PUBLIC PROTECTION CABINET
Department of Alcoholic Beverage Control
(As Amended at ARRS, November 10, 2015)
804
KAR 4:015. Interlocking substantial interest between licensees
prohibited.
RELATES
TO: KRS 243.030, 243.040, 243.110, 244.240, 244.570, 244.590
STATUTORY
AUTHORITY: KRS 241.060
NECESSITY,
FUNCTION, AND CONFORMITY: [Pursuant to] KRS
241.060 authorizes[,] the board[has
authority] to promulgate administrative regulations
regarding matters over which the board has jurisdiction. The control of alcoholic
beverages in the Commonwealth of Kentucky, as codified in Chapters 241 - 244 of
the Kentucky Revised Statutes, has been established by the Kentucky legislature
as a "three tiered" system. The three (3) tiers of this system
are designated as manufacturer/producer[producer], wholesaler[wholesale]/distributor,
and retailer[retail]. Each of these three (3) levels operates[operate]
separately, distinctly, and apart from each other for the purpose
of control. In order for this control to be effectively administered by this
board, it is necessary to prevent any type of interlocking substantial interest
by and among[between] the three (3) separate tier levels.[The
purpose of] This administrative regulation provides[is
to provide] additional detail regarding incompatible licenses
and prohibited[describe][clarify the] interlocking substantial
interests among the tiers[which will be prohibited by this board].
Section
1. Definitions.[As used in this administrative regulation
unless otherwise specified:]
(1)
"Manufacturer" means a[any]
person or entity who is a distiller, rectifier,[blender,]
winery, brewer, or who otherwise produces alcoholic
beverages,["Manufacturers" include distillers,
rectifiers, blenders, wineries, and brewers] whether located within or without
this state.
(2)
"Retailer" means a[any]
person or entity who sells alcoholic beverages at retail,
whether located within or without this state, excepting manufacturers with
limited retail privileges or the right to hold certain retail
licenses.
(3)
"Substantial interest" means:
(a)
Membership in, or a direct or indirect ownership interest in,[or
membership in,]a business, sole proprietorship, partnership,
corporation, limited liability company, limited liability partnership, or other
legal entity, whether individually, or by a spouse, or in combination
with a spouse, which amounts to ten (10)[five
(5)] percent or greater of the total ownership or membership
interests;
(b)
A common officer, director,[or] manager, or
employee with managerial responsibilities, in a business, sole
proprietorship, partnership, corporation, limited liability company, limited
liability partnership, or other legal entity;
(c)
A common owner, partner, or member, including a spouse[an immediate
family member], the aggregate share of which is ten
(10)[five (5)] percent or greater of the total
ownership of, or membership in, a business, sole proprietorship, partnership, corporation,
limited liability company, limited liability partnership, or other legal entity;
or
(d)
Any other direct or indirect interest which provides an ability to control
or influence decisions by a business, sole proprietorship,
partnership, corporation, limited liability company, limited liability
partnership, or other legal entity.
(4)
"Wholesaler" means a[any]
person or entity who is a wholesaler, distributor, or who
sells alcoholic beverages at wholesale["Wholesalers" include
wholesalers of distilled spirits and wine and distributors of malt beverages],
located within this state.
Section
2. A[No] manufacturer[, or their immediate
family members,][of distilled spirits or
wine]
shall not have or acquire a substantial interest[a financial interest,
directly or indirectly, by stock ownership, or through interlocking directors
in a corporation,]
in the establishment, maintenance, or operation of[in] the
business of a [liquor and wine] wholesaler or a retailer. A[No] manufacturer[, or their immediate family members,] shall not
have or acquire, by ownership, leasehold, mortgage, or otherwise, directly
or indirectly, a substantial[financial] interest
in the premises of a retailer.
Section
3. A[No][manufacturer or]
wholesaler[, or their immediate family members,] shall not
have or acquire a substantial interest[a financial interest, directly
or indirectly, by stock ownership, or through interlocking directors in a
corporation, or otherwise,] in the establishment, maintenance, or operation
of[in] the business of a manufacturer
or retailer. A[No][A manufacturer or]
wholesaler[, or their immediate family members,] shall not
have or[not] acquire, by ownership, leasehold, mortgage, or
otherwise, directly or indirectly, a substantial[financial] interest in the
premises of a retailer.
Section
4. A[No] retailer[, or their immediate
family members,] shall not have or acquire a substantial interest
in the establishment, maintenance, or operation of the business of a
manufacturer or wholesaler.
Section
5. The malt beverage administrator and[or] distilled spirits
administrator, as appropriate, shall[may] examine every
applicant for a new or renewal license to determine whether issuance or renewal
of the license is prohibited under applicable law or this administrative
regulation. If the issuance or renewal of the license is prohibited, the
appropriate administrator shall not issue or renew the license[the
ownership and management of new applicants or existing licensees to
determine the presence of any substantial][an interlocking][interest
herein prohibited prior to issuance or renewal of licenses].
Section
6.[5.] This administrative regulation shall
not apply to:
(1)
Prohibit an[any] affiliated business
arrangement which meets the requirements provided in 804 KAR 4:280, Section 2;
(2)
A license issued prior to June 24, 2015, for any prohibited substantial
interests resulting from the ownership interests of a spouse; or
(3)
A license[licenses] issued prior to December 1, 1976.
FREDERICK
A. HIGDON, Commissioner
AMBROSE
WILSON IV, Secretary
APPROVED
BY AGENCY: October 14, 2015
FILED
WITH LRC: October 15, 2015 at 11 a.m.
CONTACT
PERSON: Melissa McQueen, Department of Alcoholic Beverage Control, 1003
Twilight Trail, Frankfort, Kentucky 40601, phone (502) 782-7906, fax (502)
564-7479.
