How the TABC Regulates On-Premises Promotions for Texas Liquor License Holders, Part III
By now, you know the term — “On-Premises Promotions” — and that the Texas Alcoholic Beverage Commission (TABC) has a lot to say about what works and what doesn’t.
Today, we are wrapping up our summary of how the TABC regulates promotions carried at the locations of retailers who sell alcohol for on-premises consumption, e.g. bars and restaurants.
Over the last couple of weeks, we have discussed the prohibitions related to free and discounted drinks — the first blog focusing more on the pitfalls associated with the use of coupons and the second describing other common promotions involving free and discounted alcoholic beverages.
Today, we are shifting gears to focus on restrictions related to the volume of drinks sold, prohibitions against drinking games, and other miscellaneous restrictions.
As we’ve mentioned in our previous blogs, the TABC expects its Texas liquor license and permit holders to refrain from encouraging “excessive consumption.” Plus, there are a couple of other issues at play here that are helpful to keep in mind:
- Selling alcohol to an intoxicated person is a criminal offense and can also result in the TABC issuing fines associated with, suspension of, or cancellation of your Texas liquor license or permit.
- In certain circumstances, selling or serving alcohol to an obviously intoxicated person can result in significant civil liability.
This one is simple enough — the TABC prohibits selling or serving more than two drinks to one person at one time. If four people are placing an order for drinks, for example, the maximum number of drinks that they can order is eight — two drinks per person.
As with most of these rules, there is some room for discretion. For example, you might have a group of four sitting out on a patio that gets impatient waiting on a server and sends one person inside to buy drinks for the table. Can the bartender sell the person four drinks? The decision is a judgment call on behalf of the bartender (and perhaps the undercover TABC officer witnessing the transaction and deciding whether to issue a warning or citation).
Also, the bartender must remember the prohibition against serving an intoxicated person. He or she has the responsibility to ensure the recipient of that drink is not intoxicated. If the bartender cannot see that recipient, he or she cannot make that conclusion.
Exception for Wine
Does the two-drink limit prohibit someone from buying a bottle of wine for on-premises consumption? No, with one caveat: the bottle of wine must be accompanied by a meal. One individual customer may purchase a full bottle of wine but only “during the sale or service of a meal to the customer,” per TABC Rule 45.103 (e)(3). So, even though there are approximately four “drinks” in a standard bottle of wine, it is possible for a solo diner to order the bottle.
Exception for Pitchers, Carafes, & Buckets
What about pitchers and buckets of beer? Or carafes of mimosas, since bottomless mimosas are illegal (see below)? Pitchers, buckets, carafes, and similar containers are all OK, again with one caveat: the service must be for two or more customers. Unlike wine, these need not be served with a meal.
Do I need to price my bucket of beer to make sure I am not offering a volume discount that is prohibited by the TABC? No. For example, let’s say you sell a certain beer for $5 each, and you sell a bucket of six of those same beers for $25. That is OK. What is not okay, is advertising that bucket of beers as follows:
“Buy five beers get one free.” (Violates the BOGO prohibition.)
“17% discount if you purchase six beers at one time.” (Violates the prohibition against discounts based on volume.)
As mentioned in our previous blog, much of the prohibitions focus on perception. Remember, the goal is to achieve the balance of promoting your products while not encouraging your patrons to consume alcohol to excess.
No Bottomless Mimosas in Texas
Any version of “bottomless” or “all you can drink” alcohol is illegal. Don’t do it. And by all means, certainly make sure you don’t get recognized on a list of the Top 10 Bottomless Mimosas in town. The TABC regularly reviews restaurant publications, online articles, and social media to make sure Texas liquor license and permit holders are not violating these rules.
So, what common promotions does this capture?
- Offering “bottomless” alcoholic beverages, i.e. selling an undetermined amount of alcohol for a set price.
- Collecting a fee at the door and offering unlimited drinks inside.
- Collecting a fee at the door so you can offer heavily discounted drinks inside.
Other Prohibited Promotions
Texas law prohibits Texas liquor license and permit holders from conducting, sponsoring, or participating in drinking games. We know, you are shocked.
What do we mean when we say, “drinking games?” If one of these two circumstances exist, it is a “drinking game:”
- If winning (a) involves consuming alcohol or (b) is somehow determined by the amount of alcohol consumed.
- If a winner receives free or reduced-price alcohol.
The Excessive Consumption Catch-All
The rules we’ve discussed above and in our two previous blogs were all created by the TABC to help the public identify those activities that inherently result in the excessive consumption of alcohol. They cannot possibly imagine every creative promotion on-premises retailers in Texas can think up. Thus, we do not have an exhaustive list to offer.
As we said earlier, this is something that often ends up being processed through the “I know it when I see it” standard. Which brings us to the catch-all listed in the TABC Rules intended to apply to all the promotions that cause excessive consumption, but do not fall into any of the practices listed above:
Texas liquor license and permit holders are prohibited from engaging in any practice “that is reasonably calculated to induce consumers to drink alcohol to excess, or that would impair the ability of the licensee or permittee to monitor or control the consumption of alcoholic beverages by consumers.”
If you do not find your promotional idea fitting into any of the categories mentioned in this three-part “On-Premises Promotions” blog series or are unsure whether you fit into this catch-all, we recommend reaching out to a knowledgeable TABC representative or finding someone who can contact the TABC on your behalf to make sure your promotion is compliant.
Finally, remember that this blog series has focused on the prohibited practices that exist to limit over-consumption. In addition, there are prohibited practices related to on-premises promotions and other advertising that exist to ensure interactions between manufacturers, wholesalers/distributors, and retailers do not violate the “three-tiered system.” Stay tuned for more on these prohibited practices and the three-tiered system in an upcoming blog.
About the Author. Ashley Storm Ruleman is an experienced legal counselor serving two diverse but often overlapping industries: the real estate development/construction industry and the alcoholic beverage industry. Before entering private practice, Ashley served as in-house counsel to a family of companies involved in real estate development, construction and management and was Assistant General Counsel to the Texas Alcoholic Beverage Commission (TABC). She now advises bars, restaurants, golf courses, and other clients regarding appropriate business structures, contracts, and real estate transactions that comply with the rules and policies created by the TABC and other applicable Texas laws. For more information, contact her at Ashley@MartinPowers.com.
About Martin Powers & Counsel, PLLC. Dallas-based Martin Powers & Counsel, PLLC is a boutique business law firm dedicated to providing personalized and strategic legal services for businesses of every size. The firm is home to experienced attorneys with expertise in business disputes, bankruptcy and creditors’ rights, Texas Alcoholic Beverage Commission (TABC) compliance, labor and employment law, real estate transactions, landlord/tenant disputes, contract negotiations, general counsel services, and other areas at the intersection of business and law.