Secondary use Debate Wages on – Further discussion set to take place at public hearing in March

news secondary-useSecondary use Debate Wages on – Further discussion set to take place at public hearing in March

There’s been a debate brewing between bar and restaurant owners, and beer and wine wholesalers — and those who support them — for a few years.

It centers around allowing liquor company logos on what is called “secondary use” items — mugs, glasses, coasters, napkins and so on. Currently, these branded items are banned unless approved in writing by the Michigan Liquor Control Commission (MLCC).

This rule, now known as the Michigan Liquor Control Code Act of 1998, makes Michigan the only state that has a complete ban on such items.

Some believe it’s time to remove it; others want to protect it.

Scott Ellis, Executive Director, Michigan Licensed Beverage Association (MLBA) and Mike Lashbrook, President, Michigan Beer and Wine Wholesalers (MBWW), represent members on both sides of the debate.

Ellis calls the rule currently on the books “archaic” and he notes that the approvals for special use by the MLCC “have been very limited over the years.” Lashbrook calls the prohibition “reasonable” and promotes fair trade.

Marji Cheadle, owner of Dagwood’s in Lansing, agrees with Ellis that the rule doesn’t make sense. “We should have everything at our disposal to be able to market and promote our products,” she said. If she wants to promote a new vodka or a little-known craft beer, she wants to have the right to use small promotional items like coasters that she can afford to buy. “It’s money well spent.”

The debate began in 2010 when Governor Rick Snyder established the Office of Regulatory Reinvention (ORR) to review and update the Administrative Rules of all businesses throughout the state.

A newly-formed Liquor Control Advisory Rules Committee was asked to review Michigan’s Liquor Control rules and regulations and recommend changes within the liquor control system. One of the rules they looked at was Michigan Liquor Control Commission’s ban against promotional logos on “secondary use” items.

“The Michigan Administrative Rules prohibit the use of items of secondary use in on-premises establishments unless they have been approved by the MLCC,” said Ellis. “This means that anything with an alcoholic beverage brand logo that is not purely advertising and that can be used for some other purpose is not allowed in bars and restaurants.”

“Michigan has gone back and forth over the years on what is prohibited and what is allowed. The current Rule has been in place since 1977 and the Michigan Liquor Control Commissions over the years have historically not approved items of secondary use for all licensees,” Ellis said.

The MLBA and Michigan Restaurant Association submitted a request to the MLCC to rescind the rule in September 2013. Their argument is that “Michigan bars and restaurants want to be able to purchase and use alcohol brand logoed items to promote their business,” said Ellis. “There are many new and innovative Made in Michigan beers, wines and spirits available today that cannot be promoted in local bars and restaurants because of the secondary use ban.”

However, the wholesalers group and others disagree. They believe that larger establishments would have an unfair advantage over smaller ones — like craft breweries.

“These ‘secondary-use-and-value’ items are supplies that a bar or restaurant would need in the normal conduct of their business like glasses, coolers, draft equipment and so on,” Lashbrook said. “If distributors or manufacturers were allowed to provide these items, the current competitive marketplace could become subject to undue and unfair influence from the highest bidders — including large businesses with the deepest pockets.”

Michigan wholesalers and distributors want to leave the law as it is because it limits “giveaways” and makes for an even playing field.

“These restrictions have resulted in a highly competitive marketplace and an even playing field that has allowed Michigan’s craft brewers to explode in the marketplace,” added Lashbrook. “Michigan is No. 5 in the country in the number of craft brewers in the state — and Michigan’s beer sector is successful because of safeguards like common-sense, reasonable rules on ‘secondary-use-and-value’ that promote fair competition for all businesses.”

The Michigan State Senate took up the debate, too. In November 2013, they passed a package of bills or tied together — including SB 505. SB 505 was introduced by Sen. Joe Hune (R) on Sept. 17, 2013, “to codify in law an administrative prohibition on alcohol manufacturers, sellers and distributors of alcohol giving bars and restaurants items that promoted brands and prices of their products, including things like glasses with brand logos, etc.”

But the fight isn’t over yet.

This package of liquor laws, including SB 505, was referred to the House Committee on Regulatory Reform, chaired by State Rep. Hugh D. Crawford, District 38.

Members of the House Regulatory Reform Committee met to discuss two new proposed substitutes to Senate Bill 505, also known as the “secondary use” bill. Rep. Cindy Denby (R-Fowlerville) introduced House Substitute 1, and Regulatory Reform Chair Hugh Crawford (R-Novi) introduced House Substitute 2.

House Substitute 1 would allow secondary use items to be purchased for use in licensed establishments and follows federal guidelines in regard to the issue. House Substitute 2 would allow the purchase of “barware,” which includes anything used to prepare or serve a drink, but must be purchased from a barware retailer not affiliated with the wholesaler or manufacturer.

The House Committee members will hold a public hearing on March 19 for further discussion.
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