Navigating Tied House laws & advertising for AlcBev brands

For marketers in the alcohol industry, Tied House laws are a familiar, daunting, subject. Originating from the pre-Prohibition era, these regulations continue to influence how AlcBev brands operate, especially in advertising. Named "tied-house" laws because they prevent retailers from being tied to suppliers, they can appear complex. Yet, modern AlcBev brands have found innovative strategies to thrive within these regulatory constraints.

The history of Tied House laws 

The term "tied-house" originated in the UK, referring to pubs or bars required to exclusively stock beer from a specific brewery. A “free house,” on the other hand, could purchase its alcohol supply from any producer they chose. The U.S. adopted similar practices in the late 19th and early 20th centuries, where bars often entered exclusive contracts with manufacturers. In many cases, massive alcohol manufacturers could take advantage of supply arrangements, giving businesses cheap loans, providing free draft systems, and even providing payments for favorable treatment. This created fierce competition amongst local bars, resulting in the intentional lowering of prices to draw in customers. These deals resulted in monopolistic practices, promoting excessive consumption and eventually leading to the start of Prohibition.

Prohibition ended in 1933, yet alcohol remains rigorously regulated in the US due to the 21st Amendment. This amendment, currently enforced by the Alcohol and Tobacco Tax and Trade Bureau (TTB), empowers each state to establish alcoholic beverage control laws, known as Tied House laws, for bars and retailers. These laws aim to prevent monopolies and market oversaturation.

Here’s the timeline:

Late 19th-early 20th Century:

• Similar UK practices started in the US.
• Bars entered exclusive contracts with manufacturers.
• Alcohol manufacturers provided incentives like cheap loans, free draft systems, and payments for better placement.
• Fierce competition rose and price lowered.

Prohibition Era:

• Excessive consumption and monopolistic practices led to Prohibition's onset.
• Prohibition ended in 1933.

Post-Prohibition (21st Amendment):

• The 21st Amendment empowers states to establish beverage control laws, known as Tied House laws.
• Alcohol regulations are rigorously enforced by the Alcohol and Tobacco Tax and Trade Bureau (TTB).

Current regulations:

• Tied House laws uphold fair competition.
• Prevents monopolies and market oversaturation.
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Modern advertising and Tied House compliance

Fast-forward to today, and the world of alcohol advertising has grown exponentially more intricate—especially on online platforms. Social media has added layers of complexity, forcing brands to tread carefully to avoid violating regulations. For instance, federal and state laws prohibit alcohol brands from offering anything of value—like free advertising—to encourage retailers to stock their products. 

Here’s where these laws can get tricky. A brand tagging a retailer in a social media post or including their logo in an ad could be interpreted as a violation unless the ad adheres to specific state requirements. Regulations can vary greatly; some states require brands to list a minimum of two retailers in a digital ad, while others require at least three. 

Get regulatory solutions built into your ads

Brands evaluating ad compliance solutions should look for these features while doing their research:

• Dynamic retailer display: Ads automatically adapt to state laws, showing the required number of retailers.
• Neutral retailer sorting: Avoid preferential treatment by randomizing retailer display order.
• Control your retailer display: Pin certain retailers or aggregators to the bottom of the retailer list so other retailers always display first.
• Custom age settings & legal disclosures: Add age gating and required legal text seamlessly. 

With these tools, the guesswork of regulatory compliance is removed, mitigating risks while running high-performing campaigns. Take a look at how JaM Cellars advertises on Meta with Pear:

Alcohol compliance through ad innovation

Navigating Tied House laws might sound daunting, but it is achievable for modern alcohol brands with the right tools. By leveraging shoppable ad integrations, shoppers can click directly from an ad to purchase at a local retailer. Since ad platform algorithms dynamically determine relevant retailer pairings–brands hold no influence–eliminating compliance concerns.

For AlcBev brands navigating complex laws in a highly competitive market, Pear stands out as the most equitable retail ecommerce platform. 

• Unmatched retail reach: Connect with over 3,000 retailers across 165,000 locations. Unlike competitors, who manage a limited selection, Pear ensures a level playing field for all retailers. Pear also automatically pulls in fallback options so your ads always show the required number of retailers for your state, including local stores.
• Purpose-built compliance: State-specific configurations simplify ad creation, ensuring you never second-guess your shoppable ad strategy. With one click to purchase on social commerce, your drink brand can create all the buzz.
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Compliant shoppable ad units are 29x more effective

A powerful new social and display ad unit integration takes shoppers from a social or display ad directly to a retailer’s website, proving 29x more effective.

Here’s how Pear Connect works:

• Pear has a one-time integration with each ad platform where it uploads its full database of product-retailer combinations; for the purposes of this example, we’ll use Meta. Then, Pear informs Meta which products are in-stock and available at which of the retailers in its network daily.
• Without any input from Pear or the brand, Meta’s technology chooses which product and retailer combination to display, based on what is most likely to get selected by the ad viewer.
• Meta selects based on the data it has on each person, none of which is available to Pear or the brand. Pear nor the brand see any PII throughout the process.
• Because neither the brand nor Pear have any influence over which retailers are selected, any sort of inducement is impossible. Instead, the retailers displayed are based on what is available for purchase at any time, as well as what each ad platform thinks is likely to be selected by the shopper.
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Read the enterprise brand Pear Connect case study here.

The takeaway 

Tied House laws no longer need to feel convoluted or restrictive. With the combined power of Pear unTied and Pear Connect, alcohol brands can confidently execute innovative marketing strategies without risking regulatory violations. 

Are you ready to elevate your campaigns while ensuring compliance? Get in touch with Pear to discover how we can help your AlcBev brand thrive within the rules.

Book your free demo→

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Legal Disclaimer: The information provided in this blog post is for general informational purposes only and is not intended as legal advice. Pear Commerce and its contributors are not responsible for any legal claims or liabilities that may arise in connection with the interpretation or application of Tied House advertising laws. While we strive to provide accurate and up-to-date information, the complexities of legal matters may vary, and it is advisable to seek professional legal counsel for specific advice tailored to your situation. Reliance on the information contained herein is at your own risk, and Pear Commerce disclaims any responsibility for actions taken or not taken based on the content of this blog post. Always consult with qualified legal professionals to address your specific legal concerns.

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