Selling alcoholic beverages in Illinois? Retailers, wholesalers, distilleries, breweries and wineries should get familiar with the soon-to-be new rule regarding alcoholic beverage promotions involving coupons and rebates; scan backs are prohibited.
Following an initial first-round publication (now edited) and two rounds of comments (here and here), the Illinois Liquor Control Commission has now provided the Joint Committee on Administrative Rules with a second publication and partially edited proposed Administrative Rule governing alcoholic beverage couponing and rebate promotions between liquor manufacturers and distributors and retailers. Here is the link to the updated new proposed rule on alcoholic beverage coupons in Illinois.
The new rule addresses three different types of rebates/coupons/promotions:
- The first are those rebates and coupons offered from manufacturers (brewers, distillers, wineries) to consumers whereby the funds for the coupon/rebate are disbursed directly to the consumer – e.g., they are what people typically think of as manufacturer rebates – the redemption is made by the consumer and not a retailer.
- The second are the retailer redeemed coupons (these are what you normally think of as coupons) where a consumer buying beer, wine or spirits, presents the coupon at the time of sale and the liquor retailer (grocery store, liquor store) applies the discount to the price and later seeks reimbursement for honoring the promotion from the brewer, distiller, wholesaler, or winery.
- The third – the prohibited kind of promotion under this rule – are known as “scan back” promotions – a promotion run by a retailer that is sponsored by a liquor supplier or wholesaler at or with a particular retailer where the discount is applied when scanning the item without presenting a coupon from a customer and the retailer is provided funds for the discount from the liquor manufacturer or wholesaler. This new rule prohibits scan backs.
- I know, we said three (and that’s what the new Illinois couponing rule for alcohol/liquor sales addresses) but a fourth kind – unaddressed by the rule and thus unaffected – are simple retailer run promotions. These have nothing to do with reimbursement from liquor manufacturers or distributors/suppliers and take the form of advertised discounts or coupons offered by retailers. Retailers are still free to run their promotions and offer their own coupons subject to existing rules like not giving away liquor for free.
In its initial statement detailing the plans for the new Illinois liquor couponing and rebate rule, the ILCC set out with some goals for achieving and eliminating industry practices and perceived fairness:
• Authorization of the use of Industry Member coupons in retailer publications, newspapers, and other traditional print media outlets.
• Authorization of digital couponing through the use of phone apps and text messaging.
• Authorization of cross-merchandise coupons to allow the consumer to receive discounts on non-alcoholic products.
• Ensuring transparency in couponing practices by requiring the face of the coupon to include a statement that the coupon can be redeemed by all participating retailers.
• Ensuring small retail outlets receive their fair share and proportionate number of coupon and rebate opportunities.
• Promoting responsible consumption by prohibiting coupons that “give away” alcoholic liquor.
• Eliminating coupon and discount reimbursement practices that favor large retailers over small retailers.
The newly proposed rule codifies much of what was once Trade Practice Policy 11. Those looking to offer coupons for beer, wine and spirits will find valuable guidance in running their coupon or rebate promotions in Illinois. Some interesting points from the proposed rule:
- Coupons are defined as being in the possession of the consumer and presented by the consumer;
- Digital coupons are allowed;
- Coupons can be placed by industry members (manufacturers and wholesalers) in retailer publications (but even those placed in specific publications must be redeemable at all participating retailers);
- Cross-product coupons are allowed if the discounted cross-products are non-alcoholic and not private label or retailer branded;
- Third-party (non-licensed) fulfillment processors can be utilized;
- Instantly redeemable coupons are allowed;
- Product adjacent retailer redemption coupons are allowed under limited exceptions;
- Retailers that normally have to keep their records for six months must now keep records of coupon redemptions and promotions for three years;
- All retailer redemption coupons must contain the statement “This coupon shall be redeemable at all participating retailers.”
- Coupons must have expiration dates and cannot be redeemed beyond such dates.
One small issue that should be fixed: The failure to account for geographic locality and the nature of the retailers makes this rule’s mandate of offering in-retailer coupon promotions to “all retailers” untenable (see 18(B)(iv) at bullet 5). An interesting point raised by DISCUS in their comments to the proposed rule involves the state-wide application of this portion of the rule without qualifying language to limit the state-wide effect of this mandatory parity provision. As stated, a wholesaler or manufacturer would need to offer coupons placed at retailer locations to all accounts state-wide. Given that many distributors do not have state-wide coverage, this mandate seems unfair and ungovernable – especially considering that wholesalers restricted by contractual territorial boundaries are generally prohibited from dealing with extra-territorial retailers. Failing to limit the mandatory provisions pertaining to all retailers both territorially and retailer type (on-premise v. off-premise) in a way that applies to “similarly situated” retailers in a “geographic locality” makes offering coupons unwieldy for large state-wide manufacturers and wholesalers and nearly (if not completely) untenable. (I know, that’s actually two issues – location restrictions for coupons and on-premise versus off-premise restrictions). Seriously, does a wholesaler assigned to Rockford that does not have Carbondale in its territory have to provide its coupons for its promotion to a Carbondale store to run in their magazine/coupon publication? Does the distributor in Carbondale have to honor them? Also, can a bar honor a coupon? If it chooses when to honor the coupon, could that choice lead to a violation of the happy-hour rules?
For those looking for the exact language of the latest iteration of the rule, here it is:
18) Consumer Coupons and Discounts
A) Coupons; Defined – A coupon for alcoholic liquor is a paper or digital price discount (e.g., E-coupon) offered by an industry member to a consumer, in the possession of the consumer, and which are presented by the consumer either directly or indirectly to an industry member through redemption by an industry member, third-party fulfillment agent, or a retailer. For purposes of this Section, a coupon is not a paper or digital price discount offered and funded solely by the retailer to a consumer.
B) Coupons; Types and conditions
i) Direct to Consumer Coupons – Direct to Consumer Coupons are coupons offered by an industry member directly to a consumer, in possession of the consumer, and which are presented by the consumer without redemption through a retailer (e.g., mail-in rebates or coupons). Subject to retailer approval, industry members may offer or make available Direct to Consumer Coupons to consumers from any location including within the licensed retail premises and at or near the product discounted. Direct to Consumer Coupons are solely authorized as follows:
• Free standing inserts from a retailer or non-retailer publication;
• In-ad Direct to Consumer Coupons printed by a retailer in a retailer publication or by a third party in a non-retailer publication;
• Cross-product Direct to Consumer Coupons if the discount applies to a non-alcoholic product which is not a retailer branded or private label product;
• On-product or product display Direct to Consumer Coupons including but not limited to neck hangers and shelf tags;
• Retailer register printed Direct to Consumer Coupons;
• Consumer printed Direct to Consumer Coupons;
• Digital/online/paper Direct to Consumer Couponstransmitted directly or indirectly through a non-retailer third-party fulfillment processor to the consumer (e.g. phone app, text message);
• Direct to Consumer Coupons that consumers return (via mail/email) directly to an industry member or indirectly to an industry member through a non- retailer third-party processor to an industry member (Mail-in coupons).
ii) Retailer Redemption Coupons– Retailer Redemption Coupons are Coupons offered by an industry member to a consumer, in the possession of the consumer, which are presented by the consumer to a retailer for an instant price discount at the retailer point of sale and for which the retailer is reimbursed by the industry member for the face value of the Coupon. Such coupons may include Instant Redeemable Coupons or “IRCs” and are solely authorized as follows:
• Free standing inserts from a retailer or non-retailer publication;
• In-ad Retailer Redemption Coupons or IRCs from a retailer or non-retailer publication;
• Cross-product Retailer Redemption Coupons or IRCs if the discount applies to a non-alcoholic product which is not a retailer branded or private label product;
• Retailer register printed Retailer Redemption Coupons or IRCs;
• Consumer printed Retailer Redemption Coupons or IRCs;
• Digital/online Retailer Redemption Coupons or IRCs transmitted directly to the consumer.
iii) Product Adjacent Retailer Redemption Coupons; Prohibited; Exceptions – Neither an industry member nor a retailer shall offer or place Retailer Redemption Coupons or IRCs at or within the retailer licensed location except for free standing inserts from a retailer or non-retailer publication; in-ad Retailer Redemption Coupons or IRCs printed in a retailer publication or in a non-retailer publication; Retailer Redemption Coupons or IRCs printed at the retailer register after sale; digital/online Retailer Redemption Coupons or IRCs transmitted directly to the consumer.
iv) Coupons, conditions
• Retailer Redemption Coupons or IRCs shall be reimbursed to the retailer only with substantiation through books and records that there has been a purchase of product to warrant the reimbursement. All books and records of reimbursements, including any supporting documentation, proof of reimbursement, and purchase invoices, shall be maintained by the retail licensee for a period of three years.
• Industry members shall not reimburse a retailer for more than the face value of all Coupons redeemed. No retailer shall accept reimbursement for more than the face value of all Coupons redeemed.
• Retailer Redemption Coupons or IRCs shall be redeemable at all participating retailer locations and shall include a statement on the face of the Retailer Redemption Coupon or IRC substantially similar to the following statement: “This coupon shall be redeemable at all participating retailers.”
• Coupons regulated in this Section shall not identify the name or brand of the retailer.
• Industry members offering coupons to be placed at the retailer licensed location shall distribute such coupons to a retailer in direct proportion to the number of coupon-related products sold by the retailer and shall offer such coupons to all retailers.
• Coupons shall abide by 11 Ill. Admin. Code 100.280. Coupons shall not result in giving away alcoholic liquor nor shall Coupons use the word “free” or “complimentary” on the face of the coupon.
• Coupons subject to this Section shall not be redeemable for retailer branded or retailer private label products or be retailer specific in any manner.
• Coupons must contain an expiration date and cannot be redeemed by the retailer beyond the expiration date.
• Coupons shall state on the face of the coupon that coupon use is for persons aged 21 and over.
• Coupons offered at a retailer licensed premises shall be presumed to be funded by industry members unless otherwise demonstrated.
• Coupon programs are voluntary. An industry member shall not compel a retailer to accept a Coupon nor shall a retailer demand an industry member to offer a Coupon.
• Coupons may be fulfilled through an unlicensed third-party fulfillment agent acting on behalf of the industry member offering the Coupons. Any act or omission of a third-party fulfillment agent related toCoupons is the act or omission of the industry member.
C) Scan Discount, prohibited – A Scan Discount is a non-Coupon product discount incorporated into the advertised price of the product either by agreement between an industry member and a retailer or by act of the industry member for a specified promotional period, whereby the consumer receives a price discount through the purchase of the product or by membership in a retailer program, or through a similar non-Coupon program, and the retailer obtains reimbursement from the industry member for the face value of the discount. Such Scan Discounts may also be known as “scan backs”. An industry member shall not reimburse a retailer and a retailer shall not accept from an industry member any reimbursement for a Scan Discount.