Legislating Liquor Laws: The Fallout

As of midnight on Sunday, July 31st, legislators in Massachusetts will no longer collectively meet in full formal sessions for the remainder of the year. Although informal legislative sessions will take place in the coming months, they are reserved for non-controversial items. Therefore, the 2015-2016 Legislative Session has effectively come to an end. There were a number of proposals that would have significantly impacted the alcoholic beverage industry, from the Governor's attempt to give municipalities authority over their own liquor license quotas, easing the laws governing distribution agreements between brewers and distributors, to further regulating alternative proprietorship arrangements. Let’s take a look at what they did and did not do:

Approved Changes

 

  •  A TWO Tier System: The Nashoba Valley Winery debacle exposed a specific outdated area of Massachusetts alcoholic beverage laws, but it may also have opened the door to a more serious look at how these laws have failed to keep up with the ever-changing industry. In one of the most dramatic changes to the liquor laws in years, the legislature authorized licensees to hold both a manufacturers license to produce beer, wine, or distilled spirits (Farmer Series Licenses - Section 19B, 19C & 19E) and a restaurant license (On-Premise Section 12 License) so they can serve their product for on-premise consumption alongside a tasty meal. Although this change was directed at solving the Nashoba Valley situation, it will be interesting to see how other licensees take advantage of the new freedom to expand their business opportunities and cater, literally, to their patrons in new ways. 
  •  Cats and Dogs Living Together: In another targeted change at the liquor laws, the Legislature approved a change that would allow retail stores licensed to serve off-premises consumption under Section 15 (i.e. a liquor store) to also serve serve alcohol to patrons at restaurants located within the premises (a Section 12 license) if at least 50% of the revenue at the licensed location is from the sale of grocery items. So this is really only impacting your larger supermarket chains and, the impetus for the change in the first place, the soon-to-open Mario Batli's Eataly in Boston. 
  • Alternating Brewing Arrangement Regulations: As I described in a previous blog, an amendment was filed during the Fiscal Year 2017 Budget deliberations to further regulate alternative proprietorship arrangements by instructing the ABCC to create and issue a Tenant Brewer's License that authorizes the holder to use a host brewers premises and equipment to manufacture their beer. You can read the changes here.
  • Purging the Puritans: Small changes to a few antiquated puritan laws were approved that would allow restaurants and bars to open the Monday following Christmas if it were to fall on a Sunday and for the sale of alcohol after noon on Memorial Day. So its great to see the Legislature ending our state-wide, 250+ year (?) nightmare. 

What Could Have Been

 

  • House Bill 245 An Act relative to small brewers: This bill probably received the most wide-spread attention from breweries during the legislative session but was vehemently fought by the distributors. H. 245 would have eased the ability for brewers to end distribution relationships with a wholesaler. Currently, it is extremely difficult for a manufacturer to end its relationship with a distributor once they enter into a distribution relationship. It requires a showing of "good cause," a threshold almost impossible to meet in practice. Interestingly, a last ditch effort to get the two sides together and come to an agreement would have established a commission to study the distribution agreement laws. The language also could have opened the door for the commission to study other areas of alcoholic beverage laws, if it so chose. Unfortunately, the commission was excluded from the final version of the omnibus Economic Development bill passed at the 11th hour. 
  • Municipal Autonomy over Liquor License Quotas: In an attempt at another big change that saw a great deal of attention, Governor Charlie Baker included a section in another omnibus bill (House Bill 4565 An Act Modernizing Municipal Finance and Government) that would have granted municipalities autonomy over how many liquor licenses they can issue. This is significant because currently if a town or city has maxed out its available licenses they must appeal to the Legislature for additional ones via the legislative process - a time consuming and costly venture. Mayor Marty Walsh of Boston joined proponents near the end of the legislative session, heavily favoring the change, but local legislators opposed the measure and eventually won out. 
  • Sale of Beer at Farmers Markers: Most breweries in the State are licensed to manufacture beer under a "Farmer-Brewers" license, but they are not allowed to sell their product at farmers markets. There was language to change this haphazard law, but in an even stranger move it was not approved. 

And that's it for your 2015-2016 Legislative Session, folks! The Legislature will likely be approving additional liquor licenses in the coming months for specific cities and towns that have reached their quota, but it is not anticipated that any of the above issues that failed will be taken up. The 2017-2018 Legislative Session will start in January of 2017, so we will have to wait and see what issues will be re-filed and if any new ones are proposed. As an alcoholic beverage license lawyer for Massachusetts we can help you make the best use of these new changes

-Rob McGovern