If you represent a brewery, or even an individual or a company with a financial interest in a brewery, there are some new laws and restrictions to consider.  Referred to as the “3-Tier for Beer” laws, found in T.C.A. Title 57, Chapter 5, these laws prohibit certain joint relationships between breweries and retailers of beer.

After Prohibition, when states were given the authority to regulate alcohol, the “3-tier” system (Manufacturer – Wholesaler/Distributor – Retailer) was developed and incorporated into the alcoholic beverage industry to prevent the abuses that were believed to cause unfair competition and trade practices resulting from “tied house” relationships.  A tied house relationship exists when the relationship between two or more tiers (a manufacturer and retailer, for example) is such that it can be seen to induce, with undue influence, the retailer to purchase product from the manufacturer to the exclusion of products offered by other manufacturers (think Anheuser-Busch InBev brewing beer and distributing the product directly to an Anheuser-Busch Inbev owned bar, not connected to the brewery, which serves nothing but Budweiser products).

Tennessee has historically expressly prohibited wine and spirits manufacturers (Tier 1) from having an ownership interest in a wholesaler/distributor (Tier 2) or a retailer.  With the 2015 enactment of T.C.A. § 57-5-101(a)(2), the prohibition against multi-tier ownership now applies to breweries and beer retailers as well (i.e. the moniker “3-Tier for Beer”).

As the Tennessee craft beer industry continues to boom, it is essential for any lawyer advising and/or representing a brewery or an individual or company with an interest in a brewery to know and understand the interplay between T.C.A. § 57-5-101, et al. and the relevant sections of the Federal Alcohol Administration Act so that business opportunities and legal pitfalls can be navigated appropriately.

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    By: Curtis R. Harrington II

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