Anheuser-Busch, Inc. v. Dept. of Business Regulation, ANHEUSER-BUSC

• Decision Date: 11 February 1981
• Docket Number: ANHEUSER-BUSC,INC,No. SS-38,SS-38
• Citation: 393 So.2d 1177
• Parties: , Appellant. v. DEPARTMENT OF BUSINESS REGULATION, Division of Alcoholic Beverages and Tobacco, Appellee.
• Court: Florida District Court of Appeals

Page 1177

393 So.2d 1177

ANHEUSER-BUSCH, INC., Appellant. v. DEPARTMENT OF BUSINESS REGULATION, Division of Alcoholic Beverages and Tobacco, Appellee.

No. SS-38.

District Court of Appeal of Florida, First District.

Feb. 11, 1981.

T. Paine Kelly, Jr., MacFarlane, Ferguson, Allison & Kelly, Tampa, for appellant.

Harold F. X. Purnell and Dennis E. LaRosa, Tallahassee, for appellee.

ROBERT P. SMITH, Jr., Judge.

Anheuser-Busch appeals from an order of the Division of Alcoholic Beverages and Tobacco finding that the brewer's promotional "bar spending" for vacationing collegians at Daytona Beach violated Section 561.42(1), Florida Statutes (1979), the "Tied House Evil" law. The Division assessed a monetary penalty equal to appellant's payments for beer and its tips for service. We reverse the order because of its substantial deficiencies as a policymaking instrument under Chapter 120, Florida Statutes (1979).

Anheuser-Busch, licensed in Florida as a beer manufacturer, sells its products to distributors who in turn sell to retail vendors. To promote its products, the manufacturer sponsored free beer parties in 16 Daytona Beach bars and taverns during the college Spring break in 1978. Anheuser-Busch paid the vendors their usual retail price for Anheuser-Busch beer consumed by the vendors' customers during those parties and paid conventional tips to the vendors' employees who served that beer. Appropriately enough, this is called manufacturer's "bar spending." For beer and service Anheuser-Busch paid approximately $7,000 to selected Daytona Beach vendors and their employees during a four-day period in March 1978.

The Division charged that the manufacturer's bar spending constituted "the giving of a gift, loan of money or property or ... the giving of a rebate" to retail vendors, in violation of Section 561.42(1), which provides:

(1) No licensed manufacturer or distributor of any the beverages herein referred to shall have any financial interest, directly or indirectly, in the establishment or business of any vendor licensed under the Beverage Law, nor shall such licensed manufacturer or distributor assist any vendor by any gifts or loans of money or property of any description or by the giving of any rebates of any kind whatsoever....

Exercising its power to "establish rules ... to enforce the herein established limitation upon credits and other forms of assistance," Section 561.42(8), the Division has promulgated Rules 7A-1.09 and 7A-1.10, Fla.Admin.Code, amplifying the terms "rebate" and "gift" as used in the statute:

7A-1.09 Rebate. The term "rebate" (often referred to as accumulative promotion or retroactive discount) shall include any refund or discount made or allowed other than such discounts as are permitted under Section 561.42, Florida Statutes (allowing trade discounts in the usual course of business, Section 561.42(6)); and as such they are prohibited.

7A-1.10 Gift. The term "gift" shall apply to the giving of free goods or things of value as a discount not otherwise permitted by law or reward for purchasing any given quantity of alcoholic beverages either at one time or over a period of time; and as such they are prohibited.

The Division and Anheuser-Busch presented the present licensee discipline complaint to a hearing officer of the Division of Administrative Hearings on a bare-bones stipulation of facts, substantially as recited above, which concluded:

Bar spending (i. e., the practice of a representative of a manufacturer or of a wholesaler of purchasing drinks for consumers at the premises of a retail licensee) has long been an industry marketing practice in Florida, albeit on a more limited scale than set forth above. The Florida Division of Alcoholic Beverages and Tobacco has known of the practice, but has never before brought any action against a licensee for such bar spending activities, or otherwise advised the brewing industry of its opposition to spending on any scale. The brewing industry has never sought such an opinion as to the legality of bar spending from the Division. This is the first activity known to the Division incorporating all of the features described in the foregoing statement.

The Division argued to the hearing officer that bar spending "incorporating all of the features" of this particular promotional campaign constituted a "rebate" or "gift" by the sponsoring manufacturer to the retail vendors in that the retailers received increased gross revenues as a result of the parties, or they received increased profits due to discounts allowed by distributors for their greater than ordinary purchases for the parties. The hearing officer rejected these propositions as a matter of fact because the Division's abbreviated proof did not show that the vendors sold more beer at Anheuser-Busch's expense than they would have sold at their customers' own expense. The hearing officer concluded:

Having failed to establish the increased volume theory, the (DIvision) is unable to demonstrate increased profits due to increased volume, ergo there is no "rebate" or retroactive discount that has been shown by the (Division) in its proof. Moreover, the ordinary meaning of the word "rebate" does not lend itself to the establishment of a "rebate" by the evidential facts adduced in this hearing....

... (T)here is no showing that (Anheuser-Busch) was repaying, making restoration or returning money to the vendors as a form of restitution or repayment when it purchased the alcoholic beverages for the benefit of the patrons of the vendor .... There is no showing that the vendors paid any less than usual when they purchased the products which were subsequently given away to the general public and paid for by (Anheuser-Busch) at the usual prices.

The (Division) has also failed to prove that the "bar spending" constituted a "gift" within the meaning of Rule 7A-1.10, Florida Administrative Code. The free goods that were given were goods given to the general public and, absent a showing that the volume of sales would have been increased due to (Anheuser-Busch's) purchase of the alcoholic beverages, it cannot be shown that the vendors were extended free goods.... Finally, the (Division's) assertion that the mere act of having the promotional staff of (Anheuser-Busch) put on the bar party constituted a "gift" or reward is not convincing for reason that the proof does not indicate that particular benefit.

The hearing officer recommended an order finding that the charges had not been sustained.

The Division's final order, while purporting to accept the hearing officer's findings of fact, drew the different conclusion that "the entire party from beginning to end was a gift to the vendor" which had "substantial intrinsic if not precise worth to the vendor in the party's effect on the vendor's profit, overhead, cash flow, promotional value, competitive edge, advertising and good will." The Department's order concluded:

It is beyond reason to suggest that the vendors did not receive a financial benefit from the transaction outlined in the facts of this case. If the promotional activities of (Anheuser-Busch) in this case are not prohibited, then nothing would prevent manufacturers similarly situated from having 1, 5, 50, or 100 free parties per year at preferred or key vendors locations. Such would be an inducement for other vendors to carry the products of the promoting manufacturer, thus creating a Tied House effect heretofore condemned in this State.

Thus the Division's order in this case equates the antitrust, antifavoritism and antipredator purposes of Section 561.42(1) with the perceived dangers of manufacturers' bar spending. Through this order there begins to emerge a Division policy, rooted in the statute, which condemns manufacturers' bar spending in a certain volume or when carried out with a certain sophistication and forethought ("The instant matter does not involve the situation in which a member of Respondent's promotional staff went in to a vendor's place of business unknown to the vendor and bought a round of the Respondent's products for the patrons. Instead, it involves a promotional scheme ...").

On this record the Division cannot successfully dispute the hearing officer's findings that there was no proof of a manufacturer's "gift" or "rebate" in the sense of discounts realized by vendors in purchasing greater than usual quantities of Anheuser-Busch beer from distributors or in the sense of income or profits realized by serving greater than usual quantities of beer to their patrons. The record is not susceptible to the Division's substituted finding that the bar spending had "substantial intrinsic if not precise worth to the vendor in the party's effect on the vendor's profit, overhead, (and) cash flow ...." Therefore no violation of Section 561.42(1) can be founded particularly on Rules 7A-1.09 and 7A-1.10, whose terms emphasize the "gift" and "rebate" characteristics of direct financial rewards given by a seller to a buyer in return for purchases in the chain of distribution. The Division's order finding a violation of Section 561.42(1) therefore depends less on the precise terms of Rules 7A-1.09 and 7A-1.10 than on the general purposes of the statute itself, whose reach the Division says is illustrated but not exhausted by the Rules:

The definitions (Rules 7A-1.09 and 7A-1.10) do not indicate that they are exclusive of any other commonly used meaning of the words ("gift" and "rebate"), nor should an agency interpretation of a statute by rule be used to frustrate the clear and unambiguous intent of the law.

The Division correctly suggests that having rules which particularly define one sort of conduct within the reach of a regulatory statute does not foreclose the Division's application of the statute to other conduct through adjudication. If by promulgating a single set of interpretative rules an agency should lose power to further interpret the statute through...