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New York State Clarifies Legality of Groupon-Type Sites’ Alcohol Activities

October 28, 2011

As online deals site Groupon prepares for an initial public offering, The New York State Liquor Authority (NYSLA) has issued a declaratory ruling clarifying the legality of similar sites’ activities in the on-premise beverage alcohol arena. The ruling was solicited by William Schreiber, Esq., on behalf of an “unlicensed business entity.” It describes a proposal for a “third party provider” to sell coupons on its website to be redeemed for discounted food and beverage alcohol at bars and restaurants.

The NYSLA’s ruling found no violations of New York’s Alcoholic Beverage Control Law in the proposal, after examining two specific potential issues: whether the business model constituted an “illegal ‘availing’”of an alcohol license and whether it constituted an “unlimited drinks offering,” both of which are outlawed in the state. On the former question the NYSLA said the proposal was not in violation because the third party “will be entitled to a relatively insignificant percentage of the retail licensee’s income from beverage alcohol … and have no other interest in the ownership, management or business operations” of the licensee. Its second concern was satisfied by the stipulation that the coupons in question give consumers no more than a 50% discount off retailers’ drinks prices, the level it has adopted as an “informal standard” beyond which constitutes a violation of the “unlimited drinks offering” prohibition.

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