This article is Part 1 of a three-part series addressing a common, thorny issue in Florida alcoholic beverage licensing: Who can have a financial or controlling interest in beverage company? Part 1 focuses on the Three Tier System and how it is enforced through the licensing process. Part 2 focuses on identifying the Related Parties of a beverage license applicant. Part 3 focuses on the qualities of a Related Party that can disqualify the applicant from getting a Florida alcoholic beverage license.
Florida’s Three Tier System
A key aspect of alcoholic beverage regulation in Florida is the Three Tier System. Following repeal of the 18th Amendment to the US Constitution and Alcoholic Beverage Prohibition, variations of the Three Tier System were adopted throughout the United States to regulate, control, and tax the alcoholic beverage industry. In particular, the Three Tier System was aimed at breaking up the control manufacturers and distributors historically exerted on independent vendors (called “tied houses”). In Florida, the Three Tier System separates alcoholic beverage businesses into three primary categories or “tiers”–Manufacturers, Distributors, and Vendors. Generally, Florida law prohibits a person or company from simultaneously engaging in more than one tier, unless a specific exception applies.
A direct violation of the Three Tier System is clearly prohibited in Florida. For example, a direct violation of the Three Tier System would exist where VendCo, LLC–which operates as an alcoholic beverage vendor in Florida–also manufacturers alcoholic beverages. In addition, the Florida Beverage Law also prohibits certain indirect violation. For example, were an officer of VendCo, LLC engaged in manufacturing alcoholic beverages, this would be an indirect violation of the Three Tier System under the Florida Beverage law.
Impact on Alcoholic Beverage Licensing
The Florida Division of Alcoholic Beverages and Tobacco (the “ABT”) principally enforces the state’s Three Tier System–against both direct and indirect violations–through the licensing of alcoholic beverage industry members. A business cannot be engaged in making, distributing or selling alcoholic beverages in Florida without the right ABT-issued license, and the ABT will not issue a license that allows a direct or indirect violation of the Three Tier System.
To protect against indirect violations of the Three Tier System, the Florida Beverage Law requires “Related Parties”– companies and individuals having certain relationships with a license applicant–to also be included on the license application. The ABT considers not only whether the applicant would be in direct violation of the Three Tier System, but also whether an indirect violation would exist involving any Related Parties. In addition, the ABT determines whether each Related Party satisfies other qualification standards before granting a license to an applicant.
Before applying for an alcoholic beverage license in Florida, each applicant must take great care to identify all of the Related Parties of the applicant. How to identify the applicant’s Related Parties is covered in Part 2 of this series: Identifying the Related Parties of a Florida License Applicant. Once all of the Related Parties are identified, the applicant must confirm that each Related Party is qualified for purposes of beverage licensing. The qualification of an applicant’s Related Parties is covered in Part 3 of this series: Qualification of Related Parties for Florida Alcoholic Beverage Licenses.
Do you have questions about Florida’s Three Tier System. We’d love to discuss it with you. Contact us at firstname.lastname@example.org to schedule a 15-minute introductory call at no charge.
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