A Black night club owner in Western Illinois and PepsiCo seem to be the unlikeliest pair to end up in the same regulatory predicament, but as they say truth is stranger than fiction.
I represented this night club owner who obtained their liquor license after a tough two-year battle. Along the way we encountered a lack of evidence and a lack of due process afforded my client. It is up to another body and not me to decide if race was a factor in this process and without not wanting to present evidence in this post, I will not conclude on this issue in public.
What struck me as odd was throughout this process, my client was denied a license based on what the regulators believed could happen if this night club was given a license. And hence a license was not issued. The license was subsequently issued when the Illinois Liquor Control Commission overturned the city’s license denial, and forced the city’s hand.
But it goes back to my main point, in my opinion the night club was essentially denied a license not based on solid empirical evidence, but based on what the regulator thought. Instead of issuing a license at a location without a troubled history and to an individual with no criminal issues, the mayor denied the license. If there were issues after obtaining the license, the regulator based on empirical evidence could take way the license if there was trouble.
Instead, the mayor chose based on his thoughts and without empirical evidence to deny a nightclub owner his rightful spot in the marketplace.
A similar fate may befall PepsiCo’s Blue Cloud Distribution. Many regulators are worried that Blue Cloud, which distributes alcohol could be taking advantage of nefarious practices to enhance their place in the market.
The fear is based on the power of PepsiCo, which along with Pepsi soft drinks, owns a large chips portfolio through Frito Lay. In the chips world it is legally permitted for a chips manufacturer to pay slotting fees to a retailer in exchange for beneficial shelf space. In the alcohol world this practice is prohibited.
According to some in the industry, Blue Cloud could take advantage of the power of PepsiCo’s slotting fees for non-alcoholic goods to enhance their market share. In other words, they are utilizing indirect payment of slotting fees to build their marketplace at the expense of others.
Problematically, this is a theory/opinion and not a fact. There exists in the marketplace no empirical evidence to support this conclusion.
Similar to the black night club owner, Blue Cloud’s place in the market is threatened by what regulators think versus what actually exists.
Everyone looks at Blue Cloud and feels the threat of their size and what could happen in the marketplace. With PepsiCo’s size they are a behemoth in the marketplace.
I see Blue Cloud and I also see something different; that is, we could be going down a dangerous road for regulating. The same regulatory challenges Blue Cloud faces in obtaining a license are the same regulatory challenges my night club owner client faced. We should not look at the result and say it is wrong to deny a black night club owner a license, but it is not wrong for Blue Cloud.
Instead, what we should be asking is whether the process is applied fairly, because if it is not, and regulators can deny someone like Blue Cloud a spot in the marketplace based on what could happen and what they think, and this replaces empirical evidence as the standard, then I will guarantee you more black night clubs run the danger of not obtaining a liquor license.