Title of Regulation: 3VAC5-50. Retail Operations (amending 3VAC5-50-160).

Statutory Authority: §§ 4.1-103 and 4.1-111 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: August 11, 2019.

Agency Contact: LaTonya D. Hucks-Watkins, Legal Liaison, Virginia Alcoholic Beverage Control Authority, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4698, FAX (804) 213-4574, or email latonya.hucks-watkins@abc.virginia.gov.

Basis: The Board of Directors of the Virginia Alcoholic Beverage Control Authority (ABC) is granted the authority to promulgate regulations under § 4.1-101 of the Code of Virginia, and § 4.1-111 of the Code of Virginia provides the board with the authority to adopt reasonable regulations that "...shall prescribe the terms for any 'happy hour' conducted by on-premises licensees. Such regulations shall permit on-premises licensees to advertise any alcoholic beverage products featured during a happy hour but prohibit the advertising of any pricing related to such happy hour."

Purpose: Virginia ABC has undertaken this action as a measure to allow its licensees to engage in responsible advertising for happy hour events. These changes will provide the public with a regulation that is condensed and easily accessible and understandable by eliminating some redundancies and clarifying the rules relating to happy hour advertising, all of which lends itself to the ongoing protection of the health, safety, and welfare of citizens. Virginia ABC does not anticipate any potential issues that would have to be addressed as this regulation is developed. Virginia ABC hopes that the change will afford licensees more discretion in the language that they choose to use in their advertising while still maintaining compliance with the Code of Virginia.

Substance: The substantive changes to the existing regulation include adding a new subsection B to 3VAC5-50-160 that permits happy hour advertising so long as the advertisement does not induce minors or interdicted individuals to consume alcohol or encourage people to consume in excess. The section is relabeled to accommodate the addition of the regulation permitting happy hour advertising, and a cross reference to the definition of "advertising" in 3VAC5-20-10 is included. Subdivisions B 2, B 5, and B 6 are deleted because those provisions are addressed in other regulations.

Subsection E is added and includes a provision that the regulation is subject to and shall be adhered to in a manner consistent with all other regulations of the authority.

Issues: The primary advantage to the public is that licensees will have more discretion in advertising happy hour events, provided they do so responsibly and according to the provisions of the Code of Virginia. The primary advantage to the agency is that the regulation maintains compliance the Code of Virginia and removes some redundancies. There are no disadvantages to the public or Commonwealth associated with this regulatory change.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Virginia Alcoholic Beverage Control Board of Directors (Board) proposes to repeal prescriptive restrictions on happy hour advertising.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. Section 4.1-111(B)(15) of the Code of Virginia authorizes the Board to permit on-premises licensees to advertise any alcoholic beverage products featured during a happy hour. The statute, however, prohibits the advertising of any pricing related to such happy hour.¹

Under the current regulation, licensees are prohibited to advertise happy hour anywhere other than within the interior of the licensed premises unless they only use the terms "Happy Hour" or "Drink Specials" in outside advertisements and only provide a list of the alcoholic beverage products featured during a happy hour as well as the time period within which alcoholic beverages are being sold at reduced prices.

The Board proposes to repeal this permissive but prescriptive language allowing happy hour advertising only in certain ways, which would effectively afford licensees more discretion in how they advertise their happy hour event. However, the Board also proposes to add new language stating that a licensee may advertise its happy hour so long as the advertising does not tend to induce minors or other interdicted individuals to drink or encourage persons to consume to excess; and that the new language is subject to and shall be adhered to in a manner consistent with all other regulations of the authority. As a result, licensees would be allowed to advertise as they wish so long as they do not induce minors, encourage excess consumption, and do comply with the other regulations of the Board. These changes would benefit the licensees in terms of the flexibility they would provide for happy hour advertising, but also establish performance criteria on what the advertisement shall not do.

The remaining changes repeal language duplicative of other regulations, which are not expected to create any economic impact.

Businesses and Entities Affected. There are 7,579 on-premises alcoholic beverage licensees. Most of the licensees are likely small businesses such as restaurants, bars, grocery stores, wineries, etc. According to the Virginia Alcoholic Beverage Control Authority, there were three advertising-related violations in the last three calendar years.

Localities Particularly Affected. The proposed changes would not disproportionately affect particular localities.

Projected Impact on Employment. The proposed changes are unlikely to affect employment.

Effects on the Use and Value of Private Property. The proposed changes are unlikely to significantly affect the use and value of private property.

Real Estate Development Costs. The proposed changes would 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 changes would not have costs on small businesses licensees, but allow more flexibility in how they advertise their happy hour events.

Alternative Method that Minimizes Adverse Impact. The proposed changes would not impose adverse impacts on small businesses.

Adverse Impacts:

Businesses. The proposed changes would not impose adverse impacts on non-small business licenses.

Localities. The proposed changes would not adversely affect localities.

Other Entities. The proposed changes would not adversely affect other entities.

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¹According to the Alcoholic Beverage Control Authority, an advertisement that does not state the dollar price is allowed. For example, an advertisement stating "one-half of regular menu price during happy hour" is not prohibited.

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

Summary:

The proposed amendments (i) permit advertising of happy hour so long as the advertisement does not tend to induce minors or other individuals who cannot legally drink to drink or encourage persons to drink in excess, (ii) remove superfluous provisions that appear in other authority regulations, and (iii) add a reminder that the regulation is subject to and shall be adhered to in a manner consistent with all other authority regulations.

3VAC5-50-160. Happy hour and related promotions; definitions; exceptions.

A. Definitions. The following words and terms when used in this section shall have the following meanings unless the context clearly indicates otherwise:

1. "Happy hour" means a specified period of time during which alcoholic beverages are sold at prices reduced from the customary price established by a retail licensee.

2. "Drink" means any beverage containing the amount of alcoholic beverages customarily served to a patron as a single serving by a retail licensee.

B. A licensee may advertise its happy hour so long as the advertising does not tend to induce minors or other interdicted individuals to drink or encourage persons to consume to excess.

C. No retail licensee shall engage in any of the following practices:

1. Conducting a happy hour between 9 p.m. of each day and 2 a.m. of the following day;

2. Allowing a person to possess more than two drinks at any one time during a happy hour, with the exception of flights of wine and beer consisting of samples of not more than five different wines or beers or samples of five different distilled spirits products provided each distilled spirits sample contains no more than one-half ounce of distilled spirits;

3. 2. Increasing the volume of alcoholic beverages contained in a drink without increasing proportionately the customary or established retail price charged for such drink;

4. 3. Selling two or more drinks for one price, such as "two for one" or "three for one";

5. Selling pitchers of mixed beverages except in accordance with 3VAC5-50-60;

6. Giving away drinks;

7. 4. Selling an unlimited number of drinks for one price, such as "all you can drink for $5.00"; 8. Advertising happy hour anywhere other than within the interior of the licensed premises, except that a licensee may use the term "Happy Hour" or "Drink Specials," a list of the alcoholic beverage products featured during a happy hour as well as the time period within which alcoholic beverages are being sold at reduced prices in any otherwise lawful advertisement; or

9. 5. Establishing a customary retail price for any drink at a markup over cost significantly less than that applied to other beverages of similar type, quality, or volume.

C. D. This regulation section shall not apply to prearranged private parties, functions, or events, not open to the public, where the guests thereof are served in a room or rooms designated and used exclusively for private parties, functions, or events.

E. This section is subject to and shall be adhered to in a manner consistent with all other regulations of the authority.