After years of our persistent advocacy, the State Liquor Authority has initiated a formal rulemaking process to prevent liquor wholesalers from charging split case fees in any amount they choose. Currently Empire charges a $30.00 split case fee ($2.60 per bottle – 12 bottle case) and Southern charges a $36.00 split case fee ($3.00 per bottle – 12 bottle case). Under the SLA’s proposal, wholesalers would be authorized to charge a split case fee no more than $7.39 per case ($0.62 per bottle – 12 bottle case) – that’s a savings of more than 75 percent!
The pricing practices of Empire and Southern have been a priority of our advocacy efforts for some time. We’ve advanced legislation to allow on-premises licensees to join purchasing groups in order to take advantage of quantity discounts and to allow you to purchase from liquor stores, but these initiatives have been blocked by the wholesalers. We’ve also raised concerns about the delivery fees and split case fees forced upon small retailers by the major wholesalers. An analysis we compiled last year found that a typical small tavern owner ordering two mixed cases of liquor each week pays more than $8,000 each year in delivery and split case fees – that’s a lot of money so we dug in further.
We discovered an SLA regulation covering split case fees which, while last updated more than 40 years ago, was apparently still “on the books” even if it hadn’t been enforced in years. Beginning in 1969 the State Liquor Authority mandated that liquor wholesalers charge a split case fee in order to be compensated for the cost of opening a case of liquor and taking one or more bottles out for a retailer seeking to purchase less than a full case. The purpose of the regulation was to prevent unlawful price discrimination – to ensure wholesalers charged all retailers the same fee under the same conditions and that the charge was reasonable (otherwise they’re subsidizing larger purchasers). The fee was set at $1.00 per case in 1969 and had increased to almost two dollars per case by 1980.
It’s unclear why the Liquor Authority stopped enforcing this regulation, but as a result the major wholesalers have continued to raise this fee over the years without any limitations. The Association’s Board met with the SLA in June of 2020 to press them to act on this. The Authority agreed to set up a meeting with the wholesalers – including the other major on-premises trade representatives – and when that meeting produced no meaningful conversation, we filed a formal complaint with the State Liquor Authority charging Empire and Southern with violating the regulation limiting split case fees.
After two years of inquiry, investigation, research, and legal analysis, the State Liquor Authority has now confirmed their commitment to limiting split case fees in order to prevent unfair discrimination against small retailers. At their Board meeting on June 8th the Liquor Authority made clear they intend to use this regulation to prevent unfair discrimination through the charging of exorbitant split case fees. They proposed adjusting the fee set in 1980 by using the Consumer Price Index which result in the proposed new split case fee of $7.39.
This is good news, but it’s not a done deal. Within the next few weeks the formal rulemaking process will begin and members of the industry and the public will be able to comment on the proposal. We’re going to need to file comments for the record and we’ll need to make sure our voices are heard at a public hearing the SLA is hosting on September 14th. We’ll be in touch with the details.