Violation of obscure law hobbles S.F. brewery
Seven Stills Brewery & Distillery has been on a rapid growth spurt since its 2016 founding. The San Francisco company, which brews craft beer and also distills that beer into whiskey, has already opened four different taprooms in the city — two of which are large production facilities — and a Nob Hill hotel bar.
But now the brewerydistillery is downsizing. After being accused of violating state liquor laws by the California Department of Alcoholic Beverage Control, the company will see some of its licenses temporarily suspended. As a result, it is temporarily closing one of its taprooms while permanently closing another taproom and its original brew house. (Seven Stills’ partnership with the Stanford Court Hotel ended quietly in mid2019.)
Why? The alleged violations mostly have to do with an obscure set of rules known as tiedhouse laws, some as seemingly harmless as sending a tweet about where Seven Stills’ beer is sold. The situation magnifies a collision between early20th century law and 21st century brewery culture.
Tiedhouse laws were creat
ed in the aftermath of Prohibition’s 1933 repeal. They are meant to prevent any alcoholic beverage producer from exerting too much influence over a retailer, restaurant or bar customer. The name has even more historic roots: In England, a “tied house” refers to a pub that is obligated to buy at least some of its beer from a particular brewery.
“These laws prevent monopolistic and anticompetitive behavior, whereby manufacturers could promote one or multiple retailers over others, thus creating an atmosphere of unfair competition in the marketplace,” explained John Carr, public information officer of Alcoholic Beverage Control (ABC).
In an extreme case, a tiedhouse violation could be a brewery paying a bar to keep its beer on tap. But tiedhouse laws also apply to actions that might look benign to an outsider. For example, producers are forbidden from providing advertising or promotion to a retailer, since that is considered to have value. In a scenario that 1933 lawmakers might not have been able to imagine, it’s illegal for breweries to post anything about bars, restaurants or liquor stores on social media.
If a brewery were to post on Instagram, “Come taste our beer at Whole Foods tonight!” it would be breaking the law. (A notable exception to tiedhouse laws is the allowance for breweries to provide coasters emblazoned with their logo to bars.)
ABC field agents enforce these laws. In 2014, Revolution Wines in Sacramento was put on a oneyear probation, and its license threatened, after it retweeted a tweet about a wine tasting at a local grocery store. It had violated tiedhouse laws, the ABC said, by giving free advertising to the store.
Now, the ABC has filed a 68count accusation against Seven Stills, including for many violations of tiedhouse laws.
The alleged violations vary. In one case, Seven Stills CEO Tim Obert posted on social media about a beer that would be available at a specific store.
The ABC also cited Seven Stills for nontiedhouse violations, including the free goods law, which prohibits licensees from giving away alcohol for free. According to the ABC, Seven Stills offered a free beer to anyone who signed up for an email list, among other examples.
“We didn’t know that a lot of the stuff we were doing was against the law,” said Obert, who cofounded the company with Clint Potter.
Each violation could carry a $10,000 fine, but Seven Stills instead agreed to accept a penalty — the ABC’s version of a plea bargain. The agreement calls for a 90day suspension of Seven Stills LLC’s license, which covers the Bayview brewery and its taprooms on 24th Street in the Mission and in the Outer Sunset.
Given the expense of operating the 24th Street spot — which opened last summer, taking over the space formerly occupied by Almanac Beer Co. — Obert and Potter decided to close it permanently. It has been closed already for a few weeks. They will keep producing beer and spirits at the Bayview brew house until the suspension begins, after which they’ll shut it down permanently too. The Mission Bay facility is under a different license; it will remain open and become the company’s main production facility.
The 90day suspension will likely begin in the first week of March, though the exact date is still undetermined. Until then Obert said they’re trying to produce as much beer and whiskey as possible, to keep the Mission Bay taproom stocked during the license suspension.
No employees have been fired, said Obert, though a few have quit. He and Potter have found other roles in the company for those who worked at the shuttered locations.
It might sound absurd to cite a brewery for a social media post, but Tom McCormick, executive director of the California Craft Brewers Association, said that tiedhouse laws are an important protection for small breweries.
“They are kind of like a mini antitrust umbrella that really creates by their very nature an equal playing field for large breweries and small breweries and everyone in between,” McCormick said.
Obviously, if retailers required breweries to provide financial kickbacks to carry their beers, the little guys like Seven Stills could never compete with the Budweisers of the world. But that logic can be extended to social media promotions. “What if a retailer said, ‘OK, if you want a tap handle I want you to sit at our bar every Friday night posting about our establishment?’ ” McCormick posed. “AB InBev would say, ‘Sure, we’ll send someone down.’ But can a tiny brewery afford to do that?”
McCormick’s organization has vigorously defended tiedhouse laws in the state. “I would venture to say that the craft brewing industry would not exist if we did not have tiedhouse laws,” he said. “There’s no way that these little tiny breweries back in the ’80s would have been able to gain traction against the dominant breweries.”
As for Obert, he hoped that his example would help spread awareness of tiedhouse laws among other alcohol producers. He suspected that many of his peers did not understand how perilous an innocent-seeming social media post could be.