The State Liquor Authority (“SLA”) attempted to revive and implemented regulations that address split-case fees. A split-case fee is a fee a wholesaler charges a retailer that orders less than a full case of a product.
Split-case fees go back to the repeal of Prohibition. However, in 1964, the New York Legislature amended Sections 101-b, and added 101-bb and 101-bbb (since repealed) of the Alcoholic Beverage Control Law, which provided for minimum retail prices for spirits. In 1969, the SLA enacted Rule 65.4(e), which created a fixed relationship between a bottle and case price. This was necessary to enforce the minimum-price statute. In 1990, the minimum retail price statutes were repealed, and the SLA ceased enforcing Rule 65.4(e)
In November 2022, the SLA amended 65.4(e). It applied the limitation on split-case fees to wine as well as spirits. It also imposed a new split-case fee limit of $7.39 per case. The SLA intended for the rule to become effective regarding sales to retailers on or after February 1, 2023. However, before the rule could become effective, the SLA published the following announcement:
On December 1, 2022, Southern Glazer’s Wine and Spirits brought an action in NYS Supreme Court challenging the State Liquor Authority’s (SLA) statutory rulemaking authority to promulgate rules that allow for and place limits on split case fees.
On December 2, 2022, the Court put in place a temporary restraining order (TRO) enjoining the SLA from enforcing its regulations regarding split case fees.
Therefore, notwithstanding previous instruction in the Authority’s November 28, 20222 email, the SLA has determined that for the January 5, 2022 retail price posting and until the TRO is lifted, you may proceed to post a split case fee separate from the posted bottle price at a cost not to exceed any split case fee posted on the December 5, 2022 retail posting.
We will continue to update you as to your obligations as the matter proceeds.
Whether, in the face of the TRO, the SLA has the power to limit split-case fees to that charged by the wholesaler in its December price posting is an open question. The industry will also have to wait to see what the court ultimately decides and whether any such decision will be appealed.
As they say on television, we all just have to “stay tuned.”
This article is not intended to give specific legal advice. Before taking any action, the reader should consult with an attorney familiar with the relevant facts and circumstances.
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