Know The Law: SLA Approves New Smartphone App
Posted on | November 1, 2013
Written by | Keven Danow and Arielle Albert
On September 25th, Drizly, Inc. ("Drizly") received the approval of the New York State Liquor Authority to begin use of a smartphone and web-based application that allows users to purchase wine or liquor from a local licensed package store and have it delivered.
Drizly does not hold a license to sell beverage alcohol and does not intend to apply for one. Instead, Drizly obtained SLA approval to operate as a third party provider to off-premise licensees. Although the Authority previously has allowed third parties to contract with licensees to provide services related to the sale of beverage alcohol, if those services amount to the sale of beverage alcohol by the service provider, the retail licensee will be charged with allowing a third party to avail upon its license.
"Sale" is defined in ABCL §3(28) as "any transfer, exchange or barter in any manner or by any means whatsoever for a consideration… to solicit, receive an order for, to keep or expose for sale, and to keep with intent to sell." Further, a licensee may not make its license available to a person who has not been approved by the authority. (ABCL §111). This means that any person who participates financially in the proceeds from the sale of beverage alcohol must be included on the seller's license. In a response to a previous Request for Declaratory Ruling made by a third party internet provider (unrelated to Drizly), the SLA explained that the license holder must take an active role in every sale. Licensees that allow third parties to participate in the decision-making process or who allow the parties to assume the inherent risk of the sales transaction are likely to be found guilty of availing.
In addition, the Authority has warned licensees that allowing an unlicensed service provider to be compensated based on a portion of the sales will be viewed as some evidence of availing. The SLA found that Drizly's method of operation did not violate any of these provisions or contradict the guidelines established in its earlier ruling. Any package store can sign up for a Drizzly account by purchasing an iPad, a Drizly Driver Phone and a license to use Drizly's software. The Drizly application directs consumers to a participating package store within the customer's vicinity. Once in contact, the licensee has complete control over the transactions. All orders received through the Drizly application appear on the iPad which must be kept on the licensed premises. The retailer must accept the order or void the transaction from the iPad. Once an order is received and accepted, the retailer's driver will be notified on a Drizly Driver Phone. The driver will pick up the order from the licensed premise and notify the customer that the order is on its way. Upon delivery, the driver will use the Drizly software to authenticate the customer's identification.
Additionally, Drizly's fee structure is also in accord with the Authority's prior pronouncements. Drizly states that "it does not take any money from the sale, either as a percentage of the total transaction or a flat fee per transaction." Drizly has no access to the money received by the retailer; all money is transferred from the customer's credit card/bank account to the licensed retailer. Drizly's profit comes from a monthly fee paid by the retailer for the area licensed and from the sale of its hardware.
Drizly is the first sales app approved by the New York State Liquor Authority. It is likely to set the stage for others to follow. More information about Drizly can be found at drizly.com.
Changes to the Retail Licensing Application
The SLA has made several changes to streamline the application process for retail licenses, as announced at a meeting held on Ocotber 7th. Changes include, but are not limited to: revisions to the applications instructions; more detailed sample diagrams; and the inclusion of the applicant's email address, as well as an email address for their representative or attorney.
Additionally, Chairman Dennis Rosen took the opportunity to reiterate the requirement that attorneys who self-certify applications must thoroughly explain all questions included in the application, and ensure that clients understand the consequences of providing incorrect information. He also emphasized the requirement that those attorneys must review all original documents provided by their clients before accepting a copy of the document.
The Authority is in the process of revising the application process and new forms have been published. The revision process is ongoing.
Additional information is available at http://www.sla.ny.gov/streamline-license-applications.