wine glasses hanging in rack

How the TABC Regulates On-Premises Promotions for Texas Liquor License Holders

Ashley Storm Ruleman

Texas alcoholic beverage law not only regulates who can buy and sell alcohol, but also how alcoholic beverages are advertised and promoted, especially at on-premises retail locations, i.e., locations like bars and restaurants that sell alcohol for on-premises consumption. In fact, the Texas Alcoholic Beverage Commission (TABC) established an entire rule entitled “On-Premises Promotions.”

What gives the TABC the authority to create that rule? What does the rule say about happy hours and drink discounts and other familiar promotions? We try to answer those questions in our three-part, blog series about on-premises promotions.

Note that this blog focuses on activities carried out by on-premises retailers independently from manufacturers, wholesalers, and distributors. Look for an upcoming blog discussing the rules governing interactions among the different tiers related to advertising and promotion.

TABC Authority

The stated mission of the TABC is “to serve the people of Texas, and protect the public health and safety through consistent, fair, and timely administration of the Alcoholic Beverage Code.”

According to Texas Alcoholic Beverage Code Section 11.46(a)(8), the TABC can take action against a Texas liquor license or permit holder if “the place or manner in which the permittee conducts his business warrants the cancellation or suspension of the permit based on the general welfare, health, peace, morals, and safety of the people and on the public sense of decency.”

What in the world does that all mean?

The TABC developed rules that try to help Texas liquor license and permit holders comply with the law. TABC Rule 45.103 On-Premises Promotions prohibits practices that are “reasonably calculated to result in excessive consumption of alcoholic beverages by consumers.” It goes further to clarify that “excessive consumption” basically means consumption that results in a person becoming publicly intoxicated.

Now, what does that all mean?

While to a large extent there is a “I know it when I see it” standard, the TABC has provided a laundry list of common practices they consider to be “reasonably calculated to result in excessive consumption.” Again, we find that in the TABC Rules. The TABC provides a helpful list of FAQs related to on-premises promotions here. We think it’s also helpful to have a summary of the related TABC Rules, and we have provided that below:

Free & Discounted Drinks

One of the easiest ways to violate the rules governing on-premises promotions is to offer an illegal discount. If you promote your restaurant using coupons or rebates and pretty much any discount related to alcohol, we strongly recommend that you review the related TABC prohibitions.

Coupons & Rebates

There are several types of promotions that you can simply mark off of your list, because they are strictly prohibited with no room for discretion. Coupons is one of those promotions. Coupons for alcoholic beverages are always prohibited in any shape or form.

A “coupon” refers to anything that allows patrons to receive a free or discounted drink. This includes your traditional, cut-it-out-of-a-newspaper coupon and even a coupon that you might find online and display on your phone to redeem. What we are seeing a lot recently is “show this social media post and we’ll give you a free drink.” This is an illegal coupon. Keep in mind that TABC utilizes social media and is watching out for these violations.

A variation of this is the prohibition on rebates. Upon selling or serving a drink, a TABC permit holder cannot offer to rebate the purchase price in any form, including offering something else of value back to the customer for purchasing a drink.

Of course, there are some exceptions. First, this TABC rule does not restrict an on-premises retailer from offering a complimentary drink or drink discount as part of a meal or hotel package.

The second exception applies to airlines. Don’t worry, your drink tickets are not illegal. Southwest and other airlines can still send you coupons for free drinks. In either case, two requirements must be met:

  1. The coupon or offer cannot be associated with any particular brand.
  2. The retailer must bear the cost of the free drink, i.e., a manufacturer or wholesaler cannot reimburse the retailer for the drink.

Note that these prohibitions do not just apply to the on-premises retailer. They extend to manufacturers of alcoholic beverages as well as wholesalers and distributors. For example, your favorite winery cannot give you a coupon or rebate that you can redeem at a restaurant or any alcoholic beverage retailer for that matter.

Stay tuned – our next blog will continue with more drink discount guidelines and prohibitions (such as the promotion this St. Louis bar is running. Don’t try this one in Texas). Keep the whole series in mind as you craft a marketing plan that will bring in the customers, and not the TABC.

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.