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  The ILCC Legal Division

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Specific items or activities which have been reviewed by the Commission for “of value” violations

The following listing captures a large number of trade practice issues which have been submitted to the Commission for determination.

1) “Consumer Specialties”

Items commonly referred to as “consumer specialties” such as, for example, hats, t-shirts, jackets, sweat shirts, mugs, steins, key chains, sunglasses, lighters and the like, which are intended to be given to and received by the consumer, shall be distributed in person by the manufacturer, distributor, importing distributor or foreign importer licensee or by an employee of the manufacturer, non-resident dealer, distributor, importing distributor or foreign importer licensee so as to verify that the items are being received by the consumer.

Generally, a manufacturer, non-resident dealer, distributor, or importing distributor or foreign importer may not provide free items to a retailer, if such items inure to the benefit of the retailer, as such items would be considered something "of value". A retailer may purchase consumer advertising specialties from a manufacturer, distributor or importing distributor. If the retailer pays for the consumer advertising specialties, such items may be retailer specific.

Consumer advertising specialties may be provided for free to a retailer if the retailer gives such items away to the ultimate consumer. If the retailer does not pay for the consumer advertising specialties, then such items may be brand or promotion specific only, but may not be retailer specific.

2) Courtesy Wagons

Retail Licensees
Pursuant to Reg. Sec. 100.210, a distributor or manufacturer may provide a courtesy wagon or coil boxes and pumps, free of charge, one time per year, for a one day period, for picnics held by a retailer. The manufacturer or distributor, however, may not supply free beer, wine or spirits for such event. If the event is held off the retail licensee's premise, the retail licensee must first obtain a special use permit pursuant to 235 ILCS 5/5-1(q).

Special Event Retailers
Pursuant to Trade Practice Policy TPP-4, a manufacturer or distributor may not supply product directly to a special event retailer licensee. Pursuant to 235 ILCS 5/1-3.17.1 a Special Event Retailer is an educational, fraternal, political, civic, religious or non-profit organization which sells or offers for sale beer or wine, or both, only for consumption at the location and on the date(s) designated on a special event retail license. Such organization must obtain a Special Event Retailer's License pursuant to 235 ILCS 5/5-1(e). In addition, a manufacturer or distributor may supply, free of charge, coil boxes and pumps, to any special event licensee. Such services are not considered something "of value" under 235 ILCS 5/6-5 and 5/6-6.

3) Meal and Entertainment Expenses

Distributors, importing distributors and manufacturers may incur reasonable expenses related to meals and entertainment with retailers. This Commission considers reasonable business meal and entertainment expenses as a standard business practice and conduct not in violation of the intent of the "of value" provisions of 235 ILCS 5/6-5 or 5/6-6. The practice of paying for a retailer's meal or entertainment expenses will be permitted so long as the inducement does not result in full or partial exclusion of products sold by other industry members. A manufacturer distributor or importing distributor may incur these expenses so long as it does not provide such meals and entertainment repeatedly to one retailer or a group of retailers, does not exclude other Illinois retailers, and does not violate the purpose or spirit of the federal Tied House Laws.

4) Participation in Retail Association Activities

This Commission shall allow distributors or manufacturers to participate in the following retail association activities:

  1. Display of their products at a convention or trade show;
  2. Rent display booth space, if the rental fee is not excessive and is the same as paid by all exhibitors;
  3. Provide hospitality, where it is done as a separate activity or in conjunction with a banquet or dinner;
  4. Purchase tickets to functions and pay registration fees, if the fees paid are not excessive and are the same as paid by all exhibitors;
  5. Make payments for advertisements in programs or brochures issued by a retailer or association at a convention or trade show, if the total payment for all such advertisements do not exceed $300 per year for any retail association.

5) Retailers Charging for Floor or Shelf Space

The practice of a retailer charging a distributor or manufacturer for the floor or shelf space upon which its alcoholic beverage products sit is a violation of 235 ILCS 5/6-5 which forbids a retailer from accepting anything "of value" directly or indirectly from any manufacturer or distributor. Likewise, 5/6-5 prohibits any manufacturer or distributor from giving anything "of value" directly or indirectly to any retailer. Thus, both the payment for floor or shelf space and the receipt of such payment are violations of the statute by both the retailer and the supplier.

This Commission will investigate practices in which payment of space for non-alcoholic products is used to ensure placement of alcoholic products in a retailer's premise. In addition, this Commission will consider it to be a violation by both the supplier and retailer if a third-party promotion company is used to pass payment for prominent floor or shelf space from the supplier to the retailer. This Commission believes that an allowance for payment for floor and shelf space would result in "bidding wars" between suppliers, thereby resulting in the discriminatory exclusion of brands in retailer outlets.

6) Assisting in Pricing and Providing Products To Retailers

Pursuant to 235 ILCS 5/6-5, manufacturers, distributors and importing distributors may not provide anything "of value" to a retailer, which includes services provided to a retailer. It is a violation for distributors and manufacturers to perform functions which are usually performed by the retailer in the normal operations of its business. Allowing manufacturers, distributors and importing distributors to perform such functions would be equivalent to the distributors or manufacturers performing employee functions for the retailer, and therefore will not be allowed. This Commission will review the such "services" provided to retailers on a case-by-case basis.

Manufacturers, distributors and importing distributors shall not affix prices to product on behalf of retailers. This prohibition maintains the historic division between manufacturers, distributors and retailers relative to the determination of prices of alcoholic liquor at the retail level. Additionally, this prohibition will avoid even the appearance of any attempt by manufacturers, distributors and importing distributors to obtain control over the operations of retailers. Pricing of product shall include distributors or manufacturers affixing price stickers directly to product or entering prices into retailer computer systems.

Manufacturers, distributors and importing distributors may however after stocking a shelf affix “shelf tags” which identify the product and price of the product; however, at no time shall a manufacturer, distributor or importing distributor delegate or contract this service to a third party. “Shelf tags” shall be considered advertising materials and are subject to the provisions of Section 6-6 of the Liquor Control Act. Therefore, manufacturer shall not directly or indirectly require the distributor or importing distributor to purchase “shelf tags” or directly or indirectly require the distributor or importing distributor to purchase any advertising materials from the manufacturer or the manufacturer’s designated supplier. If the stocking involves movement and a change in the placement of the product on the shelf, the “shelf tags” may be moved to the new position of the product.

7) “No Charge” Products

Recently agents of the Commission have been finding invoices upon retailer premises which appear to be evidence of providing products without payment. These invoice items are usually designated as “N/C.” As you know, Sec. 5/6-5 prohibits manufacturers, distributors and importing distributors from giving and retailers from receiving items “of value” within the meaning of the statute. Rule 100.280 provides that no licensee, shall give away any alcoholic liquor for commercial purposes.

The Commission agents regularly report to the Legal staff marketing practices upon which they observe during regular licensee inspections. Frequently the agents are given the explanation by the retailer and distributor that "this is the way business has always been done," however, Commission agents can only examine whatever documents are available at the retailer's premises when they perform their inspections and base their observations on those documents. If the distributor has advertised price promotions directly to its clients, or the price is based upon oral representations by the distributor's sales personnel, etc., there is no information upon which an agent could come to the conclusion that the "N/C" alcohol represents a product-based price reduction. It is suggested that the confusion created in the minds of our agents is created by bare identifier "N/C" alcohol.

The Commission also understands that distributors usually assign an internal code number to each invoice item reflecting "no charge" merchandise, but such internal coding, without explanation of same to the agent is meaningless. The addition of a legend of "N/C" with a numeric identifier also provides no more information to the agents than does the bare reference to "N/C" alcohol. A legend, such as, for example, "product in lieu of price reduction," or words to that effect, would more properly allow the Commission's agents to prepare reports of their findings after reviewing invoices and other documents, upon which reports the Legal Staff could come to reasoned decisions concerning a particular promotion.

It may turn out that the product is being given "no charge" for a valid reason, i.e. replacement of product broken upon delivery, a product in lieu of a reduction in price, etc.; however, it is incumbent upon the retailer and distributor to advise the agent of the reason for the apparent delivery of product without charge.

8) Retailer Warehousing

It is the policy of the Commission that a retailer may not warehouse alcohol on unlicensed business premises.

The following statutory provisions have application to the question of whether retailers are permitted to warehouse products.


5/1-3.15. Distributor

"Distributor" means any person, other than a manufacturer or non-resident dealer licensed under this Act, who is engaged in this State in purchasing, storing, possessing or warehousing any alcoholic liquors for resale or reselling at wholesale, whether within or without this State. (Source: P.A. 83-1254) (from Ch. 43, par. 95.15)

5/1-3.17. Retailer

"Retailer" means a person who sells, or offers for sale, alcoholic liquor for use or consumption and not for resale in any form. (Source: P.A. 82-783) (from Ch. 43, par. 95.17)

5/5-1 Licenses issued by Illinois Liquor Control Commission

(d): A retailer's license shall allow the licensee to sell and offer for sale at retail, only in the premises specified in such license, alcoholic liquor for use or consumption, but not for resale in any form: Provided that any retail license issued to a man­ufacturer shall only permit such manufacturer to sell beer at retail on the premises actually occupied by such manufacturer. After January 1, 1995, there shall be 2 classes of licenses issued under a retailers license: i) "retailers on premise consumption license" shall allow the licensee to sell and offer for sale at retail, only on the premises specified in the license, alcoholic liquor for use or consumption on the premises or on and off the premises, but not for resale in any form, ii) An "off premise sale license" shall allow the licensee to sell, or offer for sale at retail, alcoholic liquor intended only or off premise consumption and not for resale in any form. Notwithstanding any other provision of this sub­section (d), a retail licensee may sell alcoholic liquors to a special event retailer licensee for resale to the extent permitted under subsection (e).

(b): A distributor's license shall allow the wholesale purchase and storage of alcoholic liquors and sale of alcoholic liquors to licensees in this State and to persons without the State, as may be permitted by law.

5/7A-1.Terms Defined

For the purposes of this Article: "Warehouse" means any room, house, structure, building, place, yard or protected enclosure wherein personal property belonging to another is stored for compensation. "Warehouseman" means any person, firm, partnership, association or corporation owning, controlling, operating, managing or leasing any warehouse within this State. "For com­pensation" means any direct or indirect charge for storage. (Source: P.A. 82-783) (from Ch. 43, par. 157a)

5/7-A6. Violations

Any person who violates any of the provisions of this Article or any of the rules and regulations of the Department [of Revenue] for the administration and enforcement of the provisions of this Article is guilty of a Class B misdemeanor. In case of a continuing violation each day's continuance thereof shall be a separate and distinct offense. (Source: P.A. 82-783) (from Ch. 43, par. 157f)

5/2.1 Scope of Act

No person shall manufacture, bottle, blend, sell, barter, transport, deliver, furnish or possess any alcoholic liquor for beverage purposes, except as specifically provided in this Act. The usual reason for warehousing by a retailer is to take advantage of volume discounts at the time of purchasing.

The problems which are created by such warehousing include: deliveries to non-licensed premises possible sales of alcoholic beverages from such non-licensed premises possible geographic boundary violations additional work necessary by Commission agents to track such alcohol.

Since the definition of a “distributor” states that it may among other activities “warehouse” the Act has made this activity allowable. But the definition of “retailer” does not make any reference to the concept of “warehousing,” so referring to Sec. 5/2.1, it cannot warehouse. The argument is that whatever the conduct is, if it is not specifically allowed under the statute, it is prohibited. This is supported by the plain language of Sec. 5/2.1.

The contrary position, which is being espoused by the proponents of retailer warehousing, is that since the activity of “warehousing” is not a specifically prohibited activity of a retailer, it is allowed. This argument flies in the face of Sec. 5/2.1 above. This also flies in the face of the concept of returning control over the alcohol trade to the States by the adoption of the 21st Amendment. Since the 18th Amendment essentially made the alcohol business illegal and the 21st Amendment by repealing the 18th made the trade legal, and since the States were given the power to control the activity, the statutes which were enacted subsequent thereto, such as the Illinois Liquor Control Act, were making previously illegal activities legitimate.

To say that the enabling statute allows any activity not specifically prohibited does not comport with the “except as specifically provided in this Act,. . .” language. People v. Select Specialties, Ltd., 317 Ill.App.3d 538, 740 N.E.2d 543, 251 Ill.Dec. 462 (4th District, 12/6/00) The Act provides as follows: "No person shall manufacture, bottle, blend, sell, barter, transport, deliver, furnish or possess any alcoholic liquor for beverage purposes, except as specially provided in this Act ***." 235 ILCS 5/2-1 (West 1996).

The cardinal rule in statutory construction is to give effect to legislative intent. Solich v. George & Anna Portes Cancer Prevention Center of Chicago, Inc., 158 Ill. 2d 76, 81, 630 N.E.2d 820, 822 (1994); Central Illinois Public Service Co. v. Illinois Commerce Comm'n, 268 Ill. App. 3d 471, 483, 644 N.E.2d 817, 825-8209;26 (1994). The primary guide as to intent is the language of the statute. Solich, 158 Ill. 2d at 81, 630 N.E.2d at 822. Words in the statute should be given their popularly understood meaning. International Bureau of Fraud Control, Ltd. v. Clayton, 188 Ill. App. 3d 703, 710, 544 N.E.2d 416, 421 (1989), citing Kozak v. Retirement Board of the Firemen's Annuity & Benefit Fund, 95 Ill. 2d 211, 215, 447 N.E.2d 394, 396 (1983). Where the statutory language is unclear, a court may look beyond it, but where it is clear the court must give it effect. Solich, 158 Ill. 2d at 81, 630 N.E.2d at 822. When the language is unclear, a primary source for construing the statute is the purpose behind the law and the evils the law is designed to remedy. Solich, 158 Ill. 2d at 81, 630 N.E.2d at 822. Courts avoid interpretations that would render part of a statute meaningless or void. Fraud Control, 188 Ill. App. 3d at 710, 544 N.E.2d at 421, citing Harris v. Manor Healthcare Corp., 111 Ill. 2d 350, 362-63, 489 N.E.2d 1374, 1379 (1986).

The Act is to be liberally construed toward protecting the public health, safety, and welfare and toward promotion of temperance in the consumption of alcohol by careful control and regulation of the manufacture, sale, and distribution of alcoholic liquor. 235 ILCS 5/1-2 (West 1996).

A strict or technical construction of any of its provisions detrimental to the public interest should be avoided . Carrigan v. Liquor Control Comm'n, 19 Ill. 2d 230, 236, 166 N.E.2d 574, 577-8209;78 (1960). The business of selling liquor is not favored; no inherent right exists to carry it on and it may be entirely prohibited. Daley v. Berzanskis, 47 Ill. 2d 395, 398, 269 N.E.2d 716, 718 (1971). If the Act is to have any meaning, it must be interpreted as starting from a point of prohibition. The Act then provides exceptions where persons may conduct certain activities involving alcohol as long as they have a valid liquor license. 235 ILCS 5/2-1, 5-1 (West 1996). “The State argues the Act prohibits what it does not permit. The Act must expressly permit the actions of the defendants in this case or they are in violation of the Act. There is no express permission for their conduct, and we conclude they violated the Act.” People v. Select Specialties, Ltd., 317 Ill.App.3d 538, 740 N.E.2d 543, 251 Ill. Dec. 462 (4th District, 12/6/00)

9) “Buckets”

The practice of distributors "providing" plastic buckets to retailers, which are used in serving multiple bottles of beer to a proper party, in accordance with Sec. 6-28(c)(6) of the Happy Hour law, is governed by the normal "of value" inquiry as well as reference to Sec. 6-6(iv), which provides that items, such as for example, "coasters, trays, napkins, glassware and cups shall not be deemed to be inside signs or advertising materials and may only be sold to retailers." Since these buckets fall within the general category of non-sign, non-advertising materials above, they may only be sold to retailers.

10) “Coolers”

In 1998 a major brewery submitted a request for approval of the giving away of coolers to retailers. The Commission’s response was that the proposed activity was a violation of the “of value” provisions of the Liquor Control Act. In 1999 a major trade association requested a position on the same or a very similar activity, and was advised of the existence of the 1998 opinion, which remained in effect until such time as the Commission had revisited the issue and announced a modification of its position.

The term “utilitarian” has been applied to these coolers. Illinois does not have an expressed position on the “utility” of "signage and advertising materials," but it does expressly state that the providing of “any furnishing, fixture or equipment on the premises of a place of business of another licensee authorized under this Act to sell alcoholic liquor at retail” is prohibited activity.

Since these coolers have the attributes of both signage and a trade fixture (therefore equating them with “utility”), they are something of a hybrid, being neither totally signage nor fixture, but at the same time being both. Since signage and advertising materials may be given or sold to retailers, while fixtures may be neither given nor sold to retailers, the subject of these coolers was viewed with an eye toward allowing the advertising while upholding the prohibition against giving or selling equipment, furnishings and fixtures.

In an attempt to strike a balance between allowable activities and activities absolutely prohibited under 5/6-5 and 5/6-6, the Commission has come to the position that these coolers may be “provided” to retailers, however, they must be sold at fair market value. (The Commission is advised that the average fair market value of these coolers usually ranges from $70-150.00, however the Commission will be receptive to additional cost information which will be factored into future discussions.)

Again, the Commission notes that once a program of providing coolers is undertaken, the manufacturer, distributor or importing distributor must stand ready to “provide” the items for all retail licensees who want to purchase them.

11) Retailer storage on the licensed premises of wine purchased by a consumer

The question has been posed whether a retailer of fine wines can store small quantities of wine, which are solely intended for consumption by the purchaser, and family, friends, etc., and not for any possible resale, in a temperature controlled environment, etc., upon the retailer’s licensed premises, for a consumer who has purchased the wine but does not have appropriate storage for it at his/her home.

The usual reasons for storing/warehousing by a retailer, i.e., to take advantage of volume discounts at the time of purchasing, such as we saw when the tax increase took effect on July 1, 1999, does not appear to be relevant to this inquiry. The other usual problems which are created by such warehousing, which include possible deliveries to non-licensed premises; possible sales of alcoholic beverages from such non-licensed premises; possible geographic boundary violations; additional work necessary by Commission agents to track such alcohol, also do not appear to be relevant here. Also, the usual inquiry into such transactions from the “of value” perspective does not apply since this transaction does not involve a relationship between the licensed tiers, but rather between the retail licensee and the ultimate consumer.

The statutory sections which apply to retailers, 5/1-3.17 and 5/5-1(d), and the general “Scope of the Act” section, 5/2-1, have been examined and no prohibition to the approval of this relationship has been found.

It is the Commission’s position, which has been pronounced in connection with the concept of distributor warehousing for retailers, that all “of value” activities between the tiers are prohibited unless specifically allowed, or excepted, and the subject inquiry has also been examined from this perspective to see if the requested activities are otherwise prohibited. We find no such prohibition.

There are potential problems which we may see in this transaction, which involve the concept of consignment sale, which the Commission has found to be an improper transaction between the retailer and consumer, as well as raising possible commercial problems, such as loss or destruction of the property of another during this “bailment” arrangement. The Commission does not have statutory power to inquire into these commercial problems, and expects the parties to the proposed arrangement will adequately deal with them.

Therefore, as long as:

  1. the sale of the product is complete before the storage arrangement is undertaken, and capable of objective documentation, which will negate the possibility of a prohibited consignment sale;
  2. the consumer/purchaser has taken legal title to the property;
  3. the product purchased is of a size which would be appropriate for a consumer, such as the two case limitation imposed upon reciprocal shipments of wine under sec. 5/6-29 of the Liquor Control Act, as opposed to a purchase of product which would be appropriate for resale; and
  4. there is a documented payment from the consumer to the retailer for the “storage” fee, pre paid or at regular intervals, the Commission does not see other prohibitions against the transaction.

12) The listing of retail liquor licensees carrying the products of a manufacturer or distributor, importing distributor or foreign importer on the manufacturer’s or distributor, importing distributor or foreign importer’s website

The Commission has received requests from certain manufacturers and distributor, importing distributor or foreign importers of alcoholic liquors if the listing of the names and addresses of retail liquor licensees carrying the products of a manufacturer or distributor, importing distributor or foreign importer for sale on the manufacturer’s or distributor, importing distributor or foreign importer’s website is a violation of the “of value” provisions of the Liquor Control Act of 1934.

Sections 5/6-4, 5/6-5 and 5/6-6 of the Liquor Control Act, the so-called “of value” or “tied house” provisions generally prohibit ownership/licensing relationships, the extension of credit and the providing of various types of advertising materials unless excepted in the said sections.

It is the Commission’s considered opinion that the listing of the names and addresses of all retail liquor licensees who carry the products for sale of a manufacturer or distributor, importing distributor or foreign importer may be listed on the manufacturer’s and/or distributor, importing distributor or foreign importer’s websites, subject to the following conditions:

  1. The retailer contacts the manufacturer, distributor or importing distributor or foreign importer to have its business information included in the retailer listing.
  2. The retailer listing shall include only the business name, business address and telephone number. The inclusion of E-mail or website addresses is prohibited.
  3. The retailer listing does not provide specific product information, but rather is a general statement that the retailers listed carry the products of the manufacturer or distributor, importing distributor or foreign importer.
  4. The retailer listing shall include all retail licensees carrying the manufacturer’s or distributor, importing distributor or foreign importer’s products, which listing may be on a city, town or village basis, or zip codes, or by any system which assures that all retailers are listed.
  5. The listing shall include no retailer information other than referenced in these subsections, and “sales” or “product promotions” or the like are strictly prohibited.
  6. The inclusion of any and all retailers on the manufacturer’s or distributor, importing distributor or foreign importer’s website shall be at no direct or indirect cost to the retailer.
  7. The manufacturer’s, non-resident dealer’s, distributor’s, importing distributor’s or foreign importer’s website may provide a “link” to a website of any retail licensee, provided such linking is made available to all retailers requesting it.

The Commission publishes this opinion with the express understanding that the purpose of such retailer listings is to provide truthful, accurate and up-to-date information to the ultimate consumer concerning the availability of alcoholic beverages.

13) “EOM”, “EOY” etc. credits or rebates

Suppliers are paying EOM ("end of month") EOY (“end of year”) or other variously identified credits ("rebates") for purchases at or in excess of agreed upon quantities. Is this an "of value" violation?

Traditionally, the Commission has not involved itself in the pricing of alcoholic beverages, nor has it unduly involved itself in the commercial relationships between manufacturers, distributors and importing distributors, and retailers, other that specifically provided for in Sec. 5/6-5. The use of product credits, such as end of month, quarter, year, etc., credits is viewed as an adjustment of the purchase price based upon volume purchasing, rather than a prohibited "of value" payment. So, the general treatment of such payments is that they are allowable, if broadly offered to similarly situated retailers.

Does the payment of the credit, which would otherwise be allowable, directly to the home office of a chain retailer cause this practice to become a violation? Since the multiple outlets of the chain retailer are all owned by the same corporation, there is a unity of owner and licensees, so payments to the corporation or the individual retail outlet has the same legal effect.

It is the opinion of the Legal Division that this practice is not a violation of Sec. 5/6-5.

14) Carbon Dioxide Filters

A Manufacturer, Importing Distributor, or Distributor may sell, supply, furnish, give or pay for, or otherwise provide to and install for a licensee authorized to sell alcoholic beverages at retail, carbon dioxide filters provided that the following applies: 1) The cost to the manufacturer importing distributor or distributor for such filters, including labor and installation costs, does not exceed Fifty Dollars($50.00). 2) The filters are installed in such a manner that it protects and cleans the CO2 supply for all the draft beer in the retailer’s delivery system and not just the products carried by the manufacturer, importing distributor or distributor supplying the filter. 3) The filters must be made available to all retailers that sell draft beer. 4) The manufacturer, importing distributor, or distributor may not limit the availability of the filter to only the retailers that carry the brands of the supplying manufacturer, importing distributor or distributor.

It is the determination of the Commission that CO2 filters may provide consumer protection and aid in providing a safe and healthy product delivered to consumers. Therefore, the Commission has determined that providing such items under the above standards, would not constitute a “thing of value” or otherwise be prohibited within the meaning of Sections 5/6-4, 5/6-5 or 5/6-6, of the Illinois Liquor Control Act (235 ILCS 5/1 et seq.)

This trade practice issue shall expire and be repealed on October 1, 2006 unless readopted by the Illinois Liquor Control Commission.

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