or free goods
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium “Who’s Tied to the House?” “Who’s Tied to the House?”
Regulators’ Point of ViewRegulators’ Point of View
• Historically the legislature and industry has only allowed narrowly crafted exception to the tied-house laws to address a specific problem such as brew pubs, stadiums, ownership interest in amusement parks etc. Very difficult to make major changes in law because of competing interest.
• Despite the states inability to make changes in a global market place it has achieved many of its public policy goals.
• In general the market for alcoholic beverages is orderly and disciplined and licensees are committed in good faith to comply with the law.
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium “Who’s Tied to the House?” “Who’s Tied to the House?”
Regulators’ Point of ViewRegulators’ Point of View
• Consumers have a broad array of convenient choices in both available beverages and in outlets with a wide and diverse option of amenities.
• Suppliers and retailers have been able to promote their businesses and products in creative ways and in a wide variety of media.
• The legislature and industry has been successful in passing exceptions to the tied-house laws to continue business development in the hospitality and tourist industries.
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium “Who’s Tied to the House?” “Who’s Tied to the House?”
The Illinois ExperienceThe Illinois Experience
1. TIED HOUSE EXAMPLES
• Traditional- Untouchables
• Modern- Retailer
2. ILLINOIS PROBLEM
• Retailer Domination
3. ENFORCEMENT ACTION
4. RESULTS AND IMPACT
• Greater Competition
• Consumer Benefits
• Industry Benefits
5. ENFORCEMENT IS GOOD & NECESSARY!
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium“Who’s Tied to the House?”“Who’s Tied to the House?”
Legal/Industry Point of ViewLegal/Industry Point of View
• Application of historical principles of the past to the present – industry business practices
• Identify the historical principle underlying regulatory structure – a control analysis
• Today’s inquiries on industry business practices
• The industry today – business model
• Maximum efficiency vs. regulated industry
• Enforcement vs. Change
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NABCA 16NABCA 16thth Annual Symposium Annual Symposium“Who’s Tied to the House?”“Who’s Tied to the House?”
QUESTIONS?
THANK YOU!
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