As a rule that requires a RFA, RAFA or JIS, this rule will be initially reviewed in the calendar year 2025, which is no later than the 3rd year after the year in which this rule is being adopted.

Summary of Assessment of Public Comment

Since publication of a Notice of Proposed Rule Making in the June 29, 2022 State Register, sixty-three written public comments were received from sixty three individuals regarding the Split Case Fee Rules Reform Package (the “Package”). There were also three public comments made in-person at the Authority’s public hearing on September 14, 2022 from persons who had already submitted written public comments.

PUBLIC COMMENTERS ONE THROUGH FIFTY-THREE: Fifty-three persons submitting the same electronic mail support letter are all restaurant owners in New York and expressed support for the Package as part of an effort to support restaurants and small businesses generally in light of today’s economic environment featuring inflation and heightened costs across the board for small businesses in the wake of the COVID-19 pandemic.

AUTHORITY RESPONSE: The Authority agrees.

PUBLIC COMMENTER FIFTY-FOUR: The fifty-fourth person submitting public comments expressed support for the Package as part of an effort to support restaurants and small businesses in light of today’s economic environment. This commenter also argues that wholesalers in New York have established legal statewide monopolies over the brands they sell in contravention of the original intent of the statute, so that currently retailers are forced to purchase products from each brand’s sole in-state wholesaler who uses this market power to place significant economic pressure on small retailers. This commenter also notes that while the Authority has not actually changed the split case fee in SLA Rule 65.4(e) since 1980 (increasing from $0.96 to $1.92 maximum per case), that today the two largest wholesalers in the state are charging $30.00 to $36.00 per case, or between 15 to 20 times the legally authorized limit for this service. As a result, New York’s small retail and restaurant licensees (the ones that do not have the ability to store cases of multiple brands of liquor or wine) are forced to pay thousands of dollars per year in split case fees to these two statewide wholesaler monopolies each year.

This commenter concludes that SLA Rule 65.4 is not a comprehensive price control regulation – as erroneously claimed by the wholesalers - since wholesalers are free to charge whatever price they wish for the brands of liquor and wine they sell, and that the Package merely regulates the additional charges that may be imposed by wholesalers for the splitting of a full case, thereby ensuring that smaller retailers, those that tend toward smaller purchases, are not discriminatorily impacted by exorbitant and unjustified split case fees.

AUTHORITY RESPONSE: The Authority agrees.

PUBLIC COMMENTER FIFTY-FIVE: The fifty-fifth person submitting public comments expressed support for the split case fee cap of $7.39 included in the Package, as well as requiring alcoholic beverage wholesalers, and self-distributing manufacturers to post the total price per bottle – including any split case fee.

AUTHORITY RESPONSE: The Authority agrees.

PUBLIC COMMENTER FIFTY-SIX: The fifty-sixth person submitting public comments expresses support for the split case fee cap of $7.39 included in the Package, as well as ensuring that the Authority actually enforce the new split case fee limits once in place. This commenter notes that the cost of doing business in the hospitality industry has increased drastically in recent years, and that while small retailers can control some costs simply by changing vendors, they have no choice but to purchase their liquor and wine from one or the other of the two large wholesalers that have developed for themselves statewide distribution monopolies on essentially every popular brand.

AUTHORITY RESPONSE: The Authority agrees.

PUBLIC COMMENTER FIFTY-SEVEN: The fifty-seventh person submitting public comments expressed support for the Package as part of an effort to support restaurants and small businesses in light of today’s economic environment. This commenter noted that inflation and price increases have taken a significant toll on his restaurant business coming on the heels of the economic crisis resulting from the COVID-19 pandemic.

AUTHORITY RESPONSE: The Authority agrees.

PUBLIC COMMENTER FIFTY-EIGHT: The fifty-eighth person submitting public comments expressed support for the Package as part of an effort to support restaurants and small businesses in light of today’s economic environment, noting that the restaurant industry faces many challenges on a daily basis. This commenter stated that the additional fees the liquor wholesalers are currently getting away with are hurting the small independent restaurant businesses.

AUTHORITY RESPONSE: The Authority agrees.

PUBLIC COMMENTER FIFTY-NINE: The fifty-ninth person submitting public comments expressed support for the Package, stating that his hotel has been in operation since 1987, and that after the COVID-19 pandemic small businesses could use a break during these difficult times. This commenter argued that he does not have a choice which wholesalers to purchase his liquor or wine from, and that wholesalers hold all the cards and he has no choice but to play the game.

AUTHORITY RESPONSE: The Authority agrees.

PUBLIC COMMENTER SIXTY: The sixtieth person submitting public comments expressed opposition to the Package, stating that: the statutory basis for the rule at issue was the now repealed Alcoholic Beverage Control Law 101-bb, which related to interstate pricing of liquor and wine; the Authority does not have general rule making authority; the intent of Alcoholic Beverage Control Law Sec. 101-b is for each wholesaler to set its own bottle and case price; the Authority does not have the power to set or control prices; and that the reforms contained in the Package are unlawful because they would restrict wholesalers’ right to set their prices, would have the effect of banning quantity discounts, and forces wholesalers to discriminate in favor of retailers who purchase by the bottle.

AUTHORITY RESPONSE: The Authority disagrees that the Package should be rescinded for lack of statutory underpinning, and notes that were it to be true that no statutory authority exists to promulgate this Package as suggested, the result would not be an unchecked ability of the wholesalers to create and charge split case or other fees, rather it would be the inability to add any fees to the posted bottle and case prices and therefore the requirement that all overhead and operational costs be incorporated into that pricing. Further, the Authority has not actually changed the split case fee in SLA Rule 65.4(e) since 1980 (increasing from $0.96 to $1.92 maximum per case), however today the two largest wholesalers in the state are charging $30.00 to $36.00 per case, or between 15 to 20 times the legally authorized limit for this service, an unjustified amount far above any inflation adjusted increase. As a result, New York’s small retail and restaurant licensees (the ones that do not have the ability to store cases of multiple brands of liquor or wine) are forced to pay thousands of dollars per year in split case fees to these two statewide wholesaler monopolies each year, all during these challenging economic times brought on by the aftermath of the COVID-19 pandemic. SLA Rule 65.4 as amended by the Package does not constitute a price control regulation since wholesalers would remain free to charge whatever price they wish for the brands of liquor and wine they sell.

PUBLIC COMMENTER SIXTY-ONE: The sixty-first person submitting public comments expressed opposition to the Package, stating that: the Authority has demonstrated bias against wholesalers by wrongfully describing their $30.00 to $36.00 split case fees as “exorbitant.”

This commenter then argues that if the Package is adopted the proposed limits on split case fees would result in adverse economic impacts for the industry and consumers, stating it would likely aggravate economic differences between retailers, as larger retailers would still be in a better position to absorb the impacts of increased retail prices, and since retailers are likely to pass on their increased costs to consumers there would be higher consumer prices for all. This commenter concludes by arguing that wholesalers cannot be expected to absorb such cost increases, and may seek to diminish the Packages’ impact by reducing service levels, delivery schedules, and other operational changes, including possibly cutting jobs.

AUTHORITY RESPONSE: The Authority disagrees and notes that were it to be true that no statutory authority exists to promulgate this Package as suggested, the result would not be an unchecked ability of the wholesalers to create and charge split case or other fees, rather it would be the inability to add any fees to the posted bottle and case prices and therefore the requirement that all overhead and operational costs be incorporated into that pricing. Further, the Authority has not actually updated the split case fee in SLA Rule 65.4(e) since 1980 (increasing from $0.96 to $1.92 maximum per case), however today the two largest wholesalers in the state are charging $30.00 to $36.00 per case, or between 15 to 20 times the legally authorized limit for this service, As a result, New York’s small retail and restaurant licensees (the ones that do not have the ability to store cases of multiple brands of liquor or wine) are forced to pay thousands of dollars per year in split case fees to these two statewide wholesaler monopolies, all during these challenging economic times brought on by the aftermath of the COVID-19 pandemic. SLA Rule 65.4(e) as amended by the Package does not constitute a price control regulation since wholesalers would remain free to charge whatever price they wish for the brands of liquor and wine they sell.

PUBLIC COMMENTER SIXTY-TWO: The sixty-second person submitting public comments expressed opposition to the Package, stating that: the regulation arbitrarily places a cap on the amount a wholesaler may charge for the price of a split case, arguing that the economy is headed toward recession, inflation is rising along with the price of labor and fuel, and wholesalers require the flexibility to accurately price their services to absorb increased costs. This commenter states that, if passed, the Package will result in wholesalers being faced with a decision to discontinue split cases or provide the service at a loss, adding this in turn harms the small producers who may lack the ability to efficiently get their product to the retail sector, and that they may find themselves unable to establish themselves in the New York market as a result.

AUTHORITY RESPONSE: The Authority disagrees that the maximum split case fees included in the Package are in any way arbitrary, being mere inflation adjusted increases from the already existing limits set forth in SLA Rule 65.5(e). Further, the Authority has not actually updated the split case fee in SLA Rule 65.4(e) since 1980 (increasing from $0.96 to $1.92 maximum per case), however today the two largest wholesalers in the state are charging $30.00 to $36.00 per case, or between 15 to 20 times the legally authorized limit for this service. As a result, New York’s small retail and restaurant licensees (the ones that do not have the ability to store cases of multiple brands of liquor or wine) are forced to pay thousands of dollars per year in split case fees to these two statewide wholesaler monopolies, all during these challenging economic times brought on by the aftermath of the COVID-19 pandemic.

PUBLIC COMMENTER SIXTY-THREE: The sixty-third person submitting public comments expressed support for the Package generally, but opposes setting the maximum split case fee at $7.39 since that number is not divisible by the usual case configurations of six, twelve, or twenty-four.

AUTHORITY RESPONSE: The Authority disagrees.

COMMENTS AT THE AUTHORITY’S PUBLIC MEETING:

At the public meeting on September 14, 2022, three persons appeared, all in support of the Package. All expressed the need to support restaurants and small businesses generally in light of today’s economic environment featuring high inflation and heightened costs across the board for small businesses.

AUTHORITY RESPONSE: The Authority agrees that the Package should be adopted as a price anti-discrimination measure, one that is meant to allow wholesalers to recover the (inflation adjusted) cost of the additional effort to splitting cases, while protecting smaller retailers (those that more often utilize split cases), still recovering from the economic effects of the COVID-19 pandemic, from the discrimination of exorbitant and unjustified split case fees.