(Media, PA) – On Monday, Iron Hill Brewery and Restaurant sent out an email to Mug Club members saying that changes were coming to the program due to some illegalities of how the program had been operating.
More specifically, the Pennslyvania Liquor Control Board took issue with how incentives worked in the program.
Iron Hill Chief, Kevin Finn, told The Beer Circle that the company has only been issued a verbal warning and is taking the necessary steps to fix the program. How the issue made its way to the PLCB in the first place is unknown though the incident may have implications for similar programs in the state.
Below, is the PLCB’s statement in full:
OPINION: This office has reviewed the promotional materials provided in your first e-mail, as well as the revised promotion materials in your subsequent e-mail. In general, mug clubs tend to have two (2) issues in that they often constitute an unlawful inducement to purchase beer and violate the acceptable discount pricing practices.
With regard to the unlawful inducement, the Liquor Code prohibits providing anything of value as an inducement to purchase alcohol. [47 P.S. § 4-493(24)(i)]. However, an exception allows manufacturers and licensees to provide advertising novelties of nominal value, which bear advertising matter, to other licensees and consumers with or without a purchase. [47 P.S. § 4-493(24)(i); see also 40 Pa. Code § 13.52]. “Nominal value” currently is interpreted as fifteen dollars ($15.00) each, wholesale cost, or less. [Board Advisory Notice No. 10 (6th Revision)]. Such advertising novelty giveaways may or may not be conditioned on the purchase of an alcoholic beverage.
Your Mug Club promotion, as revised, would be permissible as described, since it would not be considered an unlawful inducement to purchase beer. Since the Mug Club members have to pay the same price for their beer as non-members, there is no inducement for patrons to pay the membership fee in order to take advantage of receiving an increased amount of beer that is not afforded to non-members.
Further, the offering of points for purchases is problematic when points are accumulated based on the purchase of beer/alcohol, regardless of whether the points are ultimately redeemed for food and non-alcoholic products only. However, your revised Mug Club promotion specifically excludes the accrual of points on purchases of alcohol; therefore, your promotion would be permissible with regard to the offering of points.
Finally, as to the unlawful discount pricing, section 13.102(a)(2) of the Board’s Regulations prohibits the sale and/or serving of an increased volume of one (1) drink of liquor, wine or malt or brewed beverages without a corresponding and proportionate increase in the price for the drink. [40 Pa. Code §13.102(a)(2)]. Therefore, if the amount of beer given to Mug Club members is greater than a normal beer mug for non-members, the price for that larger amount of beer must increase proportionately. Since your promotion has been amended to not permit Mug Club members to obtain twenty-four (24)-ounces of beer for the price of sixteen (16)-ounces of beer, there would not be a violation of section 13.102(a)(2) of the Board’s Regulations. Please note that although discount pricing restrictions do not apply to manufacturers, such as breweries, they do apply to brew pubs and restaurants operated in connection with breweries, which appears to be the case here.
Please note that if the Mug Club benefit regarding “invitations to exclusive mug club events throughout the year” includes the benefit of alcohol, the discount pricing practices rules found in section 13.102 of the Board’s Regulations would apply. [40 Pa. Code § 13.102]. Also, note that it would be incumbent upon you to establish that if points are used to acquire alcoholic beverages, the value of the points must be equivalent to the cash price.
THIS OPINION APPLIES ONLY TO THE FACTUAL SITUATION DESCRIBED HEREIN AND DOES NOT INSULATE THE LICENSEE OR OTHERS FROM CONSEQUENCES OF CONDUCT OCCURRING PRIOR TO ITS ISSUANCE. THE PROPRIETY OF THE PROPOSED CONDUCT HAS BEEN ADDRESSED ONLY UNDER THE LIQUOR CODE AND REGULATIONS. THE LAWS AND POLICIES ON WHICH THIS OPINION IS BASED ARE SUBJECT TO CHANGE BY THE LEGISLATURE OR THE PENNSYLVANIA LIQUOR CONTROL BOARD.