Title of Regulation: 3VAC5-20. Advertising (amending 3VAC5-20-10, 3VAC5-20-60, 3VAC5-20-90, 3VAC5-20-100).

Statutory Authority: §§ 4.1-111 and 4.1-320 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: July 19, 2013.

Agency Contact: W. Curtis Coleburn III, Chief Operating Officer, Department of Alcoholic Beverage Control, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4409, FAX (804) 213-4411, TTY (804) 213-4687, or email curtis.coleburn@abc.virginia.gov.

Basis: Section 4.1-103 of the Code of Virginia provides that the board has the power to control the possession, transportation, sale, and delivery of alcoholic beverages within the Commonwealth, while § 4.1-111 of the Code of Virginia authorizes the board to promulgate reasonable regulations necessary to carry out the provisions of the Alcoholic Beverage Control Act. Section 4.1-320 of the Code of Virginia provides that there shall be no alcoholic beverage advertising in Virginia except as allowed by board regulations.

Purpose: The proposed regulatory action is necessary to clarify provisions and remove provisions that are vague and unenforceable. The streamlining and clarification of the provisions of this regulation should help promote the welfare of citizens by providing more definitive and reliable guidelines for advertising alcoholic beverages.

Substance: The proposed amendments to 3VAC5-20 eliminate antiquated, unenforceable language; prohibit the distribution of novelty and specialty items bearing alcoholic beverage advertising to persons younger than 21 years of age; and allow combination packaging for beer and distilled spirits products.

Issues: The clarification of the use of coupons benefits the regulated community and the agency by establishing more definitive guidelines. It is a benefit to the public for persons younger than 21 years of age not to be provided items bearing alcoholic beverage advertising.

The removal of vague and unenforceable provisions will ease the burden on the regulated community. The streamlining and clarification of the provisions of this regulation should help promote the welfare of all citizens by providing more definitive and reliable guidelines for advertising alcoholic beverages. There are no known disadvantages to the public, the agency, or the Commonwealth.

The Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Alcoholic Beverage Control Board (ABC) proposes to amend its advertising regulations to clarify existing provisions of regulation, prohibit licensees from giving novelty and specialty items emblazoned with alcoholic beverage advertising to anyone under 21 and to allow manufacturers, importers, bottlers and brokers to provide mail-in rebate coupon pads to retailers as wholesalers are allowed to now.

Result of Analysis. Benefits likely outweigh costs for implementing these proposed changes.

Estimated Economic Impact. With this regulatory action, ABC proposes to change or move several sections of regulation so that regulatory requirements are clearer and easier to find. For example, ABC proposes to remove language that references specific federal agencies and replace it with more generic language so that interested parties are not directed to the wrong place to find out whether they are in compliance with federal alcoholic beverage advertising rules. No affected entity is likely to incur costs on account of these regulatory changes because no new requirements are being added. Affected entities will benefit from the additional clarity these changes bring to the regulation.

Current regulations have a list of specific advertising prohibitions that licensees must follow. ABC proposes to add a prohibition to this list so that licensees will not be able to give novelty or specialty merchandise that advertises alcoholic beverages to anyone under the legal drinking age. ABC reports that the scope of alcoholic beverage advertising has expanded in recent years and that this prohibition already exists in private advertising policies which most if not all licensees follow. This prohibition is also implied in other advertising rules that prohibit licensees from marketing alcohol to individuals under the legal drinking age. Because of already existing prohibitions, adding this language to these regulations will likely just clarify rules for licensees rather than imposing a new restriction on them. No licensee is likely to incur costs on account of this change.

Current regulations allow alcoholic beverage wholesalers to provide mail-in rebate coupons to retailers as part of their product marketing. ABC proposes to also allow manufacturers, importers, bottlers and brokers to provide coupon pads to retailers. This change will benefit all of these groups by giving them greater flexibility to use the marketing tools that they deem most efficient and useful.

Businesses and Entities Affected. ABC reports that 1,000 businesses would be potentially affected by this proposed regulatory change; 60% of these entities would meet the Commonwealth's definition of small business.

Localities Particularly Affected. No locality will be particularly affected by this proposed regulatory action.

Projected Impact on Employment. This proposed regulatory action is unlikely to have any effect on employment in the Commonwealth.

Effects on the Use and Value of Private Property. These proposed regulatory changes are unlikely to affect the use or value of private property in the Commonwealth.

Small Businesses: Costs and Other Effects. No small business is likely to incur any costs on account of this regulatory action.

Small Businesses: Alternative Method that Minimizes Adverse Impact. No small business is likely to incur any costs on account of this regulatory action.

Real Estate Development Costs. This regulatory action will likely have no effect on real estate development costs in the Commonwealth.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

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

Summary:

The proposed amendments (i) clarify existing language, (ii) allow combination packaging for beer and distilled spirits, and (iii) prohibit the distribution of novelty and specialty items bearing alcoholic beverage advertising to persons younger than 21 years of age.

3VAC5-20-10. Advertising; generally; cooperative advertising; federal laws; cider; restrictions.

A. All alcoholic beverage advertising is permitted in this Commonwealth except that which is prohibited or otherwise limited or restricted by regulation of the board and such advertising shall not be blatant or obtrusive. Any editorial or other reading matter in any periodical, publication or newspaper for the publication of which no money or other valuable consideration is paid or promised, directly or indirectly, by or for the benefits of any permittee or licensee does not constitute advertising.

B. Advertising of cider, as defined in § 4.1-213 of the Code of Virginia, shall conform to the requirements for advertising beer.

C. The board may issue a permit authorizing a variance from any of its advertising regulations for good cause shown.

D. No advertising shall contain any statement, symbol, depiction or reference that:

1. Would tend to induce minors to drink, or would tend to induce persons to consume to excess;

2. Is obscene or is suggestive of any illegal activity;

3. Incorporates the use of any present or former athlete or athletic team or implies that the product enhances athletic prowess; except that, persons granted a license to sell wine or beer may display within their licensed premises point-of-sale advertising materials that incorporate the use of any present or former professional athlete or athletic team, provided that such advertising materials: (i) otherwise comply with the applicable regulations of the Federal Bureau of Alcohol, Tobacco and Firearms appropriate federal agency and (ii) do not depict any athlete consuming or about to consume alcohol prior to or while engaged in an athletic activity, do not depict an athlete consuming alcohol while the athlete is operating or about to operate a motor vehicle or other machinery, and do not imply that the alcoholic beverage so advertised enhances athletic prowess;

4. Is false or misleading in any material respect;

5. Implies or indicates, directly or indirectly, that the product is government endorsed by the use of flags, seals or other insignia or otherwise;

6. Makes any reference to the intoxicating effect of any alcoholic beverages;

7. Constitutes or contains a contest or sweepstakes where a purchase is required for participation; or

8. Constitutes or contains an offer to pay or provide anything of value conditioned on the purchase of alcoholic beverages, except for refund coupons and combination packaging for wine. Any such combination packaging shall be limited to packaging provided by the manufacturer that is designed to be delivered intact to the consumer.

E. The board shall not regulate advertising of nonalcoholic beer or nonalcoholic wine so long as (i) a reasonable person by common observation would conclude that the advertising clearly does not represent any advertisement for alcoholic beverages and (ii) the advertising prominently states that the product is nonalcoholic.

3VAC5-20-60. Advertising; novelties and specialties.

Distribution of novelty and specialty items, including wearing apparel, bearing alcoholic beverage advertising, shall be subject to the following limitations and conditions:

1. Items not in excess of $10 in wholesale value may be given away;

2. Manufacturers, importers, bottlers, brokers, wholesalers or their representatives may give licensed retailers items not in excess of $10 in wholesale value in quantities equal to the number of employees of the retail establishment present at the time the items are delivered. Thereafter, such employees may wear or display the items on the licensed premises. Neither manufacturers, importers, bottlers, brokers, wholesalers or their representatives may give such items to patrons on the premises of retail licensees; however, manufacturers or their authorized representatives other than wholesalers conducting tastings pursuant to the provisions of § 4.1-201.1 of the Code of Virginia may give no more than one such item to each consumer provided a sample of alcoholic beverages during the tasting event; and such items bearing moderation and responsible drinking messages may be displayed by the licensee and his employees on the licensed premises and given to patrons on such premises as long as any references to any alcoholic beverage manufacturer or its brands are subordinate in type size and quantity of text to such moderation message;

3. Items in excess of $10 in wholesale value may be donated by distilleries, wineries and breweries only to participants or entrants in connection with the sponsorship of conservation and environmental programs, professional, semi-professional or amateur athletic and sporting events subject to the limitations of 3VAC5-20-100, and for events of a charitable or cultural nature;

4. Items may be sold by mail upon request or over-the-counter at retail establishments customarily engaged in the sale of novelties and specialties, provided they are sold at the reasonable open market price in the localities where sold;

5. Wearing apparel shall be in adult sizes; and

6. Point-of-sale order blanks, relating to novelty and specialty items, may be provided by beer and wine wholesalers to retail licensees for use on their premises, if done for all retail licensees equally and after obtaining the consent, which may be a continuing consent, of each retailer or his representative. Wholesalers may not be involved in the redemption process.; and

7. Novelty and specialty items bearing alcoholic beverage advertising may not be distributed to persons younger than the legal drinking age.

3VAC5-20-90. Advertising; coupons.

A. "Normal retail price" shall mean the average retail price of the brand and size of the product in a given market, and not a reduced or discounted price.

B. Coupons may be advertised in accordance with the following conditions and restrictions:

1. Manufacturers or importers of spirits, wine, and beer may use only consumer mail-in refund, not instantly redeemable discount, coupons. The coupons may not exceed 50% of the normal retail price and may not be honored at a retail outlet or state government store but shall be mailed directly to the manufacturer or importer or its designated agent. Such agent may not be a wholesaler or retailer of alcoholic beverages. Consumer proof of purchase (such as a dated, retail specific receipt) is required for redemption of all consumer coupons. Coupons are permitted in the print media, via the Internet, by direct mail or electronic mail to consumers, or as part of, or attached to, the package. Beer and wine Manufacturers, importers, bottlers, brokers, wholesalers, and their representatives may provide coupon pads to retailers for use by retailers on their premises, if done for all retail licensees equally and after obtaining the consent, which may be a continuing consent, of each retailer or his representative. Wholesale licensees may attach refund coupons to the package if done for all retail licensees equally and after obtaining the consent, which may be a continuing consent, for each retailer or his representative.

2. Manufacturers or importers offering refund coupons on spirits and wine sold in state government stores shall notify the board at least 45 15 days in advance of the issuance of the coupons of its amount, its expiration date and the area of the Commonwealth in which it will be primarily used, if not used statewide.

3. Wholesale licensees are not permitted to offer coupons.

4. Retail licensees may offer coupons, including their own discount or refund coupons, on wine and beer sold for off-premises consumption only. Retail licensees may offer their own coupons in the print media, at the point-of-sale or by direct mail to consumers.

5. No retailer may be paid a fee by manufacturers or wholesalers of alcoholic beverages for display or use of coupons and the name of the retail establishment may not appear on any refund coupons offered by manufacturers. No manufacturer or wholesaler may furnish any coupons or materials regarding coupons to retailers which are customized or designed for discount or refund by the retailer.

6. Retail licensees or employees thereof may not receive refunds on coupons obtained from the packages before sale at retail.

7. No coupons may be honored for any individual below the legal age for purchase.

3VAC5-20-100. Advertising; sponsorship of public events; restrictions and conditions.

A. Generally. Alcoholic beverage advertising in connection with the sponsorship of public events shall be limited to sponsorship of conservation and environmental programs, professional, semi-professional, or amateur athletic and sporting events and events of a charitable or cultural nature by distilleries, wineries, and breweries, importers, and bottlers.

B. Restrictions and conditions.

1. Any sponsorship on a college, high school or younger age level is prohibited;

2. Cooperative advertising, as defined in 3VAC5-30-80, is prohibited;

3. Awards or contributions Contributions of alcoholic beverages are prohibited;

4. Advertising of alcoholic beverages shall conform in size and content to the other advertising concerning the event and advertising regarding charitable events shall place primary emphasis on the charitable fund raising nature of the event;

5. A charitable event is one held for the specific purpose of raising funds for a charitable organization which is exempt from federal and state taxes;

6. Advertising in connection with the sponsorship of an event may be only in the any media, including such as print media, the Internet or other electronic means, television, or radio; by direct mail or flyers to consumers; on programs, tickets, and schedules for the event,; on the inside of licensed or unlicensed retail establishments; and at the site of the event;

7. Advertising materials as defined in 3VAC5-30-60 G, table tents as defined in 3VAC5-30-60 H and canisters are permitted;

8. Prior written notice shall be submitted to the board describing the nature of the sponsorship and giving the date, time and place of it; and

9. Manufacturers may sponsor public events and wholesalers may only cosponsor charitable events.