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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 6397 October 27, 1986 INTOXICATING LIQUORS: Licensing of brewer as a specially designated merchant Sale by brewer of alcoholic liquor for consumption at micro-brewery A brewer who manufactures less than 200,000 barrels of beer per year may be licensed as a specially designated merchant for the sale of beer for public consumption off the premises. A brewer is prohibited from selling alcoholic liquor for consumption on the premises at the location of a micro-brewery. Honorable Phil Arthurhultz State Senator The Capitol Lansing, Michigan 48913 You have requested my opinion on two related questions. Your first question states: Under MCL 436.19d; MSA 18.990(4), brewers who manufacture less than 200,000 barrels of beer per year are eligible to be licensed as specially designated merchants. Would this provision, or any other provision of the Michigan Liquor Control Act, permit a micro-brewer, otherwise meeting the barrel limitation, to manufacture beer and sell it for public consumption off the premises from a single location? The Michigan Liquor Control Act, MCL 436.19d(3); MSA 18.990(4)(3), provides: "A brewer, warehouseman, or wholesaler shall not be licensed as a specially designated merchant, except for brewers who manufacture less than 200,000 barrels of beer per year. This subsection shall not affect the operation of a brewery hospitality room." For purposes of the Michigan Liquor Control Act, "specially designated merchant" (SDM) is defined in MCL 436.2q; MSA 18.972(17), as a person to whom the Liquor Control Commission grants a license to sell beer and/or wine at retail for consumption off the premises of such licensed place. Where a statute is clear and unambiguous in its terms, no interpretation of it is necessary. People v. Blodgett, 13 Mich 127, 167 (1865). There is no room for construction or to attempt an interpretation to vary statutory language which has been plainly expressed. MacQueen v. City Commission of City of Port Huron, 194 Mich 328, 342; 160 NW 627, 631 (1916). A brewer who manufactures less than 200,000 barrels of beer per year is eligible for an SDM license. Further, the statutory words "this subsection shall not affect the operation of a brewery hospitality room" indicates a legislative intent that a brewer may be licensed as an SDM licensee and as a brewer or manufacturer of beer at the same location. Although not defined in the Michigan Liquor Control Act, a hospitality room has historically been permitted on the brewery premises and at no other location. The room serves as a sampling room for a brewer's products. The brewer does not sell any alcoholic liquor products in a hospitality room, but allows visitors or tourists to sample the products free of charge. Thus, any SDM license issued to an eligible brewer shall not affect the operation of a brewery hospitality room and may be operated in a location in the brewery in conjunction with, but separate from, the hospitality room, provided that the beer and/or wine sold under the SDM license may not be consumed upon the licensed premises. It is my opinion, in answer to your first question, that a brewer who manufactures less than 200,000 barrels of beer per year may be licensed as a specially designated merchant for the sale of beer for public consumption off the premises. Your second question is: Under the provisions of the Michigan Liquor Control Act, MCL 436.1 et seq; MSA 18.971 et seq, may an individual establish a micro-brewery for the manufacture of beer for sale and consumption on the premises? The Michigan Liquor Control Act establishes a three-tier system of distribution of alcoholic liquor. In the beer industry, the first tier consists of manufacturers, including brewers, or suppliers, MCL 436.2i, 436.2j, and 436.30b(1) and (2)(i); MSA 18.972(9), 18.972(10), and 18.1001(2)(1) and (2)(i); the second tier consists of wholesalers, MCL 436.2m(g); MSA 18.972(13)(g); and the third tier consists of retailers, MCL 436.2m(d); MSA 18.972(13)(d). Legislative reference to this three-tier system is found in MCL 436.30b(1); MSA 18.1001(2)(1), which structures the business relations between suppliers and wholesalers, providing: "The purpose of this section is to provide a structure for the business relations between a wholesaler and a supplier. Regulation in this area is considered necessary for the following reasons: " ... "(b) To promote and maintain a sound, stable, and viable 3-tier system of distribution of beer to the public." A "brewer" is defined as "any person located in this state which is duly licensed to manufacture and sell beer produced by it." 436.2b; MSA 18.972(2). The term "brewer" is also included in both the legislative definitions of "manufacturer," MCL 436.2j; MSA 18.972(10), and "supplier," MCL 436.30b(2)(i); MSA 18.100192)(2)(i). Thus, a brewer is normally confined to the first tier of the state's beer distribution system. The three-tier system of alcoholic liquor distribution indicates the Legislature's intent to keep manufacturers and suppliers of beer, including brewers, out of the retail market for beer, except as expressly authorized by the Legislature in MCL 436.19d(3); MSA 18.990(4)(3). Further, the Legislature added MCL 436.31a; MSA 18.1002(1), to the Michigan Liquor Control Act by means of 1981 PA 170, to permit a brewer to acquire, develop, sell, lease, finance, maintain, operate, or promote real property occupied or to be occupied by retailers of alcoholic beverages. MCL 436.31a; MSA 18.1002(1), in pertinent part, provides: "(1) A brewer, or the parent company, a subsidiary or an affiliate of a brewer which parent company, subsidiary, or affiliate is located in this state may acquire, develop, sell, lease, finance, maintain, operate, or promote real property occupied or to be occupied by another vendor, except a wholesaler, if all of the following exist: "(a) The brewer has received written approval of the commission before entering into any arrangement or contract between the parties regarding the real property. "(b) The legislative body of the city, village, or township where the property is located certifies to the commission that the real property is in an urban, commercial, or community redevelopment area and is designated as such by a state or federal agency." "(c) Any arrangement or contract entered into between the brewer, its parent company, subsidiary, or affiliate and another vendor shall not directly or indirectly influence or control the brand of alcoholic liquor sold or to be sold by the vendor and shall only be concerned with real property." (Emphasis added.) It is noted that the term "vendor" is defined by MCL 436.2m(e); MSA 18.972(13)(e), to mean a person licensed to sell alcoholic liquor. The legislative history of this section is instructive. It indicates that it was considered by the Legislature as 1981 HB 5067. The House Legislative Analysis Section, HB 5067, Substitute H-1, First Analysis (10-12-81), identified the apparent problem addressed by the bill: "The Stroh Brewery Company has plans to redevelop a 30-acre site on the Detroit riverfront with hopes of turning what is now unproductive industrial property into a thriving commercial-residential area. The plans call for the site to contain space for restaurants and retail stores, which are considered necessary to the success of any such project. However, the Liquor Control Act presents an obstacle to Stroh's redevelopment plans. The act prohibits certain kinds of relationships between manufacturers, wholesalers, and retail licensees. For example, a manufacturer--such as Stroh's--is prohibited from having an interest, direct or indirect, in the business of any other vendor; this means Stroh's could not be a leaseholder for restaurants or retail stores with licenses to sell alcohol. The purpose of the prohibitions in the act is to keep separate the 'three tiers' of suppliers of alcohol--manufacturers, wholesalers, and retailers--in order to prevent any undue pressure on one by another that could cloud the competitive atmosphere. Otherwise, for example, a brewery could own a bar or restaurant and see to it that only its products were sold there or could have a financial relationship with a wholesaler that enabled it to keep competitors' products out of retail outlets." It should be observed that 1981 PA 170 also amended MCL 436.31(2); MSA 18.1002(2), to retain the prohibition against a brewer of beer having any financial interest, directly or indirectly, in the establishment, maintenance, operation or promotion of the business of any other vendor, "[e]xcept as provided in section 31a." In subsection (5) of MCL 436.31; MSA 18.1002, however, a licensed wine maker is permitted to sell its wine in a restaurant only for consumption on or off the premises if the restaurant is owned by the wine maker and located on the premises where the wine is manufactured. There is no similar provision in the Michigan Liquor Control Act authorizing the sale of beer or other alcoholic liquor by a brewer for consumption on the premises. Reading MCL 436.2j; 436.19d(3), 436.31, and 436.31a; MSA 18.972(10), 18.990(4)(3), 18.1002, and 18.1002(1), together, the legislative intent is manifest that a brewer may lease real property to a person licensed to sell alcoholic liquor for consumption on the premises, but may have no other financial interest, direct or indirect, in the establishment or operation of premises licensed to sell alcoholic liquor for consumption on the premises. It is my opinion, in answer to your second question, that a brewer is prohibited from selling alcoholic liquor for consumption on the premises at the location of a micro-brewery. Frank J. Kelley Attorney General
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