Craft Brewery Takes NJ To Court Over 'Unlawful' Limits On Industry

CLARKSBORO, NJ — A New Jersey craft brewery filed legal action Thursday against the state over restrictions on the industry that recently went into effect. The legal team representing Death of the Fox Brewing Company called the limits on microbreweries "unlawful," motioning for the court to strike down the new regulations.

The New Jersey Division of Alcoholic Beverage Control (ABC) issued regulations that significantly limit activities on the premises of microbreweries. The ABC's ruling cited a need to differentiate microbreweries from bars and restaurants, which typically require more expensive licensing. But leaders in the craft-brewery industry say the restrictions put their businesses in peril. Read more: Microbreweries In Peril Due To New NJ Restrictions, Industry Says

The ABC issued its special ruling in 2019, but the regulations went into effect July 1.

The regulations limit the number of on-site events and private parties that microbreweries can hold. The ABC's special ruling also states that microbreweries can only let patrons consume their products on-site if they've taken a tour of the brewery. Repeat customers don't have to take a tour if they've gone on one in the past year, but they must complete one annually and the business must document that they did so.

The Pacific Legal Foundation, a public-interest law firm that stresses "individual liberty," is representing Death of the Fox pro bono. The foundation claimed the ABC's special ruling represents "a transparent attempt to favor one kind of business—bars and restaurants—over another—craft breweries." The legal team also claims that the ABC failed to submit its rules for public notice and comment to the State Legislature for review, which is required under New Jersey's Administrative Procedure Act.

• Related article: 'Unreasonable' Microbrewery Rules Would Be Lifted Under New NJ Bills

The ABC is part of the New Jersey Office of the Attorney General. A spokesperson for the attorney general's office declined comment on the appeal because it's pending litigation.

The special ruling came amid a years-long battle between the microbrewery and bar/restaurant industries. New Jersey's microbrewery scene has quickly grown in recent years, and many have become community hubs every bit as much as bars. But limited-brewery licenses carry different privileges than those of bars or restaurants, and they often come at a cheaper price than what bars and restaurants pay for licenses to allow alcohol consumption on their premises.

Restrictions on craft breweries include the following:

• Microbreweries can only hold up to 25 on-site events and 52 private parties per year. They can only attend 12 off-site events annually.
• No selling food or collaborating with a local food vendor. Microbreweries may provide menus from local restaurants, but they can't have an exclusive relationship with them. Microbreweries can only serve "de minimis" types of foods, such as nuts or packaged crackers.
• A microbrewery can only have two television screens — none larger than 65 inches. Businesses with more than two screens can only use the extras to display information about the brewery and its products.
• No happy-hour or specially priced drinks on-premises, no mixing specialty cocktails, and no brewing or selling coffee.

The ABC originally tried to impose the new restrictions in September 2018 but suspended them a month later after an outcry from the industry. But in the new restrictions, state officials said they "must balance the concerns of the growing limited brewery sector comprised of 100 licensees against the issues and concerns facing the bars and restaurants that collectively hold approximately 6,000 retail consumption licenses."

The ABC has said that microbreweries who want to focus more on promoting consumption on their premises in tasting rooms, rather than creating products for widespread wholesaling, should couple a limited-brewing license with a plenary retail consumption license, which allows businesses to sell alcohol for on-site consumption.

The Pacific Legal Foundation doesn't buy that argument.

"Calling breweries and other alcohol license-holders competitors is a stretch, however, as these breweries can sell only their own product," the foundation said in a statement. "And no matter how popular a limited brewery becomes, it cannot sell more than its license allows."