Topeka A memorandum put out by the state's Alcoholic Beverage Control division designed to clarify regulations of the pricing of alcoholic drinks is facing a brewing level of scrutiny from those within the industry.
The ABC says the memo is meant to spell out regulations passed by the Legislature in the mid-1980s pertaining to the pricing of drinks containing alcohol.
Tuck Duncan, attorney for Kansas Wine & Spirits Wholesalers Association, and Rebecca Rice, legal counsel to the Kansas Beer Wholesalers Association, on Tuesday said the ABC wrongly interpreted the statute and the memo is a solution in search of a problem. After all, Duncan said, the statute has been on the books and functioning for more than 20 years.
The Topeka Capital-Journal reported Tuesday that the ABC on Aug. 1 would begin enforcing regulations that essentially eliminate the incentive to purchase larger quantities of alcohol because it is less expensive by the ounce. Instead, alcohol would be priced equally per ounce.
In an interview Monday, ABC director Tom Groneman said interpretation of the particular portion of the state statute the memo is based on was "pretty clear" to himself and the rest of his division.
Duncan said he intends to challenge that assertion by filing a request this week for legal review with the Kansas Attorney General's Office.
"I will be asking their office to look at it," Duncan said. "I'll probably ask some legislators to ask the office to look at it, as well."
Gavin Young, spokesman for the attorney general's office, said Tuesday afternoon he wasn't aware of any requests to review the legality of the memo.
"If we got a request from somebody we would definitely review the request," Young said.
Sen. Anthony Hensley, D-Topeka, said he isn't sure why lawmakers weren't made aware of the matter by the ABC, which had been working to formulate drink pricing regulations stemming from the statute for a year and a half.
"It seems to me that this is an appropriate issue that the Legislature could've dealt with," Hensley said. "And I'm not sure why the ABC chose not to bring it to our attention. We had a 90-day session where we could've tried to address the issue."
Hensley said he hasn't yet gathered much information on the issue but that it could be something the Legislature takes up in the 2011 session.
Duncan agreed, adding he would like the ABC to defer enforcement until Attorney General Steve Six weighs in.
"At this point," Duncan said, "I would like to see the attorney general review the memo, look at some additional legal authorities that I will provide them, ask the agency to defer it until he's made that review, and, if necessary, let's go back to the Legislature and discuss the whole matter."
Duncan said the memo is an inaccurate interpretation of state law because the statute actually refers to the acquisition costs of a drink.
For example, a shot of spirits costs 50 cents, and the mixed drink is $2 total (to pay for the labor, ice, mix, dishwashing, bartending, etc.). The acquisition cost of that drink is a constant, Duncan said. To make it a double, the acquisition cost of that second shot is almost nonexistent — it is basically the cost of the spirits.
"To suggest that if the price of a drink, including all overhead and etc., is the $2 and now a double has got to be $4, that's not what the law says," Duncan said.
Duncan also said he thinks the agency has exceeded its authority.
"The other factor is this is basically prescribing retail prices," he said, "and there is no authority for them to do it."
Rice, who also represents a small group of bars and clubs in northeast Kansas called Kansas Clubs and Associates, said the memo, though intended to clarify drink pricing, actually muddles it.
"It appears to me three different ways to add up the price," she said of the final cost of a drink to a consumer.
In one example, she said, if a mixed drink is $4, including the liquor tax, the memo states the double must be $8. She said that would apply the tax twice, creating a tax on a tax.
Additionally, she said it creates unintended consequences, of which the effects already have been made known by area bar owners. She said it will force bars to stop selling smaller draft beers to keep the prices of larger draws reasonable, which could be seen as a step toward encouraging heavier drinking in the state.
"Now, how can that possibly be the policy the state of Kansas wants to promote?" she said.