What counts as an 'excessive discount' on liquor under Texas law, and can a package store be charged for selling too cheap?

Plain-English summary

The Jack County Attorney asked, on behalf of the Jacksboro Police Department, what makes a liquor discount "excessive" under Alcoholic Beverage Code section 102.07(c). The department was looking into a local liquor store said to be selling liquor at steep discounts, with the example of a 750ml bottle advertised at $27.00 but rung up at the register for $10.99.

The AG started by saying what it would not do. AG opinions do not find facts or decide whether a crime has been committed, so the AG could not tell the department whether that particular $10.99 sale was an excessive discount or an offense. What the AG could do is explain what the phrase means in general.

Section 102.07(c) says no person who owns or has an interest in a package store or wine-only package store, nor that person's agent or employee, may allow an excessive discount on liquor. The catch is that chapter 102 uses the phrase "excessive discount" in three places but never defines it, and the Texas Alcoholic Beverage Commission has not defined it by rule either. When a statute leaves a term undefined, Texas courts use the plain and ordinary meaning, often consulting a dictionary. "Excessive" commonly means exceeding the usual, proper, or normal, and a "discount" is a reduction from a regular or list price. Put together, the AG concluded a court would likely read "excessive discount" as a reduction from a regular price that is more than what is usual, proper, or normal under the circumstances.

The AG noted the Commission does address discounts in some settings (for example, quantity-based consumer discounts and a rule on coupons and rebates) and that at least one administrative proceeding looked at whether steep discounts had legitimate business reasons, but there is no rule or formal policy generally telling the industry how to tell an excessive discount from an acceptable one. Section 102.07 carries no specific penalty, so a violation falls under the Code's general penalty: a misdemeanor punishable by a fine of $100 to $1,000, up to a year in county jail, or both.

What this means for you

If you run or work at a package store

Based on this opinion, the law bars an "excessive discount" on liquor, but neither the statute nor the Commission gives a bright-line number. The AG's reading is that a discount is excessive when it cuts the regular price by more than what is usual, proper, or normal under the circumstances. That is a fact-bound standard, so a deep markdown does not automatically violate the law, but it also is not clearly safe just because no specific percentage is banned.

If you are a police officer or prosecutor looking at a complaint

The AG will not tell you whether a given sale is an offense; that is a fact question for investigators and, ultimately, the courts. The opinion gives you the legal standard (a reduction beyond what is usual, proper, or normal) and the penalty exposure (the general misdemeanor under section 1.05(a)), but the application is yours to make on the facts.

If you advise clients in the alcoholic beverage industry

The opinion underscores how little formal guidance exists: the Commission regulates many discount practices but has not defined "excessive discount" for section 102.07(c). The AG also flags that the Legislature has, in the last three sessions, considered but not enacted bills that would repeal or pare back the excessive-discount provisions, which is worth tracking for clients who price aggressively.

Common questions

Q: Is there a specific percentage that makes a liquor discount illegal?
A: No. Neither the Alcoholic Beverage Code nor the Texas Alcoholic Beverage Commission sets a number. The AG read "excessive discount" to mean a reduction from a regular price beyond what is usual, proper, or normal under the circumstances.

Q: Was the $27.00-to-$10.99 sale in the request an excessive discount?
A: The AG would not say. It does not find facts or decide whether a crime occurred in an opinion. Whether that sale is excessive is a fact question.

Q: What is the penalty for an excessive discount?
A: Section 102.07 has no specific penalty, so the Code's general penalty applies: a misdemeanor punishable by a fine of $100 to $1,000, up to a year in county jail, or both, under section 1.05(a).

Q: Has the Commission defined "excessive discount"?
A: No. The Commission addresses some discount practices, including quantity discounts and a coupons-and-rebates rule, but it has not defined "excessive discount" for purposes of section 102.07(c).

Background and statutory framework

The Alcoholic Beverage Code is an exercise of the state's police power and is to be liberally construed (Tex. Alco. Bev. Code § 1.03), and it exclusively governs the manufacture, sale, distribution, transportation, and possession of alcoholic beverages unless it provides otherwise (§ 1.06). Chapter 102 governs intra-industry relationships and, as the Texas Supreme Court described in Cadena Comercial USA Corp. v. Tex. Alcoholic Beverage Comm'n, 518 S.W.3d 318 (Tex. 2017), provides a comprehensive framework for regulating overlapping ownership and specific financial transactions, gifts, and promotions. Section 102.07(c) bars a package store or wine-only package store (or its agent or employee) from allowing an excessive discount on liquor.

Because chapter 102 does not define "excessive discount" and the Commission has not defined it by rule, the AG applied the plain-meaning rule from Hogan v. Zoanni, 627 S.W.3d 163 (Tex. 2021), and EBS Sols., Inc. v. Hegar, 601 S.W.3d 744 (Tex. 2020), consulting dictionaries as in Sunstate Equip. Co., LLC v. Hegar, 601 S.W.3d 685 (Tex. 2020). "Excessive" means exceeding the usual, proper, or normal, and a "discount" is a reduction from a regular or list price. The Commission inspects and regulates the industry (§ 5.31(a)) and makes marketing-practices policy through a precedent manual or formal advisory (§ 5.57(a), (d)(2)), and it has addressed some discounts, but the AG was aware of no formal policy defining the term, citing the administrative proceeding in Tex. Alcoholic Beverage Comm'n v. Spec's Fam. Partners, Ltd. on business reasons for discounts under subsection 102.07(a)(7).

Citations and references

Statutes:

• Tex. Alco. Bev. Code § 102.07 — prohibited dealings, including the excessive-discount bar in subsection (c)
• Tex. Alco. Bev. Code § 1.05 — general misdemeanor penalty where no specific penalty is provided
• Tex. Alco. Bev. Code § 5.31 — TABC duty to inspect, supervise, and regulate

Key cases:

• Cadena Comercial USA Corp. v. Tex. Alcoholic Beverage Comm'n, 518 S.W.3d 318 (Tex. 2017) — chapter 102 as a comprehensive intra-industry framework
• Hogan v. Zoanni, 627 S.W.3d 163 (Tex. 2021) — plain and ordinary meaning of an undefined statutory term
• Sunstate Equip. Co., LLC v. Hegar, 601 S.W.3d 685 (Tex. 2020) — courts consult dictionaries for the common meaning of undefined terms

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0455
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2024/kp-0455.pdf

Original opinion text

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

January 29, 2024

The Honorable M. Brad Dixon
Jack County Attorney
100 Main Street, Suite 312
Jacksboro, Texas 76458

Opinion No. KP-0455

Re: Determination of an "excessive discount" under Alcoholic Beverage Code subsection 102.07(c) (RQ-0004-AC)

Dear Mr. Dixon:

You seek our opinion on what constitutes an "excessive discount" under Alcoholic Beverage Code subsection 102.07(c), which prohibits such discounts.¹ You ask on behalf of the Jacksboro Police Department, which has been asked to investigate a local retail liquor store allegedly selling liquor at discounted prices in violation of subsection 102.07(c).² The Jacksboro police chief provides the illustrative fact that a bottle of liquor advertised at $27.00 for a 750ml bottle is discounted at the register and sold for $10.99. Attachment at 1. As an initial matter, we note that we do not answer fact questions or determine whether a criminal offense has been committed in attorney general opinions. See Tex. Att'y Gen. Op. Nos. KP-0281 (2020) at 1 (acknowledging that this office does not find facts in the opinion process), GA-0956 (2012) at 4 ("[W]hether a person has committed a crime in any particular circumstance is a question of fact that cannot be resolved in an attorney general opinion."). Thus, we cannot tell you whether a particular discount is excessive or whether a person has committed an offense by offering a particular discount. We can, however, advise you generally about the meaning of "excessive discount" within subsection 102.07(c).

As a matter of policy, the Alcoholic Beverage Code (the "Code") recites that the Code "is an exercise of the police power of the state for the protection of the welfare, health, peace, temperance, and safety of the people of the state [and] shall be liberally construed to accomplish this purpose." TEX. ALCO. BEV. CODE § 1.03. The Code further recites that it exclusively governs "the manufacture, sale, distribution, transportation, and possession of alcoholic beverages" unless it specifically provides otherwise. Id. § 1.06. Title 4 of the Code, containing regulatory and penal provisions, includes chapter 102, which governs intra-industry relationships.³ See generally id. §§ 102.01–.82 ("Intra-Industry Relationships"); see also Cadena Comercial USA Corp. v. Tex. Alcoholic Beverage Comm'n, 518 S.W.3d 318, 326 (Tex. 2017) (describing chapter 102 as providing "a comprehensive framework for regulating everything from overlapping ownership among the three tiers down to specific financial transactions and gifts and promotions"). In this context, section 102.07 prohibits certain dealings with retailers or consumers. TEX. ALCO. BEV. CODE § 102.07 (entitled "Prohibited Dealings with Retailer or Consumer"). The provision about which you ask, subsection 102.07(c), provides that "[n]o person who owns or has an interest in the business of a package store or wine only package store, nor the agent, servant, or employee of the person, may allow an excessive discount on liquor."⁴ Id. § 102.07(c). Section 102.07 provides no specific penalty for the violation of any of its provisions, but a person violating a provision of the Code "for which a specific penalty is not provided is guilty of a misdemeanor and on conviction is punishable by a fine of not less than $100 nor more than $1,000 or by confinement in the county jail for not more than one year or by both." Id. § 1.05(a).

As you point out, chapter 102 does not define "excessive discount," despite using the phrase in three places.⁵ See Request Letter at 1; TEX. ALCO. BEV. CODE §§ 102.04(b)(5), .07(a)(7), (c); see also id. § 1.04 ("Definitions"). Also, as noted infra, the Texas Alcoholic Beverage Commission ("TABC") has not defined the term in any of its rules. "When a term is left undefined in a statute, [courts] 'will use the plain and ordinary meaning of the term and interpret it within the context of the statute.'" Hogan v. Zoanni, 627 S.W.3d 163, 169 (Tex. 2021) (quoting EBS Sols., Inc. v. Hegar, 601 S.W.3d 744, 758 (Tex. 2020)). Courts will consult the dictionary to ascertain the common meaning of undefined terms. See Sunstate Equip. Co., LLC v. Hegar, 601 S.W.3d 685, 697 (Tex. 2020). The term "excessive" is commonly defined to mean "exceeding the usual, proper, or normal." WEBSTER'S THIRD NEW INT'L DICTIONARY 792 (2002). In the context of pricing, the term "discount" commonly means "a reduction from a price made to a specific customer or class of customers." Id. at 646; see also MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY 357 (11th ed. 2004) (defining "discount" to mean "a reduction made from a regular or list price"). With these common meanings, a court would likely conclude that an "excessive discount" is a reduction from a regular price that is more than what is usual, proper, or normal.

As we noted previously, the TABC addresses discounts in certain instances but has not defined "excessive discount" for purposes of subsection 102.07(c). The TABC "shall inspect, supervise, and regulate every phase of the business of manufacturing, importing, exporting, transporting, storing, selling, advertising, labeling, and distributing alcoholic beverages, and the possession of alcoholic beverages for the purpose of sale or otherwise." TEX. ALCO. BEV. CODE § 5.31(a). The TABC is authorized to "prescribe and publish rules necessary to carry out the provisions" of the Code and may generally "exercise . . . all powers incidental, necessary, or convenient to the administration" of the Code.⁶ Id.

The Legislature also charged the TABC with "making policy decisions regarding marketing practices regulations and for communicating those decisions to . . . the alcoholic beverage industry" through a formal process documented in a precedent manual or a formal advisory. Id. § 5.57(a), (d)(2). Under this authority, TABC advises that consumer discounts are permissible based on quantity purchasing under certain guidelines.⁷ While we are aware of at least one administrative matter that examines whether particular adjustments from the general range of normal pricing constituted legitimate business reasons for steep discounts and were not excessive, we are unaware of any rule or formal policy document generally advising the industry on how to determine what constitutes an "excessive discount." See generally Tex. Alcoholic Beverage Comm'n v. Spec's Fam. Partners, Ltd., Nos. 458-16-3124, 458-17-1741, 458-17-1742, 458-17-1743, 2017 WL 2831411, at *26–28 (filed June 23, 2017) (considering witness testimony proffering business reasons for discounts in the context of the prohibition of the discount to retailers in subsection 102.07(a)(7), to include such things as improper temperature, shelf life, new products, and improper labels or packages). Absent TABC guidance, we can advise you only that a court would likely conclude that, for purposes of subsection 102.07(c), reducing a regular price by more than what is usual, proper, or normal under the circumstances would be an "excessive discount" under the common meaning of the term.

¹ See Letter from Honorable M. Brad Dixon, Jack Cnty. Att'y, to Off. of the Att'y Gen. at 1 (July 31, 2023) ("Request Letter"). This opinion is limited in scope to the question raised. Whether prohibiting an excessive discount is the same as setting a price is a question best left to the Legislature in its constitutional role to determine regulatory powers for state agencies.

² See Attached Letter from Scott W. Haynes, Chief of Police, Jacksboro Police Dep't, to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (July 28, 2023) (hereinafter "Attachment").

³ See CANarchy Craft Brewery Collective, L.L.C. v. Tex. Alcoholic Beverage Comm'n, 37 F.4th 1069, 1071 (5th Cir. 2022) (serving up a top-shelf, spirited opinion acknowledging that a primary aim of the Code is "to prevent certain overlapping relationships between those engaged in the alcoholic beverage industry at different levels, or tiers" (citation omitted)).

⁴ Package store permits are governed by chapter 22 of the Code. See generally TEX. ALCO. BEV. CODE §§ 22.01–.19. The "excessive discount" language was first applied to a package store or wine only package store in a 1955 amendment to subsection 102.07(c)'s statutory predecessor. See Act of June 7, 1955, 54th Leg., R.S., ch. 433, § 1, 1955 Tex. Gen. Laws 1149, 1149.

⁵ Two other provisions in chapter 102 use the phrase "excessive discount." See TEX. ALCO. BEV. CODE §§ 102.04(b)(5) (prohibiting an "excessive discount" to a permittee), 102.07(a)(7) (prohibiting "an excessive discount to a retailer"). The Legislature has in the last three legislative sessions considered, but not enacted, legislation that would eliminate the term in subsections 102.04(b)(5) and 102.07(a)(7) and repeal subsection 102.07(c) altogether. See Tex. H.B. 4054, 88th Leg., R.S. (2023); Tex. S.B. 196, 87th Leg., R.S. (2021); Tex. H.B. 3791, 86th Leg., R.S. (2019).

⁶ For instance, a TABC rule addresses coupons and rebates. See 16 TEX. ADMIN. CODE § 45.101 (2022) (Tex. Alco. Bev. Comm'n, Rebates and Coupons).

⁷ See Texas Alcoholic Beverage Commission Marketing Practices Advisory – MPA014 (Nov. 21, 2023).

SUMMARY

Alcoholic Beverage Code subsection 102.07(c) provides that no "person who owns or has an interest in the business of a package store or wine only package store, nor the agent, servant, or employee of the person, may allow an excessive discount on liquor." Absent a definition from the Alcoholic Beverage Code or guidance from the Texas Alcoholic Beverage Commission, the common meaning of the term "excessive discount" is a reduction from a regular price that is more than what is usual, proper, or normal. Accordingly, a court would likely conclude that, for purposes of subsection 102.07(c), reducing a regular price by more than what is usual, proper, or normal would be an "excessive discount" under the common meaning of the term.

Very truly yours,

KEN PAXTON
Attorney General of Texas

BRENT WEBSTER
First Assistant Attorney General

LESLEY FRENCH
Chief of Staff

D. FORREST BRUMBAUGH
Deputy Attorney General for Legal Counsel

AUSTIN KINGHORN
Chair, Opinion Committee

CHARLOTTE M. HARPER
Assistant Attorney General, Opinion Committee