The Texas Alcoholic Beverage Commission (“TABC”) just released Marketing Practices Advisory MPA056, available here, which addresses the use of third party advertisers and payment processors by out-of-state wineries that hold permits to ship direct to Texas consumers (“Direct Shippers”). The Advisory provides similar guidelines to those provided by the California ABC in its 2011 Industry Advisory, which we commented on here. The use of third party providers by wineries has been a hot topic since the release of the California advisory, but few states have provided guidance on the issue. Now that Texas has weighed in, it will be interesting to see if other states follow suit.

The TABC’s Advisory allows Direct Shippers to use third party service providers provided that certain conditions are met. As in California, the TABC’s touchstone is that the Direct Shippers remain in control. Key points include:

- Direct Shippers are always responsible for compliance with the TABC code and regulations, payment of taxes, and must remain “in control of the product and every stage of the transaction.”

- A third party provider may advertise wines and prices for a Direct Shipper.

- A third party provider may process an order for wine placed by a Texas consumer by redirecting the order to a Direct Shipper. The Direct Shipper may then accept or reject the order.

- Fulfillment should be managed by the Direct Shipper, and single packages containing bottles from multiple Direct Shippers are not allowed. Note: the TABC disfavors models where a third party provider acts as both an advertiser or payment processor and a warehouseman.

- A third party provider may collect payment once an order is accepted by the Direct Shipper, but the Direct Shipper must maintain control over the funds.

- There should be a written agreement between all Direct Shippers and their third party providers in order to demonstrate that the Direct Shipper remains in control. The TABC will ask a Direct Shipper for a copy of its agreement in the event that it has reason to investigate an arrangement with a third party provider.

We’ll keep you posted on any further developments on third party providers in Texas and other states. Call one of the attorneys at Strike Kerr & Johns if you have any questions about direct shipping or the use of third party providers.

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