Attorney General's Opinion
Attorney General, Richard Blumenthal
December 17, 2004
Director - Liquor Control Divsion
Department of Consumer Protection
165 Capitol Avenue
Hartford, CT 06106
Dear Mr. Suchy:
This is in response to your request for an opinion on the lawfulness of a proposed entertainment program at liquor permit premises involving the playing of poker for prizes. The proposal comes in the wake of recent announcements outlawing the betting on poker tournaments due to criminal laws against gambling. See Attorney General Says Certain Poker Nights Illegal, Asks Establishments to Cease and Desist (July 13, 2004) at Attorney General says Certain Poker Nights Illegal, Asks Establishments to Cease and Desist; see also Gambling and Licensed Liquor Establishments, Conn. Beverage Journal (Aug. 2004) at p. 46. This recent proposal involves prizes and poker playing, but no money is bet. Nevertheless, we believe the activity would run afoul of several liquor control laws and regulations and, therefore, the proposal should be denied.
According to your correspondence, and upon further inquiry, we understand that the proposal comes from a licensed liquor wholesaler, inquiring on the legality of a hypothetical "Elmer's Budweiser Poker Program." Elmer's is a fictional licensed on-premises consumption retailer (bar) and, in the hypothetical, the suggested co-sponsor, and co-promoter of poker tournaments. Budweiser is a beer made by Anheuser-Busch, Inc., a licensed out-of-state shipper of beer. There would be no charge for bar patrons to play. Players would play for points, and prizes in the form of food, merchandise and trophies would be awarded to the player receiving the most points. A description is provided as follows:
This is multi-week program where we will hold multiple mini 'tournaments' to provide a fun atmosphere for consumers. We will probably hold these on Sunday afternoons. There will be no charge for consumers to enter. Most likely the first 30 consumers to sign up will be able to play each week.
Budweiser and Elmer's will provide prizes (food, clothing, poker sets, etc). Each week, the first, second and third place finishers will be awarded points. As the weeks progress, consumers will be able to exchange points for prizes. When all the prizes have been awarded, they will be gone.
Budweiser will provide a trophy to be awarded to the consumer who wins the most prizes over the course of the program. At no point will any consumers be asked to pay to participate in this program, nor will any cash prizes be awarded.
While this office has significant concerns relating to possible violations of the state criminal laws relating to gambling, the proposed involvement of the out-of-state shipper as co-sponsor and supplier of prizes to bar patrons violates several provisions of the Liquor Control Act and Regulations of the Division of Liquor Control designed to prevent a tied-house and illegal inducements.
Connecticut has a three-tier system of liquor distribution in the general categories of shippers (out-of-state shippers, Conn. Gen. Stat. §§ 30-18. 19 and manufacturers, Conn. Gen. Stat. § 30-16) wholesalers (Conn. Gen. Stat. § 30-17) and retailers (Conn. Gen. Stat. § 30-20 et seq.). See Serlin Wine & Spirits Merchants, Inc. v. Healy, 512 F.Supp. 936, 938 (D. Conn. 1981) aff'd sub nom. Morgan v. Division of Liquor Control, 664 F.2d 353 (2nd Cir. 1981). In each category a license is required. Conn. Gen. Stat. § 30-77; The State v. Faro, 118 Conn. 267 (1934). With some exceptions, shippers may only sell to wholesalers, wholesalers may only sell to retailers, and retailers may only sell to consumers. Conn. Gen. Stat. §§ 30-74 to 76.
Trade practices between the tiers are also strictly limited. These restrictions serve to prevent the evil of the tied-house, a circumstance where one tier member owns or controls another. That problem was specifically targeted in post-prohibition legislation. See, Eder v. Patterson, 132 Conn. 152, 154 (1945). These limitations are designed to prevent the economic domination of one tier member by the other, which often results in abuses in when pressure is applied to sell more liquor, regardless of the harm to the public. See, All Brand Importers, Inc. v. Dept. of Liquor Control, 213 Conn. 184, 198 (1989); Schieffelin & Co. v. Dept. of Liquor Control, 194 Conn. 165, 183 (1984); Schwartz v. Kelly, 140 Conn. 176, 180 (1953) app. dismissed 346 U.S. 891 (1953); Beckanstin v. Liquor Control Commission, 140 Conn. 185 (1953). Sales pressure is especially pernicious when the commodity is alcoholic liquor, long considered an inherently dangerous product, and strict restrictions are justified. "[B]ecause of the danger to the public health and welfare inherent in liquor traffic, the police power to regulate the liquor trade runs broad and deep, more so than comparable regulatory power over other activities." Crescimanni v. Dept. of Liquor Control, 41 Conn. App. 83, 87 (1996) (citations omitted).
Particularly relevant here are those rules that restrict the providing of free goods and services between the tiers in Conn. Gen. Stat. §§ 30-63(b)1, 30-942 and Reg. Sec. 30-6-A29(d)43; rules that prohibit cooperative advertising, Reg. Sec. 30-6-A31a(b)4; and rules that strictly limit the furnishing of services, advertising material or equipment to retailers, Reg. Sec. 30-6-A32a(c)5. These rules evince a fundamental legislative concern that, by tying additional benefits to its purchase, "artificial inducements for the purchase of liquor will result in increased consumption." Slimp v. Dept. of Liquor Control, 239 Conn. 599, 611 (1996).
The proposal here, involving the out-of-state shipper sharing in a Budweiser tournament promotion and prize awards with its retailer customer, undoubtedly results in pressure on the retailer to purchase more Budweiser to sell to its patrons during the events. The furnishing of the goods and services in the tournament by the out-of-state shipper thus violates the letter, and the spirit, of Conn. Gen. Stat. § 30-63(b), which prohibits out-of-state shippers from giving "any free goods, allowances or other inducements for the purpose of making sales or purchases." It also transgresses the proscription in Conn. Gen. Stat. § 30-94, which prohibits the "direct or indirect" furnishing of "free goods, gratuities, gifts, prizes…or other inducements" in connection with the sale of alcoholic liquors. Also, to the extent that the out-of-state shipper does not allow the tournament at all liquor outlets, it violates the anti-discrimination provision of Conn. Gen. Stat. § 30-63(b).
A violation of Reg. Sec. 30-6-A29(d) is also evident here. That regulation prohibits an out-of-state shipper from expending "moneys directly or indirectly for the purpose of sales promotion and advertising and thus give a rebate, kickback or discount." The financial benefits to the retailer in this co-production creates this illegal advantage. Additionally, to the extent the program links the retailer with Budweiser in tournament title, and with the out-of-state shipper in co-promotion, it runs afoul of the rule in Reg. Sec. 30-6-A31a(b), which prohibits cooperative advertising.
We are cognizant that the regulations of the Division do not prohibit the furnishing of all goods and services between the tiers. Specific exceptions are carved out in the regulations. For example, in Reg. Sec. 30-6-A32a(c), retailers are permitted to receive "consumer novelties of nominal value" totaling $500 provided they are available for "unconditional distribution to patrons." This exception is not applicable here because the prizes go only to tournament participants or winners. The tournament does not appear to fall within any other exception in the rules. Unless the practice clearly falls within an exception to the liquor control laws, it is prohibited. See, Conservation Commission v. Price, 193 Conn. 414, 424 (1984). Liquor traffic is an activity in which no one can engage without the law's permission. State v. Harrington, 3 Conn. Cir. 674, 682 (1966). This promotion is not sanctioned by law, and, therefore, cannot be permitted.
Another concern is that this activity could constitute illegal gambling, which is prohibited by state criminal law. Conn. Gen. Stat. § 53-278b6. Under this criminal statute, gambling is defined as follows:
(2) "Gambling" means risking any money, credit, deposit or other thing of value for gain contingent in whole or in part upon lot, chance or the operation of a gambling device, including the playing of a casino gambling game such as blackjack, poker, craps, roulette or a slot machine, but does not include: Legal contests of skill, speed, strength or endurance in which awards are made only to entrants or the owners of entries; legal business transactions which are valid under the law of contracts; activity legal under the provisions of sections 7-169 to 7-186, inclusive; any lottery or contest conducted by or under the authority of any state of the United States, Commonwealth of Puerto Rico or any possession or territory of the United States; and other acts or transactions expressly authorized by law on or after October 1, 1973;
Conn. Gen. Stat. § 53-278a(2).
Clearly, the activity contemplated here involves the playing of a game of chance for gain under Conn. Gen. Stat. § 53-278a(2), and the fact that random bar patrons from the general public will participate forecloses the social gambling exception in Conn. Gen. Stat. § 53-278b(a)7. The inquiry then becomes whether the contestants are "risking any money, credit, deposit or other thing of value" as required for activity to constitute gambling under the definition cited above. This question should be referred to the Chief State's Attorney for resolution.
In any event, regardless of the criminal law issue, we believe, for the reasons discussed, that this tournament violates several provisions of the Liquor Control Act or Regulations of the Division and should not be permitted.
Accordingly, we believe that the proposal for "Elmer's Budweiser Poker Program" should be denied.
Very truly yours,
Robert F. Vacchelli
Assistant Attorney General
1 Conn. Gen. Stat. § 30-63(b) provides:
(b) No manufacturer, wholesaler or out-of-state shipper permittee shall discriminate in any manner in price discounts between one permittee and another on sales or purchases of alcoholic liquors bearing the same brand or trade name and of like age, size and quality, nor shall he allow in any form any discount, rebate, free goods, allowances or other inducement for the purpose of making sales or purchases.
2Conn. Gen. Stat. § 30-94 provides, in pertinent part, as follows:
(a) No permittee or group of permittees licensed under the provisions of this chapter, in any transaction with another permittee or group of permittees, shall directly or indirectly offer, furnish or receive any free goods, gratuities, gifts, prizes, coupons, premiums, combination items, quantity prices, cash returns, loans, discounts, guarantees, special prices or other inducements in connection with the sale of alcoholic beverages or liquors.
3 Reg. Sec. 30-6-A29(d) provides:
(d) No out-of-state shipper, manufacturer or wholesaler shall expend moneys directly or indirectly for the purpose of sales promotion and advertising and thereby give a rebate, kickback or discount by means of returning to permittees or proprietors a percentage of the total cost of merchandise purchased from such wholesaler in the nature of free drinks, sampling, advertising and other types of sales promotion.
(e) These provisions shall apply to transactions between all types of permittees, and are intended to prevent artificial stimulation of sales of liquor by any means.
4 Reg. Sec. 30-6-A31a(b) provides:
(b) Cooperative advertising. There shall be no cooperative advertising as between a producer, manufacturer, bottler, importer or wholesaler and a retailer of alcoholic liquor.
5Reg. Sec. 30-6-A32a(c) provides:
No brand owner, manufacturer, out-of-state shipper or wholesaler may furnish any retailer with services, advertising material or equipment except as follows, and, with respect to alcohol, spirits and wine, if allowed by federal law:
(c) Consumer novelties of nominal value for unconditional distribution to patrons of retail outlets, whose aggregate cost shall not exceed five hundred dollars per distributor of such items per retail outlet per calendar year.
6 Conn. Gen. Stat. § 53-278b provides as follows:
Gambling; professional gambling; penalties. (a) Any person who engages in gambling, or solicits or induces another to engage in gambling, or is present when another person or persons are engaged in gambling, shall be guilty of a class B misdemeanor; provided natural persons shall be exempt from prosecution and punishment under this subsection for any game, wager or transaction which is incidental to a bona fide social relationship, is participated in by natural persons only and in which no person is participating, directly or indirectly, in professional gambling.
(b) Any person who engages in professional gambling shall be guilty of a class A misdemeanor.
7Conn. Gen. Stat. § 53-278b(a) provides, in pertinent part, as follows:
(a) …provided natural persons shall be exempt from prosecution and punishment under this subsection for any game, wager or transaction which is incidental to a bona fide social relationship, is participated in by natural persons only and in which no person is participating, directly or indirectly, in professional gambling.
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