Mailing Date: June 7, 2012

Telephone:
717-783-9454
FAX:
717-787-8820


Kevin Finn, President
Iron Hill Brewery and Restaurant
VIA E-MAIL: kfinn@ironhillbrewery.com
 
          Re: Mug Club
 
Dear Mr. Finn:
 
ISSUE:  This is in response to your e-mail inquiries to this office dated May 31 and June 7, 2012.  You ask whether a mug club called the IBH Mug Club (“Mug Club”) is permissible in your restaurants.  Promotional materials for the Mug Club indicate the following rules and perks:      
 
Join our Mug Club Loyalty Program and receive a loyalty card that earns you points for your purchases.
 
How to Join
 
Simply stop by any one of our locations, fill out an application and immediately start earning rewards for your purchases.
 
Mug Club Loyalty Card Perks
 
•Earn a $25 credit reward for every 300 points accrued
•200 free points credited at time of sign-up and renewal
•Drink from an exclusive signature handmade beer mug
Any-time filling of the mug for the same price as the 16 ounce pint
•Use of your mug during any Iron Hill promotion
•Take home collectible mug at time of sign-up or renewal
•Mug design changes each year
•Invitations to exclusive mug club events throughout the year
•Direct contact via email with the Head Brewer regarding upcoming releases and events
•Keep track of your points and member profile online
 
Mug Club Loyalty Card Rules
 
•Cost of membership is $20$35 per year
•Mug club memberships expire yearly and must be renewed each year
•Unused points roll over at time of renewal
•If you choose not to renew, unused points will be forfeited
•Membership and card are non-transferable
•Points are accrued for each dollar spent (does not include alcohol), excluding tax and tip and the purchase of gift cards
 
Records of the Pennsylvania Liquor Control Board (“Board”) provide that the Iron Hill Brewery and Restaurant is the trade name for a number of brewery/restaurants, namely C & D Brewing Company of Pennsylvania, LLC, 3-5 West Gay Street, West Chester, Pennsylvania 19380, holding Restaurant Liquor License No. R-11611 (LID 42093) and Brewery License No. G-316 (LID 42101);  C & D Brewing Company of Media, LLC, 30-32 East State Street, Media, Pennsylvania 19063, holding Restaurant Liquor License No. R-14244 (LID 453093) and Brewery License No. G-332 (LID 45305); C & D Brewing Company of Montgomeryville, LLC, 1460 Bethlehem Pike, Suite 100, North Wales, Pennsylvania 19454, holding Restaurant Liquor License No. R-19567 (LID 51565) and Brewery License No. G-367 (LID 51462); C & D Brewing Company of Phoenixville, LLC, 130-138 East Bridge Street, Phoenixville, Pennsylvania 19460, holding Restaurant Liquor License No. R-19984 (LID 56139) and Brewery License No. G-383 (LID 56138); C & D Brewing Pennsylvania Holdings, LLC, 781 Harrisburg Pike, Lancaster, Pennsylvania 17603, holding Restaurant Liquor License No. R-10873 (LID 59020) and Brewery License No. G-397 (LID 59019); and C & D Brewing Company of Chestnut Hill, LLC, 8400 Germantown Avenue, Suite 2, Philadelphia, Pennsylvania 19118, holding Restaurant Liquor License No. R-3166 (LID 65104) and Brewery License No. G-439 (LID 65105).
 
OPINION:  This office has reviewed the promotional materials provided in your first e-mail, as well as the revised promotion materials in your subsequent e-mail.  In general, mug clubs tend to have two (2) issues in that they often constitute an unlawful inducement to purchase beer and violate the acceptable discount pricing practices.
 
With regard to the unlawful inducement, the Liquor Code prohibits providing anything of value as an inducement to purchase alcohol.  [47 P.S. § 4-493(24)(i)].  However, an exception allows manufacturers and licensees to provide advertising novelties of nominal value, which bear advertising matter, to other licensees and consumers with or without a purchase.  [47 P.S. § 4-493(24)(i); see also 40 Pa. Code § 13.52].  “Nominal value” currently is interpreted as fifteen dollars ($15.00) each, wholesale cost, or less.  [Board Advisory Notice No. 10 (6th Revision)].  Such advertising novelty giveaways may or may not be conditioned on the purchase of an alcoholic beverage. 
 
Your Mug Club promotion, as revised, would be permissible as described, since it would not be considered an unlawful inducement to purchase beer.  Since the Mug Club members have to pay the same price for their beer as non-members, there is no inducement for patrons to pay the membership fee in order to take advantage of receiving an increased amount of beer that is not afforded to non-members.   
 
Further, the offering of points for purchases is problematic when points are accumulated based on the purchase of beer/alcohol, regardless of whether the points are ultimately redeemed for food and non-alcoholic products only.  However, your revised Mug Club promotion specifically excludes the accrual of points on purchases of alcohol; therefore, your promotion would be permissible with regard to the offering of points.
 
Finally, as to the unlawful discount pricing, section 13.102(a)(2) of the Board’s Regulations prohibits the sale and/or serving of an increased volume of one (1) drink of liquor, wine or malt or brewed beverages without a corresponding and proportionate increase in the price for the drink.  [40 Pa. Code §13.102(a)(2)].  Therefore, if the amount of beer given to Mug Club members is greater than a normal beer mug for non-members, the price for that larger amount of beer must increase proportionately.  Since your promotion has been amended to not permit Mug Club members to obtain twenty-four (24)-ounces of beer for the price of sixteen (16)-ounces of beer, there would not be a violation of section 13.102(a)(2) of the Board’s Regulations.  Please note that although discount pricing restrictions do not apply to manufacturers, such as breweries, they do apply to brew pubs and restaurants operated in connection with breweries, which appears to be the case here.
 
Please note that if the Mug Club benefit regarding “invitations to exclusive mug club events throughout the year” includes the benefit of alcohol, the discount pricing practices rules found in section 13.102 of the Board’s Regulations would apply.  [40 Pa. Code § 13.102].  Also, note that it would be incumbent upon you to establish that if points are used to acquire alcoholic beverages, the value of the points must be equivalent to the cash price. 
  
THIS OPINION APPLIES ONLY TO THE FACTUAL SITUATION DESCRIBED HEREIN AND DOES NOT INSULATE THE LICENSEE OR OTHERS FROM CONSEQUENCES OF CONDUCT OCCURRING PRIOR TO ITS ISSUANCE.  THE PROPRIETY OF THE PROPOSED CONDUCT HAS BEEN ADDRESSED ONLY UNDER THE LIQUOR CODE AND REGULATIONS.  THE LAWS AND POLICIES ON WHICH THIS OPINION IS BASED ARE SUBJECT TO CHANGE BY THE LEGISLATURE OR THE PENNSYLVANIA LIQUOR CONTROL BOARD.
 
Very truly yours,
 
 
 
FAITH S. DIEHL
CHIEF COUNSEL
 
cc:     Pennsylvania State Police,
                  Bureau of Liquor Control Enforcement
Jerry W. Waters, Director of Office of Regulatory Affairs
          Tisha Albert, Director, Bureau of Licensing
          Jeffrey Lawrence, Acting Assistant Director, Bureau of Licensing
         
 
LCB Advisory Opinion No. 12-217

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