Massachusetts ABCC: Alcohol and Groupons Don't Mix
I am hopeful that the long-established, clear, bright lines of the boundaries of legality have not vanished in the rear-view mirror of entrepreneurism driven by unbridled and imprudent, if not reckless, enthusiasm," wrote Massachusetts ABCC General Counsel William Kelley to Groupon in February 2011 according to The Boston Globe.
At issue are deals offered by group buying site Groupon for restaurants and retailers in Massachusetts. Groupon, a Chicago-based company launched in 2008 and one of the fastest growing companies of all time, reportedly declined a $6 billion offer for acquisition from Google. A typical deal works something like this: A customer buys a voucher worth $40 of food and drinks at a specific restaurant for $20. The purchaser then prints out and redeems the voucher for some combination of food and drinks.
Kelley points to the Prohibited Practices section of Massachusetts General Laws as justification for why deals like this are prohibited. Also known as the Happy Hour Laws, they forbid selling, offering to sell or delivering to any person or group of persons any drinks at a price less than the price regularly charged for such drinks during the same calendar week. Extending the discussion to include retailers the Frequently Asked Questions section of the ABCC's website specifically addresses the issue of whether coupons are acceptable forms of promotion:
Can a retail package store use a coupon to advertise or give a discount in the price of alcoholic beverages? No. State law requires a package store to establish and post a list of prices for all products sold. All sales must be made at those posted prices. There can only be one set of prices for one licensed premises.
Therefore, a package store cannot sell alcoholic beverages at different prices to different groups of people, namely those who have the coupon and those that do not.<
According to Forbes the situation isn't unique to Massachusetts. Laws in other states also limit licensees from indirectly transferring a beneficial interest in their license to third parties. Up for debate is whether marketing fees collected by group buying sites from licensees constitutes a violation.
The Massachusetts ABCC appears to be serious about enforcing these laws. According to The Globe they've requested Groupon provide them with names of all licensees who have run promotions with them involving alcohol beverages for further investigation.
The moral of the story is clear. According to Daily Deal Media the ABCC became aware of these deals when the Cambridge Hyatt Regency did what licensees should do; request an advisory opinion of the ABCC before proceeding with a promotion.