Section 2.12 Manufacturer to Sell Only to Wholesalers; Exception for Small Farm Wine and Brandy.
Any person manufacturing controlled beverages under any alcoholic beverage control law of the State of Arkansas shall sell such controlled beverages only to persons holding a permit to sell such controlled beverages at wholesale. Provided, that manufacturers of small farm wine and brandy may also sell to consumers in accordance with the laws and Regulations applicable to such permits. (Amended 8-15-07)
Section 2.12.1 Sale of Wine for On Premises Consumption at Arkansas Native Wineries. Repealed 8-15-07
Section 2.13 Wholesalers to Sell Only to Retailers; Hours of Sale for Wholesalers.
Any person holding a permit to sell controlled beverages at wholesale under any alcoholic beverage control law of the State of Arkansas shall sell such beverages only to a person holding a permit to sell such beverages at retail.
Wholesalers may sell controlled beverages to retailers on all days that retail liquor stores may sell controlled beverages to consumers. The hours of sale shall be from 5:00 a.m. until the closing hours prescribed by state law or local ordinance for retail liquor stores. Wholesalers may not, on Sundays, sell or deliver controlled beverages to or service those retail accounts that hold permits to sell controlled beverages on Sundays. (Amended 8-17-05)
Section 2.13.1 Three-Tier System of Alcohol Distribution Defined; Violations of Prohibitions Subject to Penalty.
(1) This Regulation is intended to more clearly delineate the structure of the three-tier system of alcohol distribution established by Arkansas state code provisions and to prohibit ownership and employment interests between the three tiers. Regulation in this area is considered necessary and appropriate for the following reasons:
A. The State of Arkansas has long recognized and adhered to the three-tier system of alcohol distribution as evidenced by state laws establishing the types of permits authorized and the many Alcoholic Beverage Control Regulations currently in effect implementing those laws;
B. A clear delineation of the three-tier system that is in place will foster the understanding of the system by those people holding alcoholic beverage sales permits and those seeking to obtain permits;
C. Such regulation will give the State of Arkansas greater control of all facets of alcohol distribution and will enhance the State’s ability to more effectively administer those code provisions and Regulations that are currently in effect;
D. Such regulation will decrease the likelihood of one tier of distribution owning, gaining control over, and/or dictating distribution, brand availability and pricing, or other marketing practices in any other tiers of the system;
E. Such regulation will enhance and foster free and independent marketing of alcoholic beverages in the State and will help to maintain a wide selection of brands at reasonable prices available to the consuming public.
(2) The three-tier system of alcohol distribution consists of the three broad categories of the marketing chain. Alcoholic beverage manufacturers, including distilleries, breweries, importers or rectifiers, whether or not they hold a permit issued by the Arkansas Alcoholic Beverage Control Division, are considered the first tier of the distribution system. Alcoholic beverage wholesalers, licensed by the State of Arkansas, are considered the second tier of distribution. Alcoholic beverage retailers, licensed by the State of Arkansas, are considered the third tier of distribution.
The following ownership and employment interest among the three tiers are prohibited:
A. No person, firm or corporation owning any interest in any business involved in the first tier of distribution may own any interest in any business involved in the second or third tiers of distribution, regardless of degree of such interest. Further, no person, firm, or corporation being employed by or serving as an officer of any business involved in the first tier of distribution shall own any interest in nor be employed by any business involved in the second or third tiers of distribution;
B. No person, firm or corporation owning any interest in any business involved in the second tier of distribution may own any interest in any business involved in the first or third tiers of distribution, regardless of degree of such interest. Further, no person, firm, or corporation being employed by or serving as an officer of any business involved in the second tier of distribution shall own any interest in nor be employed by any business involved in the first or third tiers of distribution;
C. No person, firm or corporation owing any interest in any business involved in the third tier of distribution may own any interest in any business involved in the first or second tiers of distribution, regardless of degree of such interest. Further, no person, firm or corporation, being employed by or serving as an officer of any business involved in the third tier of distribution shall own any interest in nor be employed by any business involved in the first or second tier of distribution;
D. Notwithstanding the prohibitions contained in Subparagraphs B. and C. above, permit holders in the second and third tiers of distribution may hold stock in businesses involved in the first tier where that stock is traded on any national stock exchange, not to exceed one percent (1%) of the total outstanding shares of any one company;
E. Nothing contained herein shall be construed to prohibit any manufacturer licensed pursuant to the provisions of ACA § 3-5-408 from maintaining or hereafter acquiring a wholesale wine permit or retail permit;
F. In addition to any other sanctions or penalties which may be imposed by the Director pursuant to the procedures outlined in Title 3 of the Arkansas Code and Act 434 of 1907, as amended, violation of any provision of this Regulation shall also be considered a Class A permit violation, pursuant to the provisions of Act 790 of 1981, as codified in ACA § 3-4-401, et. seq. (Amended 8-19-93)
Section 2.14 Records to be Maintained by Manufacturer.
All persons manufacturing controlled beverages must keep and maintain on the premises the following records: (1) A record showing the kind, quantity and date of the receipt of all materials brought upon the premises for use in the manufacture of controlled beverages; and (2) A record of all controlled beverages sold or otherwise disposed of, indicating the date of sale or other disposition, the name of the purchaser and the quantity of controlled beverages sold or otherwise disposed of. Such records shall be preserved for a period of three (3) years from the relevant date of the record and shall be available on the premises at all times for reasonable inspection by authorized agents of the Division of Alcoholic Beverage Control. All persons manufacturing controlled beverages for shipment into the State of Arkansas shall submit to the Department of Revenue such reports as may be required by the Commissioner of Revenues.
Section 2.15 Records to be Maintained by Wholesaler. Any person holding a permit to wholesale controlled beverages shall keep and maintain the following records:
(1) A record of all controlled beverages received by the permittee, indicating the name of the manufacturer thereof, the date purchased, the number of packages and quantity of controlled beverages received, the trade name of the goods, the date received on the premises and the name of the transportation company making the delivery; and
(2) A record of all sales or other dispositions of controlled beverages, indicating the name of the purchaser, the date of the sale and the number of packages and quantity of controlled beverages sold.
Such records shall be preserved for a period of three (3) years from the relevant date of the record and must be available at all times on the premises for inspection by duly authorized agents of the Division of Alcoholic Beverage Control.
All persons holding permits to sell controlled beverages at wholesale shall submit to the Department of Revenue such reports as may be required by the Commissioner of Revenues.
Section 2.16 Wholesalers to Register Brands of Controlled Beverages; Manufacturers and Wholesalers Not to Change Brands Without Approval of Director.
(1) The purpose of this Regulation is to provide guidelines for the business relations between Arkansas wholesalers of alcoholic beverages and distillers, manufacturers, importers and producers of such alcoholic beverages. Regulation in this area is considered necessary and appropriate for the following reasons:
A. To prevent unfair business practices, discrimination and undue control of such wholesalers by distillers, manufacturers, importers and producers;
B. To maintain stability and healthy competition in the alcoholic beverage industry;
C. To promote and maintain a sound and stable system of distribution of alcoholic beverages; and
D. To promote the public health, safety and welfare.
(2) Every manufacturer, importer or producer of spirituous and vinous beverages doing business in the State of Arkansas shall submit to the Alcoholic Beverage Control Division one (1) label for each brand of spirituous and vinous beverages to be shipped for the first time by the shipper into or within the state and shall designate in the application for registration one (1) licensed liquor wholesaler in the state, who shall be the exclusive distributor of such brand or label within the state. Such designated wholesaler shall be initially approved by the Director and shall not be changed nor initially disapproved except for good cause, and the Director shall determine good cause after a hearing pursuant to the provisions set out in this Regulation. Any brands or labels previously registered in this state, and which have subsequently been withdrawn from distribution in this state, shall be treated in the same manner as the initial registration of brands or labels and are subject to the provisions hereof.
(3) Any distiller, manufacturer, importer or producer desiring to change wholesalers with respect to any brand shall file with the Director a Wholesaler Change Request containing such of the following information as is applicable:
A. The name of each brand involved;
B. The case volume in Arkansas for each brand for the current year or portion thereof and the two previous calendar years;
C. The name of the wholesaler currently distributing such brand;
D. The name of the proposed new wholesaler; and,
E. A detailed explanation of the specific business reasons for the request to change wholesalers. Business reasons which may be considered by the Director in determining good cause for authorizing a change of wholesalers will include:
1. A wholesaler’s bankruptcy or serious financial instability, including its consistent failure to pay its debts as they fall due or its failure to meet or maintain any objective standards of capitalization expressly agreed to between the wholesaler and the distiller, manufacturer, importer or producer; provided, such standards are determined by the Director to be commercially reasonable;
2. A wholesaler’s repeated violations of any provision of federal or state law or Regulation, whether or not such violations resulted in official action;
3. A wholesaler’s failure to maintain reasonable sales volume of the brand, taking into consideration such factors as the extent of the distiller’s, manufacturer’s, importer’s or producer’s advertising and promotion of the particular brand, prevailing economic conditions affecting sales generally or the extent of the wholesaler’s efforts, or lack thereof, to promote a particular brand; and,
4. Any other factors relevant to such proposed change and which aid the Director in determining good cause.
(4) At the same time that the original Wholesaler Change Request is filed with the Director, a copy thereof shall be mailed by the distiller, manufacturer, importer or producer to each wholesaler who may be affected by the proposed changes. Immediately upon receipt of any Wholesaler Change Request, the Director shall notify the currently designated wholesaler of the request by certified mail. Within fifteen (15) days after receipt of such notice by the affected wholesaler any such wholesaler or party required to be given notice by this Regulation may interpose written objections thereto. Such written objections shall be filed in the office of the Alcoholic Beverage Control Division and copies thereof shall be served by the objecting party upon the party proposing the change and upon all wholesalers who may be affected by the proposed change.
A. Upon the receipt of an objection from any party, or upon his own motion, the Director shall hold a hearing, after providing due notice to all parties concerned, for the purpose of determining the truth of any matters of fact alleged by any party and determining whether the proposed changes are based upon sufficient cause and are otherwise consistent with the policies set out in Subsection 1 above. If it is determined from the evidence deduced at said hearing that the brand or label involved is the same as, or similar to, or is such a modification of, substitution of, upgrade of or extension of a brand or label which has already been registered by the distiller, manufacturer, importer or producer, so as to render it unjust or inequitable (without cause being shown) to designate the brand or label to a wholesaler different from the wholesaler designated for the brand or label being so modified, substituted, upgraded or extended, then such request shall be denied; provided, however, that nothing herein shall be construed to prevent the distiller, manufacturer, importer or producer from treating the matter as a desire to change wholesalers, and from proceeding under the provisions of Subsection 3 above, either before or after such determination.
B. No proposed change will be approved by the Director which is based upon the failure or refusal of a wholesaler to comply with any demand or request of a distiller, manufacturer, importer or producer where such demand or request would result in a violation of any provision of federal or state law or Regulation. During such fifteen (15) day objection period, or until the proposed changes have been finally approved by the Director, the party proposing the change shall continue to supply the designated wholesaler, upon commercially reasonable terms, such reasonable quantities of the brand involved as the wholesaler may require. If, at any time, the Director finds a distiller, manufacturer, importer or producer is not shipping the wholesaler a reasonable amount of merchandise, he may withdraw approval of all brands registered by such parties within the state.
(5) Any hearing held by the Director pursuant to the provisions of Subsection 4 above shall be held within thirty (30) days after the receipt of any notice of objection to a Wholesaler Change Request. The findings of the Director made after such hearing shall be presented to the Alcoholic Beverage Control Board at its next regularly scheduled meeting. Any aggrieved party may appeal the decision of the Director to the full Board to be heard de novo and any such appeal hearing will be scheduled and held pursuant to hearing procedures established for the Alcoholic Beverage Control Division by state law and Alcoholic Beverage Control Regulations.
(6) If no objection is filed to the Wholesaler Change Request as provided in Subsection 5 above, the proposed changes shall stand automatically approved by the Director at the expiration of such fifteen (15) day period, conditioned upon the manufacturer or importer repurchasing all inventory of the subject brand from the previously designated wholesaler at such wholesaler’s laid-in cost.
(7) Any distiller, manufacturer, importer or producer who obtains or acquires in any manner the right to sell, ship or distribute any label shall for the purpose of these Regulations stand in place of, and be subject to, all the rights, privileges, and duties and obligations of its predecessor or its predecessors from whom such brands or labels were obtained or acquired.
(8) Every manufacturer or importer of beer or other malt products or light wine doing business in the State of Arkansas shall submit to the Alcoholic Beverage Control Division one (1) label for each brand of beer or malt product or light wine to be shipped for the first time into or within the state and shall designate with the application for registration any number of wholesalers in the state, each of whom shall be the exclusive distributor of such brand within the geographical territory assigned by the manufacturer or importer to such wholesaler. (Amended 7-24-87)
(9) An unlawful dual distributorship is created when any manufacturer, importer, or other person attempts to designate as its distributor more than one (1) Arkansas liquor wholesaler in the state or wholesale beer permit holder to distribute the same brand of alcoholic beverage in the same geographic area (city, county, counties, state). Further, no person shall attempt to register any brand or label which is already distributed by a licensed wholesaler holding a brand registration authorization from the manufacturer or importer for a brand or label. The creation of such dual distributorships is prohibited. In addition to any remedies to any aggrieved party authorized by law, the Director may withdraw approval of any and all brands registered by any manufacturer or importer found to be in violation of this Regulation, such findings to be made after a hearing pursuant to hearing procedures established for the Alcoholic Beverage Control Division by state law and these Regulations.
For purposes of this Regulation, a “brand” is defined as the same product or substantially the same product, as evidenced by the product label that must be filed with the Alcoholic Beverage Control Division. Identical or substantially identical labels will be considered and treated as the same brand. (Amended 8-19-03)
"Product" shall mean a brewed, fermented or distilled liquor. A brand for a product registered with the Alcoholic Beverage Control Division shall include the registered product as well as all derivatives or sub-categories of a registered product, without regard to whether such derivative or sub-category is brewed, fermented or distilled. "Product" shall not be construed to mean a particular malt, spirituous or vinous liquor, or any variety, category or sub-category thereof.
(10) The terms, conditions and requirements of this Regulation are hereby expressly made a part of the terms of and as conditions to the approval granted by the Arkansas Alcoholic Beverage Control Division to distillers, manufacturers, importers or producers to do business in the state and by the application for, the acceptance of, or the conduct of business under any such approval, a distiller, manufacturer, importer or producer consents and agrees to comply with the terms, conditions and requirements of this Regulation. This Regulation does not apply to manufacturers or wholesalers of small farm wine. (Amended 8-15-07)
Section 2.16.1 Provisions of the Preceding Section Applicable to Distribution Agreements for Beer and Light Wine in the Absence of Written Distribution Agreement.
The provisions of Section 2.16 of these Regulations shall be applicable to distribution agreements entered into in this state by brewers, manufacturers, or importers, of beer and light wine, or their agents, in all cases where any distribution agreements between any such brewer, manufacturer, importer, or agent thereof and a licensed Arkansas beer wholesaler, as contemplated by ACA § 3-5-103, has not been reduced to a written agreement which includes the rights and remedies of the respective parties in the event of default or termination or modification of any agreement by such brewer, manufacturer, importer, or agent. In such cases, any brewer, manufacturer, or importer desiring to terminate any designated Arkansas wholesaler, appoint a different wholesaler in a previously designated territory, or modify the geographical territory previously assigned to any wholesaler must comply with each and every provision of Section 2.16(3) of these Regulations requiring the filing of Wholesaler Change Requests with the Alcoholic Beverage Control Division and show good cause for any such desired termination, change, or modification of agreement. In all such cases where Section 2.16(3) of these Regulations is determined by the Director to be applicable because of the lack of required written agreement pursuant to this Regulation, the notice provisions, hearing requirement, procedures and rights of appeal set out in Section 2.16 of these Regulations for manufacturers and distributors of liquor and wine shall apply to manufacturers, brewers, and importers of beer and light wine and to their designated Arkansas wholesalers. (Adopted 7-24-87)
It is further provided that any agreements or appointments entered into by beer manufacturers and beer wholesalers in this state after the effective date of ACA § 3-5-1101, et. seq. are governed by the provisions of that Act. (Amended 8-19-93)
Section 2.17 Manufacturer and Wholesaler Selling Malt Liquor and Certain Other Controlled Beverage Must Label.
Any person holding a permit to manufacture and any wholesaler holding a permit to sell malt liquor, stout beer, or any other controlled beverages containing more than five percent (5%) alcohol by weight or six and three tenths percent (6.3%) alcohol by volume shall state on the container that it contains more than five percent (5%) alcohol by weight or six and three tenths percent (6.3%) alcohol by volume. (Amended 8-17-05)
Section 2.17.1 Alcohol Content of Malt Beverages Containing Five Percent (5%) or Less Alcohol by Weight or Six and Three Tenths Percent (6.3%) by Volume May be Listed on Containers or Labels.
The alcohol content of malt beverages containing five percent (5%) or less alcohol by weight or six and three tenths (6.3%) by volume shipped into or offered for sale in the State of Arkansas may be listed on the malt beverage container or on the malt beverage label, at the option of the manufacturer. The alcohol content must be shown as alcohol by volume. The alcohol content information may not be made in a misleading or false manner nor may the alcohol content information be more prominent than any other information contained upon the label. (Amended 8-17-05)
Section 2.18 Controlled Beverages to be Stored in Approved Warehouses Only.
All controlled beverages in the possession of any manufacturer or wholesaler in this state shall be stored only in warehouses approved by the Director. All warehouses for the storage of controlled beverages in this state shall comply with the minimum requirements prescribed by the State Department of Health for such warehouses. Storage of any controlled beverages in any building other than a warehouse approved by the Director shall be cause for seizure and forfeiture of all controlled beverages so stored.
Section 2.19 Labels and Size of Containers to be Approved by Director.
The contents of all labels affixed to containers of controlled beverages and the size and combination of such containers shall be approved by the Director. In no event shall any label or design be approved by the Director which contains any statement, design, device or representation which is obscene or indecent. Any Primary American Source (PAS) submitting a brand registration to the agency for distribution of a product shall, in addition to all other requirements, submit to the Alcoholic Beverage Control Division a copy of the Alcohol and Tobacco Tax and Trade Bureau (TTB) Certificate of Label Approval (COLA) or a Certificate of Exemption from label approval. Any PAS that wishes to register a product for sale where the PAS has obtained a Certificate of Exemption from the TTB shall certify to the Director that the labels will still comply with TTB labeling criteria as found in the “Federal Alcohol Administration Act” Title 27 CFR Subchapter A – Liquors, Part 4, Subpart D, Section 4.39, Part 5, Subpart D, Section 5.42, Part 7, Subpart C, Section 7.29. In no instance shall permitted containers of spirituous beverages be less than one hundred (100) ml, vinous beverages or wine be less than one hundred eighty-seven (187) ml or beer or malt liquor be less than one hundred sixty-nine (169) ms or five and seventy-five hundredths (5.75) ounces. (Amended 8-16-11)
Section 2.19.1 Private Labels Prohibited.
Every brand of alcoholic beverage registered for distribution in the State of Arkansas, pursuant to Section 2.16 of these Regulations, shall be made available for resale to each permitted retailer authorized to sell such alcoholic beverage. Registration and distribution of “private labels”, which for purposes of this prohibition are those labels intended or contracted for retail sale at a specific outlet or chain of retail outlets, is hereby prohibited. (Adopted 12-21-88)
Section 2.19.2 Manufacturers Who Sell Any Alcoholic Beverages Directly to Military Reservations or Other Federal Enclaves Must Label and Report.
The Arkansas Alcoholic Beverage Control Board, in the interest of promoting responsible use of alcoholic beverages, ensuring orderly market conditions and fostering the ability of the State of Arkansas to collect appropriate taxes on alcoholic beverages consumed within the state, hereby adopts the following Regulation:
(1) Each container of liquor, wine or beer, as such beverages are defined by Arkansas code provisions and these Regulations, which is shipped by any distillery, winery, brewery or other manufacturer, supplier, broker, or any agent thereof, to any federal military reservation or enclave in Arkansas, which is intended to be sold or consumed on such reservation or enclave and which is not distributed through a licensed Arkansas wholesaler, shall contain and display an identification label which states that such alcoholic beverages shall be intended for consumption within such federal reservation or enclave exclusively. This mandatory label shall be in a size, configuration and contain wording as hereinafter specified. The distillery, winery, brewery, manufacturer, supplier or broker which ships or causes to be shipped such alcoholic beverages to any federal reservation or enclave within the state is responsible for ensuring that such alcoholic beverages are appropriately labeled as provided for herein. Each manufacturer or supplier will be responsible for providing their own identification labels as required by this Regulation;
(2) The identification label required to be affixed to each container of alcoholic beverage, as set out above, shall meet the following requirements:
A. The label shall be a minimum size of one (1) inch in height and two (2) inches in length;
B. The label shall be made of day-glow orange crack and peel permanent self-adhesive paper with bold black lettering;
C. Each label shall contain three (3) lines of print, shall be consecutively numbered and shall state the following:
MILITARY RESERVATION USE ONLY
NUMBER (Letter plus five digit number)
D. One such label shall be placed on the front of each individual container (bottle or can) of any size of 375 ml or larger. Front shall mean the same side on which the label identifying the product is placed and, if on a bottle, below the neck. On containers smaller than 375 ml, such label may be placed on either the back or front of such container and may be placed lengthwise.
(3) In addition to affixing identification labels as required herein, any distillery, winery, brewery, or other manufacturer or supplier who, after the effective date hereof, ships any alcoholic beverages directly to any federal military reservation or enclave within Arkansas shall file a monthly report with the Arkansas Revenue Division Miscellaneous Tax Section, on such reporting forms as are specified by the Revenue Division, reflecting by brand, size and quantity, all alcoholic beverages shipped to any such federal reservation or enclave during the preceding calendar month. The report submitted shall also include a listing of the serial numbers of the identification labels affixed to all bottles and cans so shipped during the previous month. Such reports shall be filed with the Miscellaneous Tax Section no later than the fifteenth (15th) of each month and shall reflect all such shipments made during the previous month. It is specifically provided that the Revenue Division Miscellaneous Tax Section will have no duty or responsibility pursuant to this Regulation other than the maintenance of a file of any shipment reports received. Any and all responsibility for the enforcement of any provision herein shall be solely that of the Arkansas Alcoholic Beverage Control Division.
(4) Full and complete compliance with each and every requirement contained herein shall be considered a continuing condition of the authority of any manufacturer or supplier to distribute its alcoholic beverage products within the State of Arkansas. Failure to comply with this Regulation, after appropriate notice and hearing, could result in revocation of any such manufacturer’s or supplier’s brand registrations, thereby revoking authorization to do business in Arkansas. (Adopted 6-19-91)