Title of Regulation: 3VAC5-30. Tied-House (amending 3VAC5-30-60).

Statutory Authority: § 4.1-111 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: January 11, 2017.

Effective Date: February 3, 2017.

Agency Contact: Shawn Walker, Director of Law Enforcement, Department of Alcoholic Beverage Control, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4569, FAX (804) 213-4411, or email shawn.walker@abc.virginia.gov.

Basis: Section 4.1-103 of the Code of Virginia authorizes the board to promulgate regulations in accordance with the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia), and § 4.1-111 authorizes the board to amend or repeal regulations adopted by it in accordance with the Administrative Process Act.

Purpose: The amendment adds language that conforms with the current agency guidance document Circular Letter 06-01 allowing manufacturers, importers, brokers, bottlers, and wholesalers of alcoholic beverage to provide and install carbon dioxide filters in wine and beer draft lines of licensed retail establishments. The amendment has no adverse impact on the health, safety, or welfare of the citizens of the Commonwealth.

Rationale for Using Fast-Track Rulemaking Process: The amendment is expected to be noncontroversial as it merely conforms the regulation with current practice.

Substance: The amendment provides that representatives of manufactures, importers, bottlers, brokers, or wholesalers of wine and beer products may provide and install without charge carbon dioxide filters in draft beer lines of retail licensees.

Issues: The primary advantage for the agency, regulated community, and the public in amending 3VAC5-30-60 is to conform the regulation with a guidance document and current practice within the regulated community. Another advantage for the agency is the fulfillment of the commitment made to update the regulation when the guidance document was issued. Furthermore, the allowance of this practice enables businesses to ensure that product quality and integrity are preserved without additional expense to many small businesses. There are no disadvantages to the Commonwealth or the public.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Alcoholic Beverage Control Board (Board) proposes to specify that any manufacturer, importer, bottler, broker or wholesaler of alcoholic beverages may provide to retail licensees carbon dioxide filters without charge and install such filters in the retailers draft beer lines.

Result of Analysis. The benefits exceed the costs for the proposed change.

Estimated Economic Impact. A carbon dioxide filter is a device placed in the gas line of a beer dispensing system. Its purpose is to filter impurities from carbon dioxide gas so that the impurities do not end up in draft beer. These filters were not prevalent when this regulation was first drafted, and therefore were not included in the items that could be given to retailers. Since the carbon dioxide filters could only be sold to retailers and not given, beer manufacturers/wholesalers became concerned with the integrity of their product as some retailers did not have the same concerns and thus were not willing to purchase the filters.¹

On February 14, 2006, the Department of Alcoholic Beverage Control (Department) issued a guidance document² stating that the Board approved the provision of carbon dioxide filters free of charge. The Board's proposed amendment to this regulation conforms the regulation to this policy that has been in effect since 2006. Thus the proposal will not affect the carbon dioxide filter rule in practice, but will be beneficial in that it will improve clarity for readers of the regulation who have not also seen the guidance document.

Businesses and Entities Affected. The proposed amendment to the regulation merely clarifies, and does not change, an existing rule. The carbon dioxide filter rule potentially affects manufacturers, importers, bottlers, brokers and wholesalers of alcoholic beverages, as well as retail licensees. According to the Department there are over 9,000 such licensed entities in the Commonwealth, the majority of which qualify as small businesses.

Localities Particularly Affected. The proposed amendment does not disproportionately affect particular localities.

Projected Impact on Employment. The proposed amendment does not significantly affect employment.

Effects on the Use and Value of Private Property. The proposed amendment does not affect the use and value of private property.

Real Estate Development Costs. The proposed amendment does not affect real estate development costs.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The proposed amendment to the regulation merely clarifies, and does not change, an existing rule. Therefore, it does not significantly affect costs for small businesses.

Alternative Method that Minimizes Adverse Impact. The proposed amendment does not adversely affect small businesses.

Adverse Impacts:

Businesses. The proposed amendment does not adversely affect businesses.

Localities. The proposed amendment does not adversely affect localities.

Other Entities. The proposed amendment does not adversely affect other entities.

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¹ Source: Department of Alcoholic Beverage Control

² See Circular Letter 06-01: http://townhall.virginia.gov/L/ViewGDoc.cfm?gdid=3394

Agency's Response to Economic Impact Analysis: The Department of Alcoholic Beverage Control concurs with the economic impact analysis prepared by the Department of Planning and Budget.

Summary:

The amendment allows any manufacturer, importer, bottler, broker, or wholesaler of alcoholic beverages to provide carbon dioxide filters to retail licensees without charge and to install such filters in the retailer's draft beer lines.

3VAC5-30-60. Inducements to retailers; beer and wine tapping equipment; bottle or can openers; spirits back-bar pedestals; banquet licensees; paper, cardboard or plastic advertising materials; clip-ons and table tents; sanctions and penalties.

A. Any manufacturer, importer, bottler, broker, or wholesaler, or its representative, may sell, rent, lend, buy for, or give to any retailer, without regard to the value thereof, the following:

1. Draft beer or wine knobs, containing advertising matter which shall include the brand name and may further include only trademarks, housemarks and slogans and shall not include any illuminating devices or be otherwise adorned with mechanical devices which are not essential in the dispensing of draft beer or wine; and

2. Tapping equipment, defined as all the parts of the mechanical system required for dispensing draft beer in a normal manner from the carbon dioxide tank through the beer faucet, excluding the following:

a. The carbonic acid gas in containers, except that such gas may be sold only at the reasonable open market price in the locality where sold;

b. Gas pressure gauges (may be sold at cost);

c. Draft arms or standards;

d. Draft boxes; and

e. Refrigeration equipment or components thereof; and

f. Carbon dioxide filters, which may be provided and installed without cost.

Further, a manufacturer, bottler or wholesaler may sell, rent or lend to any retailer, for use only by a purchaser of draft beer in kegs or barrels from such retailer, whatever tapping equipment may be necessary for the purchaser to extract such draft beer from its container.

B. Any manufacturer, importer, bottler, broker, or wholesaler, or their representatives, may sell to any retailer and install in the retailer's establishment dispensing accessories (such as standards, faucets, rods, vents, taps, tap standards, hoses, cold plates, washers, couplings, gas gauges, vent tongues, shanks, and check valves) and carbon dioxide (and other gases used in dispensing equipment) at a price not less than the cost of the industry member who initially purchased them, and if the price is collected within 30 days of the date of sale.

C. Any beer tapping equipment may be converted for wine tapping by the beer wholesaler who originally placed the equipment on the premises of the retail licensee, provided that such beer wholesaler is also a wine wholesaler licensee. Moreover, at the time such equipment is converted for wine tapping, it shall be sold, or have previously been sold, to the retail licensee at a price not less than the initial purchase price paid by such wholesaler.

D. Any manufacturer, bottler or wholesaler of wine or beer may sell or give to any retailer, bottle or can openers upon which advertising matter regarding alcoholic beverages may appear, provided the wholesale value of any such openers given to a retailer by any individual manufacturer, bottler or wholesaler does not exceed $20. Openers in excess of $20 in wholesale value may be sold, provided the reasonable open market price is charged therefor.

E. Any manufacturer of spirits may sell, lend, buy for or give to any retail licensee, without regard to the value thereof, back-bar pedestals to be used on the retail premises and upon which advertising matter regarding spirits may appear.

F. Manufacturers of alcoholic beverages and their authorized vendors or wholesalers of wine or beer may sell at the reasonable wholesale price to banquet licensees glasses or paper or plastic cups upon which advertising matter regarding alcoholic beverages may appear.

G. Manufacturers, importers, bottlers, brokers, or wholesalers of alcoholic beverages, or their representatives, may not provide point-of-sale advertising for any alcoholic beverage or any nonalcoholic beer or nonalcoholic wine to retail licensees except in accordance with 3VAC5-30-80. Manufacturers, importers, bottlers, brokers, and wholesalers, or their representatives, may provide advertising materials to any retail licensee that have been customized for that retail licensee (including the name, logo, address, and website of the retail licensee) provided that such advertising materials must:

1. Comply with all other applicable regulations of the board;

2. Be for interior use only;

3. Contain references to the alcoholic beverage products or brands offered for sale by the manufacturer, bottler, or wholesaler providing such materials and to no other products; and

4. Be made available to all retail licensees.

H. Any manufacturer, importer, bottler, broker, or wholesaler of wine, beer, or spirits, or its representatives, may sell, lend, buy for, or give to any retail licensee clip-ons and table tents.

I. Any manufacturer, importer, bottler, broker, or wholesaler of alcoholic beverages, or their representatives, may clean and service, either free or for compensation, coils and other like equipment used in dispensing alcoholic beverages, and may sell solutions or compounds for cleaning alcoholic beverage glasses, provided the reasonable open market price is charged.

J. Any manufacturer, importer, bottler, or wholesaler of alcoholic beverages licensed in this Commonwealth may sell ice to retail licensees provided the reasonable open market price is charged.

K. Any licensee of the board, including any manufacturer, bottler, importer, broker as defined in § 4.1-216 A of the Code of Virginia, wholesaler, or retailer who violates, attempts to violate, solicits any person to violate or consents to any violation of this section shall be subject to the sanctions and penalties as provided in § 4.1-328 of the Code of Virginia.