Third Party Providers

Over the past few years a number of third party providers (TTPs) have provided platforms for brick and mortar stores licensed to sell liquor to list and sell their inventory online. By providing a platform for these sales, TTPs are filling a demand during a period of changing consumer buying habits. This has raised issues in a number of states, including New York, as these TTPs are not licensed to traffic in alcoholic beverages, yet they are profiting from the sale of liquor. Some of these TTPs have asked the New York State Liquor Authority to approve their method of operation and confirm that they are able to share in the liquor revenue without themselves being licensed. While some would argue that TTPs should be licensed, the Authority has tried to create a framework in which these TTPs can operate without a license. The smartphone technology did not exist and could not have been anticipated when the liquor laws were written post-Prohibition, so the Authority has had to deal with this on a case by case basis. In the early rulings sought by Groupon and Living Social, the Authority ruled that the licensee must retain control over any sale, prohibited the TTP from sharing in revenue that was percentage based, and placed a 10% of annual revenue cap that a licensee could pay the TTP. In the Ship Complaint ruling from 2013, the Authority ruled that the TTP’s profit cannot be “a substantial portion of the sale.” In the Drizly ruling the Authority looked into whether the licensee had a passive role and what financial interest the TTP had. The Authority further expanded the rights of TTPs in its Slingr ruling in 2015. Slingr took a percentage of profit, and also had a physical presence in the brick and mortar stores. A number of additional rulings have followed. At least one commentator has argued that the Authority’s rulings over the years have been inconsistent and even contradictory, or at the very least “created a hazy regulatory landscape,” that though clear at first then “crumbled” in subsequent rulings. See Alexa Bordner, How New York Drinks: If and How Third-Party Providers Can Integrate with the Three-Tier System, 83 Brook. L. Rev. (2017). Despite task forces, and proposed legislation on TTP’s including proposals that there should be a required Third-Party Provider Permit, the issues surrounding them remain fluid and evolving.