SLA Reigns In Exorbitant Split Case Fees

After years of work to address outrageous fees charged by liquor wholesalers, the Members of the State Liquor Authority adopted an updated split case fee regulation at their Board Meeting on October 26th that limits split case fees to no more than $7.39 per case ($0.87 per bottle for a 12 bottle case). Wholesalers in New York are currently charging as much as $36 per case ($3.00 per bottle for a 12 bottle case) to split a case.

This action followed an extensive lobbying campaign the Association led to persuade the Authority that Empire and Southern were charging split case fees far in excess of the amount permitted in the SLA’s regulation. They seemed to believe they could charge whatever they want. Previous administrations at the Authority ignored the regulation making it possible for wholesalers to get away with this, but Chairman Bradley took our concerns seriously. He convened a meeting with representatives of the retail and wholesale trade to try to sort the issue out.

Unfortunately, Empire and Southern really do think they can do what they want – they said so in meetings over more than two years and in their comments throughout this process. The Liquor Authority never questioned the concept of split case fees. They’ve been allowed since 1969 in order to compensate wholesalers for the cost of splitting a case. The fee was last raised by the SLA in 1981, but the wholesalers have increased them regularly over the years without the Liquor Authority’s permission. By the time the Authority got involved, wholesalers were charging nearly 20 times the approved fee.

Rather than engaging in a substantive conversation about the cost of splitting a case and adjusting the regulation to account for the change, Empire and Southern lawyered up. Without the cooperation of the wholesalers in adjusting the split case fee, the Authority decided to adjust the existing fee by the increase in the Consumer Price Index (CPI) over the years since the previous adjustment (which was also done in 1981). Applying the CPI to the existing fee of $1.92 per case resulted in the new fee of $7.39 per case. Of note, the new $7.39 split case fee is a maximum charge – wholesalers are permitted to charge less or to charge nothing at all. Currently, the split case fee is mandatory making it an attractive place for the wholesalers to pad their profits.

The New York City Hospitality Alliance and the New York State Restaurant Association joined us in advocating for this change. There were more than fifty letters of support for the formal regulatory proposal. There were a handful of opposing comments, including Empire Merchants and the New York State Beer Wholesalers’ Association.

Now that the revised regulation has been approved, it will take effect upon filing with the Secretary of State, which will likely take 30 – 45 days. There’s a good chance one or more wholesalers will bring an action against the Liquor Authority’s revised regulation to strike it down, so keep alert for any updates on the status of this revised regulation.