Although it is relatively new, it has become difficult to think of a time when we did not have social media, so pervasive has it become in our world. This is no different for operators in the beverage industry. Moreover, for those restaurants and bars that offer beverage alcohol, the challenge to remain legally compliant when using or participating in social media tools and channels is great because it is a new form of promotion and new forms of promotion do not always translate well in the beverage alcohol regulatory environment.
Take the recent example of the problem that Groupon, a social media site that offers 24-hour deep discounts to consumers, and a Boston-area restaurant ran into when Groupon offered a voucher deal of $60 worth of food and drinks at the restaurant for a cost of far less than $60. In March 2011, the Massachusetts Alcoholic Beverage Control Commission cracked down on Groupon and the restaurant and asked them to pull their on-line promotion. The State ABCC claimed that the voucher promotion violated both the state’s happy hour promotion regulations (by offering beverage alcohol at too great a discounted price) and the state’s beverage alcohol licensing regulations (by creating an interest for Groupon in the licensed business of the restaurant).
While happy hour regulations governing the discounting or offering of “free drinks” by a bar or restaurant on a nightly basis vary greatly from state to state as to the degree and extent of such discounts or offers, the licensing issue raised in Massachusetts may have further reaching implications for restaurants participating in Groupon and other social media daily deal sites such as LivingSocial or BuyWithMe. The Massachusetts ABCC apparently took the position that Groupon’s collection of the payment for the food and drinks voucher from the customer and the holdback of a portion of the payment constituted a share in the proceeds from the sale of beverage alcohol, something that the ABCC asserted constituted an interest in the restaurant’s license. It remains to be seen how other state beverage alcohol regulators view or will view this activity when it occurs in their state, but it is indicative of the complications that arise in any context when any type of social media or on-line promotion involves the sale of beverage alcohol. This will remain a challenge for bar and restaurant operators as they increasingly use social media to promote their accounts.
A New Frontier
We have seen both the manufacturer and brand-owner players in the industry make extensive use of Facebook and Twitter to increase brand awareness for their products. Bars and restaurants, however, use Facebook and Twitter and other social media tools or channels in a different way. Their goal is to use social media to drive traffic to their accounts and increase their patrons’ total spend. But on social media sites such as Facebook and Twitter there is also a space where manufacturers, brand-owners and restaurants and bars can come together to promote themselves.
This activity itself can raise other beverage alcohol regulatory challenges for the operators. Any time you bring together manufacturers and retail operators in the same space, you raise the specter of state and federal so called tied-house laws as to whether such activity is permissible. Take, for example, any social media for a brand-owner that provides a locator application via the Internet or even for smart phones to allow the brand-owner to let visitors or participants know to what bars and restaurants they can go to find the brand-owner’s products. Many state beverage alcohol regulators are of the mind-set that such activity violates their tied-house laws because it provides a “thing of value” to the bars and restaurants listed. Other states allow but impose certain guidelines to make these locator applications legal. Any social media platforms or applications that provide any links or establish a relationship between a manufacturer and bar or restaurant must be carefully vetted to ensure it does not run afoul of the law.
Regulatory challenges aside, for beverage operators, social media tools and channels are likely to continue to provide a great window of opportunity to promote their venues and the wonderful food and beverages that they offer. Nevertheless, again for beverage alcohol, bars and restaurants must be mindful of what they can offer when it comes to their social media promotions and to what extent they might involve discounts, free drinks, samples and even the pairing of food and beverage alcohol.