It’s Three-Tier Compliant! Really?
April, 2024 - United States of America
By: Jaci Flug, Esq. and Louis J. Terminello, Esq.
Many third-party tech companies market themselves with the phrase “three-tier compliant” and little else to explain how they navigate our nation’s diverse and complex alcohol laws. Suppliers and retailers engaging with third parties are obligated to ask, “What does ‘three-tier compliant‘ mean?”
Does it mean that a third party does not support illegal inter-state shipping? Does it mean the third party does not handle payments in violation of state law? Does it mean the company does not undercut retailer independence via supplier advertising or product placement? Does it refer to compliance with price discounts?
Who knows.
If it were easy to build a national tech platform for Bev Alc in compliance with all state laws, everyone would do it. The truth is: it’s not easy, and it’s not easy by design.
Our state laws vary greatly, and building state-specific, rather than uniform tech, is expensive and time-consuming. It also requires extensive legal input that only a few third parties are willing to invest in. The return on investment (ROI) for third parties investing in compliant tech is only achieved when it is valued by the retailers and suppliers they engage with. The average consumer is merrily blind to these issues. Retailers and suppliers engaging with third parties claiming “three-tier compliance” are obligated to examine what that means.
Lastly, retailers and suppliers engaging with third-party tech companies know little about data privacy and security practices compared to three-tier issues. However, the Federal Trade Commission (“FTC”) and state attorney generals are far more likely to bring enforcement actions than state Alcohol Beverage Control (“ABC”) boards. Plus, no one should forget the plaintiffs’ class action bar, which is always eager to bring suit in the name of consumer protection. Retailers and suppliers cannot rely on blanket statements like “three-tier compliant” when engaging with tech companies. The risk level is simply too high.
Appropriate diligence is required, so remember to ask: What does “three-tier compliant” really mean?
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