Title of Regulation: 3VAC5-50. Retail Operations (adding 3VAC5-50-240).

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: January 5, 2011.

Effective Date: January 20, 2011.

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 4.1-111 of the Code of Virginia requires that the Alcoholic Beverage Control Board promulgate a regulation that requires off-premises retail licensees to place any premixed alcoholic energy drink containing one-half of 1.0% or more of alcohol by volume in the same location where wine and beer are available for sale within the licensed premises.

Purpose: Energy drinks containing alcohol often feature labels very similar to nonalcoholic energy drink products popular with children, which can cause confusion among both consumers and retail clerks. This regulatory action is both mandated by statute and essential to protect the health, safety, and welfare of citizens because it will help reduce the probability of consumers mistaking products containing alcohol for nonalcoholic products.

Rationale for Using Fast-Track Process: This rulemaking is expected to be noncontroversial because the proposal closely follows the statutory requirement. The agency has very little discretion.

Substance: The proposal provides that alcoholic energy drinks, defined as alcoholic beverages that contain caffeine or other stimulants, must be displayed for sale alongside other alcoholic beverage products, and not immediately adjacent to nonalcoholic beverages.

Issues: The primary advantage of the proposed regulatory action is a reduction in the possibility of consumer confusion between energy drink products containing alcohol and those without. There are no disadvantages to the public or the Commonwealth.

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

Summary of the Proposed Amendments to Regulation. Pursuant to § 4.1-111 of the Code of Virginia, the Alcoholic Beverage Control Board (ABC) proposes to amend its regulations that govern retail operations to require that alcoholic energy drinks be displayed adjacent to other alcoholic beverages and not adjacent to nonalcoholic beverages.

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

Estimated Economic Impact. Current regulations are silent as to the placement in stores of alcoholic energy drinks. The Virginia General Assembly passed a law in 2009 that requires alcoholic energy drinks to be displayed near other alcoholic beverages and at a distance from nonalcoholic beverages. ABC now proposes to amend its retail operations regulations to add this requirement. To the extent that alcoholic energy drinks have been displayed near nonalcoholic drinks, ABC licensees may incur some minimal costs for moving these products to a legislatively approved area of their store. These costs are likely outweighed by the benefits that will accrue to consumers who will be less likely to inadvertently buy an alcoholic beverage when it was not their intention to do so. Additionally, this change may reduce the chances that minors would be able to purchase alcohol by reducing confusion of retail clerks as to what is an alcoholic beverage and what is not.

Businesses and Entities Affected. ABC estimates that approximately 6,500 licensees are subject to the requirements of these regulations. ABC further estimates that approximately 90% of these licensees meet the legislative definition for small businesses.

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

Projected Impact on Employment. This regulatory action will likely have no impact on employment in the Commonwealth.

Effects on the Use and Value of Private Property. This regulatory action will likely have no effect on the use or value of private property in the Commonwealth.

Small Businesses: Costs and Other Effects. Small businesses in the Commonwealth are unlikely to incur any costs on account of this regulatory action.

Small Businesses: Alternative Method that Minimizes Adverse Impact. Small businesses in the Commonwealth are unlikely 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 the Department of Planning and Budget's Economic Impact Analysis: The Alcoholic Beverage Control Board concurs with the economic impact analysis of the Department of Planning and Budget.

Summary:

The addition of a new section, 3VAC5-50-240, requires off-premises retail licensees to place any premixed alcoholic energy drinks containing one-half of 1.0% or more of alcohol by volume in the same location where wine and beer are available for sale within the licensed premises.

3VAC5-50-240. Alcoholic energy drinks.

A. "Alcoholic energy drink" means an alcoholic beverage that contains caffeine or other stimulants.

B. Any establishment licensed to sell beer or wine for off-premises consumption shall display alcoholic energy drinks for sale immediately adjacent to other alcoholic beverage products, and not immediately adjacent to any nonalcoholic beverages.