Question Submitted by Kouri, 062918 OKAG, 2018 OK AG 6

Docket Nº:2018 OK AG 6
Party Name:Question Submitted by: Harry 'Trey' Kouri, III, Chairman, ABLE Commission
Attorney:MIKE HUNTER ATTORNEY GENERAL OF OKLAHOMA ETHAN SHANER DEPUTY GENERAL COUNSEL
Case Date:June 29, 2018
Court:Oklahoma Attorney General Opinions
 
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2018 OK AG 6

Question Submitted by: Harry "Trey" Kouri, III, Chairman, ABLE Commission

No. 2018 OK AG 6

Oklahoma Attorney General Opinions

June 29, 2018

MIKE HUNTER ATTORNEY GENERAL OF OKLAHOMA

ETHAN SHANER DEPUTY GENERAL COUNSEL

¶0 This office has received your request for an Official Attorney General Opinion in which you ask, in effect, the following questions:

1. Does 37A O.S. § 3-111 (K) prohibit a small brewer that does not self-distribute from receiving money or another thing of value from a beer distributor in exchange for entering into a distribution agreement with that distributor?

2. If the answer to Question # 1 is yes, does the Alcoholic Beverage Laws Enforcement Commission have authority prior to October 1, 2018 to administratively discipline a small brewer that attempts to charge a beer distributor for entering into a distribution agreement?

3. Does 37A O.S. § 3-116 (A) allow a manufacturer to select one wine and spirits wholesaler to exclusively distribute its brands?

4. May a wholesaler who lawfully obtained a manufacturer's products before October 1, 2018 lawfully sell those products after October 1, 2018 if that manufacturer has given another wholesaler the exclusive right to distribute its products?

I.

BACKGROUND

¶1 During the 2016 legislative session the Legislature passed Senate Joint Resolution 68 ("SJR 68"), which was presented as State Question 792 for a vote of the people of Oklahoma. See S.J. Res. 68, 55th Leg., 2nd Reg. Sess., § 1 (2016). The measure appeared on the November 2016 ballot and was approved, effecting a broad-scale reform of the State's regulation of beer, wine, and liquor. Effective October 1, 2018, SJR 68 will repeal Article 28 of the Oklahoma Constitution and in its place enact new Article 28A, which, among other things, directs the Legislature to "enact laws providing for the strict regulation, control, licensing and taxation of the manufacture, sale, distribution, possession, transportation and consumption of alcoholic beverages, consistent with the provisions of this Article." OKLA. CONST. art. 28A, § 2(A). 1

¶2 During the same session, the Legislature passed Senate Bill 383 ("SB 383"), largely repealing Title 37 of the Oklahoma Statutes--the existing regulatory structure for alcoholic beverages--and enacting a new framework under Title 37A titled the "Oklahoma Alcoholic Beverage Control Act" (the "New Act"). 2 See 2016 Okla. Sess. Laws c. 366. Enactment of the New Act was made contingent upon the people of Oklahoma approving of SJR 68. See id. § 197. As with the constitutional changes in SJR 68, much of SB 383's repeal of Title 37 and implementation of Title 37A becomes effective on October 1, 2018. See id. § 198. Until then, many provisions of Article 28 and Title 37 remain in effect.

¶3 While the regulatory changes brought about by SJR 68 and SB 383 are far-reaching, your questions focus on discrete issues involving distribution arrangements for beer, wine, and spirits under the New Act, and seek guidance as to how the Alcoholic Beverage Laws Enforcement Commission ("ABLE Commission") should enforce these laws before and after October 1, 2018.

II.

DISCUSSION

¶4 The broad regulatory structure for distribution of beer, wine, and liquor under the new scheme is articulated in Section 2 of Article 28A of the Oklahoma Constitution, which states in relevant part: A. The Legislature shall enact laws providing for the strict regulation, control, licensing and taxation of the manufacture, sale, distribution, possession, transportation and consumption of alcoholic beverages, consistent with the provisions of this Article. Provided:

1. a. there shall be prohibited any common ownership between the manufacturing, wholesaling and retailing tiers, unless otherwise permitted by this subsection....

2. A manufacturer, except a brewer, shall not be permitted to sell alcoholic beverages in this state unless such sales occur through an Oklahoma wholesaler. A manufacturer, except a brewer... may sell such brands or kinds of alcoholic beverages to any licensed wholesaler who desires to purchase the same. Provided, if a manufacturer, except a brewer, elects to sell its products to multiple wholesalers, such sales shall be made on the same price basis and without discrimination to each wholesaler;

3. A brewer, with the exception of a small brewer as defined by law, shall not be permitted to sell beer in this state unless such sales occur through an Oklahoma licensed wholesaler pursuant to a wholesaler agreement... The wholesaler agreement shall designate the territory within which the beer will be sold exclusively by the wholesaler;

4. Winemakers either within or without this state may sell wine produced at their wineries to any licensed wholesaler who desires to purchase the wine; provided, that if a winemaker elects to sell the wine it produces to multiple wholesalers, then such sales shall be made on the same price basis and without discrimination to each wholesaler....

5. Every wholesaler, except a beer wholesaler, must sell its products on the same price basis and without discrimination to all on-premise and off-premise licensees, unless otherwise provided by law....

OKLA. CONST. art. 28A, § 2. Based on this broad directive, the Legislature passed SB 383 to implement new regulations on the beer, wine, and liquor industries.

A. Section 3-111(K) of Title 37A prohibits a small brewer that does not self-distribute from receiving money or any other thing of value from a beer distributor in exchange for entering into a distribution...

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