Here’s How to Regulate Alcohol Delivery
By now, it is a familiar story: In the wake of the COVID-19 global pandemic, to-go and delivery alcohol became part of the “new normal” of modern America. Today, the majority of states allow alcohol delivery in some form, and delivery is overwhelmingly popular with consumers. But despite these headwinds, there are those who remain skeptical about the concept of alcohol being brought directly to a customer’s doorstep.
These opponents of delivery have not succeeded in securing the outright reversal of any COVID-19-era alcohol reforms, but the debate has now shifted to the regulatory arena. This is important because a poorly thought-out and overly onerous regulatory regime can handicap a service like delivery to the point of non-viability. Given the intoxicating properties of alcohol, there is widespread agreement that some form of rules governing its delivery are appropriate. What these rules look like, however, and how they are structured, is far less settled.
Alcohol has been regulated at the state and local level since Prohibition ended nearly a century ago. As technology advances—and unexpected developments like global pandemics arise—it is important that regulations keep pace. Although delivery bears similarities to traditional brick-and-mortar alcohol sales, it also has distinct differences. Understanding these nuances can point the way toward a rational legal regime for alcohol delivery that both protects public health and safety and ensures that consumers can benefit from this popular service.
Specifically, policymakers need to think through the following key topics: delivery licenses and permits; ID verification; overserving; driver training and qualifications; insurance; and hours of sale. Taking each of these in turn can allow us to construct a set of “best practices” for appropriately regulating the delivery of alcoholic beverages.
Delivery Licenses or Permits
In America, alcohol is predominantly regulated under a licensing system. To sell alcohol, businesses such as restaurants, liquor stores, and grocery stores need to first obtain a license permitting them to do so. The rationale behind this licensing regime is simple: It allows the government to revoke or suspend the license—and thereby revoke or suspend the ability to sell alcoholic beverages—if a licensee proves to be careless.
In addition to retailers, alcohol producers and wholesalers also are required to obtain permits to operate. Given this structure, it is important to ask whether businesses that deliver alcohol—that is, take the alcohol from a retailer to a consumer’s door—should also be licensed. While policy scholars have debated the virtues and drawbacks of the licensing system, the reality is that it is not going anywhere anytime soon. Therefore, it is appropriate and congruent to require permits or licenses for alcohol delivery.
Licenses should be straightforward to obtain, have a reasonable cost, and be attached to the delivery companies rather than individual drivers. Requiring every single driver for a delivery company to carry a license would create a needless administrative nightmare and disincentivize many individuals from becoming delivery drivers. By attaching the license to the delivery company, the government would be able to revoke or suspend that company’s right to deliver alcohol if it ran afoul of state law. The license would operate similarly to the brick-and-mortar arena in that every grocery store clerk and table runner at a restaurant is not required to have an individual license—rather, the businesses themselves usually carry the license.
States also need to be careful to not use licensing fees as a backdoor mechanism for generating revenue. Unfortunately, some states have done just that, attempting to attach fees of up to $20,000 for a delivery license. Licensure should not operate as a clandestine tax, but instead as the regulatory enforcement tool it was designed to be.
ID Verification
Perhaps the most specific health and safety concern associated with alcohol delivery is the worry that delivery could provide a conduit for underage children to obtain alcohol. Although empirical evidence has not supported this concern, media stories have cropped up suggesting poor compliance rates among delivery companies when it comes to selling to minors.
Delivery companies themselves, of course, have a significant incentive to deter underage sales lest they lose their ability to sell alcohol on account of a revoked license. Because of this, the companies have proven adept at increasing their compliance rates and reducing underage sales. To combat the risk of underage access, delivery companies require their drivers to scan the IDs of would-be purchasers to ensure they are over 21 years of age.
In addition to this worthwhile practice, delivery drivers should also be required to engage in a visual check of the customer’s ID. This step is vital, as a visual check can determine whether the scanned ID actually belongs to the would-be buyer. Regulators can play a role in this sphere by providing guidance on the features that should be checked to ensure an ID is authentic, but they should resist the temptation to merely mandate complex driver training courses to impart this education (discussed below).
Instead, a better approach would be for regulators to work with delivery companies to implement the use of repeated “push notifications” within a delivery app platform that prompt drivers to engage in a visual assessment of a buyer’s ID. This type of recurring, in-the-moment nudge to visually scan an ID—with some helpful reminders on what to look for—is likely to prove far more effective than a one-time driver training course administered 10 months ago.
Other ideas, such as experimenting with monetarily compensating drivers for returning alcohol to its origin point if the buyer lacks a valid ID or exploring the use of biometric age verification in the form of facial recognition software for alcohol purchases, should also be encouraged in the years ahead.
Delivery companies and government can work together in this area, and the thoughtful use of technology—whether it simply be in the form of push notification or other innovations—offers the best way to prevent underage access.
Overserving
In addition to prohibiting underage sales, states also forbid the sale of alcohol to intoxicated customers. Laws against overserving can take multiple forms, but the most commonly known version is so-called dram shop liability. These laws hold bars and other alcohol retailers responsible for third-party harm caused by intoxicated patrons (such as a bar fly getting into a drunk driving accident on the way home from an all-nighter).
Beyond dram shop laws, many states also have what are known as “sales to intoxicated persons” (SIP) laws. SIP laws make the sale of alcohol to an intoxicated person itself a crime—regardless of whether that person then goes on to harm a third party.
Distinguishing between dram shop laws and SIP laws can be particularly relevant in the delivery context. This is because, unlike the traditional dram shop example of the drunk driving accident on the way home from the bar, delivery actually eliminates the need to get behind the wheel of a car while intoxicated. Thus, the main risk in terms of overserving in the delivery context is likely to be a delivery customer or acquaintance drinking to the point of injuring themselves—in other words, first-party rather than third-party harm—from a condition like alcohol poisoning.
Furthermore, dram shop liability in the delivery context could raise a whole host of complicated legal causation issues in terms of enforcing such laws. To appreciate why this is the case, imagine that a hypothetical person X has alcohol delivered to their home. If they later tried to drive and got into a drunk driving accident, how would law enforcement be able to definitively determine whether the alcohol that caused the drunkenness was the product that was delivered or other alcohol that person X already had in their fridge?
Likewise, what if person X invited friend Y over to watch a football game and drink beer? In such a situation, a delivery driver who sells to person X might never even lay eyes on friend Y. Holding that driver responsible for the actions of an individual he never even saw is far different than enforcing dram shop laws against a bartender who repeatedly serves a customer shots of whiskey over the course of a four-hour bender.
Because delivery drivers only interact with a customer for a fleeting transaction that lasts mere minutes, they have an extremely limited window within which to assess an individual’s intoxication level, not to mention its cause (i.e., maybe the consumer’s intoxication is from cannabis and not alcohol).
Even for pure-SIP laws outside the dram-liability context, policymakers need to be careful to not create perverse incentives for drinkers. For instance, if a delivery driver refuses to sell to an inebriated buyer who orders delivery alcohol, that customer could become frustrated and attempt to drive himself to the store to obtain alcohol. In this way, disproportionate enforcement of SIP laws in the delivery context could do more harm than good.
Given these various considerations, policymakers need to think carefully and judiciously through the application of overserving laws to the delivery context. Simply importing the standard brick-and-mortar versions of these rules could create a host of unintended and negative consequences.
Driving Training and Qualifications
For drivers to become adept at complying with overserving laws and avoiding underage sales, they will need some level of training. What type of training is appropriate for delivery drivers, however, has generated some controversy.
Certain lawmakers have advocated for delivery drivers to take a Responsible Beverage Service (RBS) course, which is the traditional training program for waiters and bartenders. Unfortunately, RBS is poorly tailored to the delivery context. RBS courses cover topics such as proper “intervention techniques” for handling an inebriated customer, education on “how alcohol affects the body” over time, and primers on drunk driving laws.
But as noted above in the context of overserving, delivery drivers merely operate at the point-of-sale—in most cases, a customer’s doorstep—in a transaction that lasts no more than a few minutes. Training drivers on how alcohol impacts the body over time, or on the ins and outs of drunk driving laws, is irrelevant at best—and deleterious at worst, if it overloads them with needless information that crowds out more delivery-specific education.
Instead, driver training should be targeted and tailored to delivery. Some states may be inclined to develop their own training curriculum for delivery drivers, but this is fraught with drawbacks in the delivery context given that each delivery company uses its own app-based platform. A one-size-fits-all training that does not take into account how a specific delivery app works will be both ineffective and cumbersome.
A more promising option is to allow delivery companies to develop training courses that align with their individual technology platforms. The curricula for these training courses can then be submitted to regulators when the company applies for a delivery license or permit. In this way, government can play a right-sized role in the process by reviewing and approving the courses developed by each company.
A final issue is what age delivery drivers must be to deliver alcohol. While many states permit 18-year-olds to serve alcohol as waiters or grocery store clerks, one could argue that the higher accident rates of 18-year-old drivers compared to 21-year-olds militates in favor of delivery personnel reaching the legal drinking age before being permitted to deliver alcohol.
Insurance
All types of delivery companies naturally carry insurance policies for their operations, whether it be the delivery of food and beverages or the delivery of packages. Given the size of many delivery companies, they usually are covered by a general liability policy, which covers claims that arise within the normal course of business. Standard general liability policies exclude coverage for liquor liability, leading somestates to require an endorsement in these policies to provide such coverage. Liquor liability insurance covers dram shop-style claims like those discussed above—that is, claims arising from any injury or damage caused by an intoxicated customer of the business.
Many brick-and-mortar alcohol retailers often select package policies in what’s known as the “program market.” There are numerous available programs for bars and restaurants, and most already include liquor liability. These types of packages could potentially be developed for delivery companies, helping to sort out what coverage is worthwhile (which overlaps with the potential application of dram shop and SIP laws discussed above). A few states have attempted to mandate a specific dollar amount for the level of general liability or liquor liability coverage that delivery companies must carry. This practice is likely unnecessary since companies already have significant incentives to carry sufficient insurance coverage. Unless evidence of under-insurance on the part of delivery companies surfaces, regulators should resist the urge to micromanage specific coverage levels.
Hours of Sale
It is also important to determine the hours within which companies should be allowed to deliver alcohol. This issue has a practical and straightforward solution: Match the hours of sale for alcohol delivery with the legal hours of sale for brick-and-mortar retailers.
Because delivery companies pick up the alcohol they deliver from retailers, it is simply unrealistic to extend delivery hours beyond retailing hours. But it again is important to consider potential perverse incentives caused by efforts to set narrower delivery hours than brick-and-mortar retailing hours. If delivery must cease by 10 pm, while the corner liquor store can stay open to midnight, this could once more spur a customer drinking at home to get behind the wheel to make a late-night liquor run. Based on these various factors, delivery hours should simply mirror traditional retailing hours.
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The Road Ahead
In the years ahead, as policymakers grapple with alcohol delivery, it will be vital for them to strike a proper balance between protecting public health and safety and encouraging innovation. These goals need not be mutually exclusive. In fact, as just one example, technological innovations like alcohol delivery can increase public safety by preventing more drinkers from getting behind the wheel in the first place.
Alcohol delivery is here to stay. But whether it meets its full potential, both in terms of its viability as a business model and its promise of getting intoxicated drivers off the road, will largely be determined by the regulatory model that is developed for the industry. Best practices that are tailored specifically to the delivery context, such as those laid out here, offer the most promising way forward.
This post is based on a larger research paper published by the R Street Institute. To learn more about delivery best practices, the paper can be found here.