What is a “Tied House” and Why is it Evil?

How a Florida law designed to prevent the “evil” of vertical integration in the alcoholic beverage industry limits the ability of suppliers to help you buy their products.

Tied Houses, Evil and Otherwise

The term “Tied House Evil” appears in the heading to Florida Statutes Section 561.42. Although the term is nowhere defined in the Florida Statutes, it is rooted in Prohibition in the United States and the re-legalization of alcoholic beverages when Prohibition was repealed in 1933.

A “tied house” is a contractual relationship between an alcoholic beverage vendor and a supplier, in which the vendor is required to buy part or all of its supply from one or a handful of suppliers. In many cases, the supplier provided essential financial backing–such as a loan or lease–without which the vendor (called the “managed house”) might not exist. The practice of tied houses still exists in the United Kingdom and other countries, but in the United States it was generally abolished by “tied house evil” statutes passed after the appeal of Prohibition. In 1971, the Supreme Court of California described “tied house evil” statutes as follows:

By enacting prohibitions against “tied-house” arrangements, state legislatures aimed to prevent two particular dangers: the ability and potentiality of large firms to dominate local markets through vertical and horizontal integration . . . and the excessive sales of alcoholic beverages produced by the overly aggressive marketing techniques of larger alcoholic beverage concerns. 

California Beer Wholesalers Ass’n v. Alcoholic Beverage Control App. Bd., 5 Cal. 3d 402, 407–408 (1971).

Statutory Limits on Help for Florida Vendors

Florida’s Tied House Evil Statute, Florida Statutes Section 561.42, generally prohibits alcoholic beverage suppliers from (1) having a direct or indirect financial interest in a Florida vendor, and (2) providing gifts, loans of money or property, or rebates to a Florida vendor. Florida vendors are also prohibited from accepting support from suppliers.

The suppliers that are limited by the Tied House Evil Statute include manufacturers, distributors, importers, primary American sources of supply, brand owners or registrants, brokers, sales agents, or sales persons, whether or not they are operating in Florida or outside the state.

There are, of course, exceptions to the Tied House Evil prohibitions. Distributors can give vendors trade credit (that is, extend the date for payment for sale) up to the 10th day after the calendar week in which a sale is made. Distributors can also give trade discounts in the usual course of business upon wine and liquor sales (discussed more fully in Alcohol Distributors’ Discounts Under Florida Law). The prohibition against providing gifts and loans of property excludes bottles, barrels and other containers necessary for transportation of purchased beverage products and, importantly, excludes advertising materials (although, advertising materials expressly excludes outside signs).

Outdoor Signs are Bad; Indoor Signs are Good

The Florida Tied House Evil Statute has a lot to say about signs–printed, painted, electric or other. Suppliers are prohibited from directly or indirectly giving, lending, renting, selling or otherwise furnishing to a vendor any outside sign, and vendors are prohibited from accepting them. Suppliers can furnish vendors with indoor signs, including posters, placards, and other advertising materials. Vendors are permitted are permitted to display signs (including neon or electric) signs in their windows facing outward, but they are limited to one sign advertising the product of any one manufacturer.

Beer Glassware and Other Advertising Assistance

The Florida Tied House Evil Statute says a lot more about the assistance beer and malt beverage suppliers can provide to vendors, particularly concerning advertising materials.

• Beer coupons: Suppliers are prohibited from providing any type of malt beverage coupon which is to be redeemable by a vendor.
• Expendable retailer advertising specialities: Beer supplier may sell to vendor, at actual cost or higher, trays, coasters, mats, menu cards, napkins, cups, glassware, thermometers and the like.
• Durable retailer advertising specialities: Beer suppliers may rent, loan without charge, or sell to vendors clocks, pool table lights, and the like which bear advertising materials.
• Consumer advertising specialties: Beer suppliers may sell to vendor, at actual cost or higher, ashtrays, T-shirts, bottle openers, shopping bags, and the like.
• Cooperative advertising: Beer suppliers may not engage in cooperative advertising with vendors (more on this in You Can’t Tag This).
• Draft equipment and tapping accessories: Beer distributors may sell to vendor, at actual cost or higher, draft equipment and may also furnish replacement parts of nominal intrinsic value, including washers, gaskets, tail pieces, hoses, hose connections, clamps, plungers, and tap markers.

Branded glassware gets detailed treatment in the Florida Tied House Evil Statute. A beer distributor may give to a vendor a limited amount of branded glassware that the distributor receives at no charge from the beer manufacturer. The glassware must hold no more than 23 ounces of liquid vollum and must bear a permanent brand name intended to prominently advertise the brand. The beer distributor can give the vendor no more than 10 cases of glassware per year per licensed premises. Both the manufacturer and distributor must keep records of glassware gifts for at least 3 years. The vendor may not sell the glassware or return it to the distributor for cash, credit or replacement.

Do you have any questions about Florida’s Tied House Evil Statute or what assistance alcoholic beverage suppliers can provide to Florida vendors? Contact us to schedule a consultation with a beverage attorney.

Because we’re attorneys: Disclaimer.

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