What Burger King Tells Us About Florida’s Three Tier System
The Florida ABT’s 2012 Declaratory Statement In re BK Whopper Bar, LLC tells us how the ABT thinks about the present separation of alcoholic beverage manufacturers, distributors, and vendors.
BK Whopper Bar Asked and the ABT Answered
In 2011, BK Whopper Bar, LLC and Burger King Corporation asked the Florida Division of Alcoholic Beverages & Tobacco (ABT) to issue a Declaratory Statement answering this question: Did Florida’s Three Tier System prohibit BK Whopper Bar from holding an alcoholic beverage vendor license? In its Declaratory Statement, the ABT concluded that BK Whopper Bar was prohibited from holding a vendor license because BK Whopper Bar’s business structure violated the Three Tier System. In particular, the ABT’s Declaratory Statement focused on the fact that three individuals were investors and directors in a parent company of BK Whopper Bar and also in Anheuser Busch InBev, one of the largest beer manufacturing conglomerates in the world.
While it has limited application outside its particular facts, the ABT’s Declaratory Statement boiled down Florida’s Three Tier System– as provided in Florida Statutes Sections 561.22 and 561.42–to three tests which are helpful in evaluating how the ABT would view other business structures under the Three Tier System.
Declaratory Statements – What They Are and What They Are Not
In re BK Whopper Bar, LLC is an example of declaratory statements that are issued by all Florida state agencies. Agencies are authorized by Florida’s Administrative Procedures Act to issue declaratory statements when requested by a person or company that is substantially affected by a state agency’s application of a state statute or agency rule. The petition for a declaratory statement must describe a set of facts and asks the agency to state how it would apply a statute or rule to those facts.
In Florida, declaratory statements are only binding on the requesting person or company and the agency in the context of the facts provided in the petition. A declaratory statement cannot be enforced on an other parties or in any other circumstances. However, agency’s declaratory statements are valuable to everyone for two reasons. First, they provide a good indication of how an agency interprets and applies a statute or rule. Second, they can be persuasive (but not binding) authority for courts that are required to make a judicial ruling on application of the statutes or rules discussed in the declaratory statement.
There are very few reported court opinions that evaluate Florida’s Three Tier System. For this reason, declaratory statements like In re BK Whopper Bar, LLC are one of few sources we have as guidance on this subject.
Three Tests for Florida’s Three Tier System
In In re BK Whopper Bar, LLC, the Florida ABT was asked whether BK Whopper Bar, LLC, with it’s indirect ties to AB InBev, could hold a vendor license under Florida Statutes Sections 561.22 and 561.42–two of the four statutes that largely define Florida’s Three Tier System (the other two statutes separate manufacturers and distributors). The ABT determined that a vendor license cannot be issued to a corporation or LLC in any of the following situations:
- Financial Interest Test: An alcoholic beverage manufacturer or distributor, operating within or outside of Florida, has a direct or indirect financial interest in the proposed Florida alcoholic beverage vendor. Florida Statutes Section 561.42(1).
- Affiliation Test: The proposed Florida alcoholic beverage vendor is directly or indirectly affiliated with an alcoholic beverage manufacturer or distributor, operating within or outside of Florida. Florida Statute Sections 561.22(3).
- Common Parent Test: The proposed Florida alcoholic beverage vendor is controlled or majority owned by a parent company which also controls or majority owns another company which is directly or indirectly engaged in alcoholic beverage manufacturing or distribution within or outside of Florida. Florida Statute Sections 561.22(3)
As described in In re BK Whopper Bar, LLC, the Financial Interest Test and the Common Parent Tests are both objective tests. A direct or indirect financial interest exists or it does not; a common parent exits or it does not.
The Affiliation Test, on the other hand, is described as a subjective test. The Declaration Statement does not precisely define “affiliation” but states “the scope of the term is meant to be broad and encompass those relationships in which control of an applicant [company] is derived from some other method than ownership.” The Declaratory Statement quotes one of the few Florida judicial opinions on this subject:
[T] wo corporations are “affiliated with” each other only when the same individual, or a group of cooperating individuals having common interests, have the power to control formation and execution for the business policies of both corporations. Such control may be from stock ownership, voting trust, common officers, contracts, or a combination of two or more of these elements, but there must be an actual practical control or a legal power to control.Walter J. John and Southern Wine and Spirits, Inc. v. Meiklejohn, Case No. 68-196 (Fla. 2nd Cir. 1968).
BK Whopper Bar, LLC failed the Affiliation Test, according to the Declaratory Statement. The Florida ABT concluded that BK Whopper Bar was affiliated with Anheuser-Busch Inc., an alcoholic beverage manufacturer, because three of the directors of AB InBev, Anheuser-Busch’s parent company, were also investors in the parent company of BK Whopper Bar, LLC (the petition also indicates that these individuals were directors of the BK Whopper Bar’s parent, but the Declaratory Statement does not mention this). The Florida ABT determined that the “common interests” of these individuals in both the Burger King companies and the AB InBev companies created a prohibited affiliation among the companies.
Do you have questions about the BK Whopper Bar Declaratory Statement and its affect on Florida alcoholic beverage licensing. Contact us at email@example.com to schedule a consultation with a beverage attorney.
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