Promotional Beer Giveaways Barred as Illegal in California

Giving away free beer to bar patrons is illegal, a California appeals court has ruled, striking down a common promotional tactic by the nation’s largest beer makers.

The ruling effectively ends a popular practice by beer makers that purchase their own products in neighborhood bars and give them to patrons.

The 2nd District Court of Appeal in Los Angeles said the marketing gimmick violated state rules prohibiting an alcohol licensee from plying consumers with free samples.

The court’s opinion marks the latest development in an ongoing legal battle between the state Department of Alcoholic Beverage Control and Anheuser-Busch Cos., the world’s largest beer maker.

In a 1995 complaint, state regulators accused Anheuser--which brews Budweiser, among other brands--of flouting California’s alcohol regulations by giving freebies to beer drinkers. The case was closely watched by other brewers, many of whom use the same gimmick to increase market share in the rough-and-tumble beer industry.

“As a result of this court decision, the industry at large now knows what is permissible and what isn’t,” said Matthew D. Botting, a deputy state attorney general who argued the case for the beverage department. “Beer makers now have to modify their promotional activities.”

Anheuser officials are disappointed in the ruling, said company attorney J. Dan Davis, and are weighing legal options including an appeal to the California Supreme Court.

Giving away beer, branded paraphernalia and other promotional incentives has become a common gimmick to entice beer drinkers, especially in California, the nation’s biggest beer-guzzling state.

In recent years, state regulators have won settlements and court rulings preventing beer makers from giving free jackets and other gear at music and comedy events.

According to Botting, state regulators stumbled on the Anheuser giveaway four years ago while conducting an unrelated, undercover operation at Roxbury East, a Riverside watering hole.

About 20 Anheuser employees descended on the bar. They bought Anheuser products, exchanging them for other brands being swilled by patrons.

Two undercover investigators swapped their Red Dog beer, brewed by Miller Brewing Co., for Anheuser’s Red Wolf lager. The beverage department later accused Anheuser in an official complaint of violating state regulations aimed at discouraging over-consumption of alcohol.

Many manufacturers buy “people drinks and had always done so,” said Lisa Barnes, an in-house lawyer for Anheuser, at an administrative hearing. “There was a concern by all of us that” the accusation would change the current practice.

Anheuser lawyers, who insisted that the free drinks were gifts permitted by state regulations, convinced two administrative law bodies that the firm’s tactic was proper. The firm took its case to the state appeals court after the beverage department’s director overturned those rulings.

On Thursday, the California Beer and Beverage Distributors, a trade group of mainly beer wholesalers that distributes 90% of the beer consumed in California, applauded the court’s decision.

If the court had ruled for Anheuser, wholesalers might have been pressured to help finance these promotions, said Christopher B. Hockett, a San Francisco lawyer for the trade group that filed a legal brief supporting the beverage department.

The decision, however, would not prevent bartenders from pouring their favorite patrons an occasional free one.

“That’s an incidental drink that’s permissible--within certain restrictions,” Botting said.