WSR 02-06-038

PROPOSED RULES

GAMBLING COMMISSION


[ Filed February 26, 2002, 4:01 p.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 01-23-091.

Title of Rule: Manufacturer/distributor credit, amendatory sections WAC 230-12-330 Availability of gambling equipment and related products and services -- Prices -- Contracts -- Discounts -- Restrictions -- Expectations, 230-12-340 Sale of gambling equipment, devices, supplies, paraphernalia, and related services -- Credit prohibited -- Exceptions, and 230-30-106 Punchboard and pull-tab flares restrictions -- Standards -- Substitute flares.

Purpose: To restructure procedures regarding manufacturers which hold a trade account with a gambling equipment distributor, who is delinquent with payments. And to allow special pricing transactions to be made over a period of seven consecutive days, rather than only one day.

Statutory Authority for Adoption: RCW 9.46.070.

Summary: WAC 230-12-340, currently, if a distributor is late making payments toward a trade account with a manufacturer, the manufacturer notifies agency staff. Staff sends letters to all manufacturers notifying them that the distributor is delinquent and any sales to such distributor shall be made on a cash basis only. Frequently, after the notice of delinquency is sent by staff, the delinquent account is immediately brought current. Staff distribute a second notice to manufacturers that sales to the distributor no longer need to be on a cash basis only. This process requires significant time and paperwork by staff. The proposed amendment requires the manufacturer holding a delinquent distributor account to notify other manufacturers that a distributor is delinquent with payments, rather than staff distributing the notice. Manufacturers will still be required to make sales on a cash basis only to the delinquent distributor, until the account is brought current. The manufacturer holding the delinquent account will then notify other manufacturers when the account is brought current, rather than staff distributing the notice.

Reasons Supporting Proposal: See Purpose and Summary above and Explanation of Rule below.

Name of Agency Personnel Responsible for Drafting: Susan Arland, Lacey, (360) 486-3466; Implementation: Rick Day, Lacey, (360) 486-3446; and Enforcement: Bob Berg, Lacey, (360) 486-3452.

Name of Proponent: Staff, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: Also, see Purpose and Summary above.

WAC 230-12-330, this rule requires manufacturers and distributors to sell gambling products and services for the same price and terms to all licensees wishing to make a purchase. Products and services may be sold at a discount when certain procedures, as set forth in this rule, are followed. Currently, discounts are only allowed on a single transaction and cannot be given over a period of time. The proposed amendment would allow for special pricing transactions to be made over a period of seven consecutive days. This would be accomplished via blanket orders, which could be released and invoiced at different intervals during a seven-day period. The proposed amendment allows greater flexibility for licensees choosing to offer discounts.

WAC 230-30-106, currently, merchandise prizes are assigned winning numbers consecutively, starting with the highest value prize being assigned the lowest available winning number. This requirement will stay the same; however, language was added to clarify that prizes shall be numbered consequently, in order of value. This will ensure consistency in accounting procedures among licensees and make auditing these games easier for staff.

Proposal Changes the Following Existing Rules: See Purpose, Summary, and Explanation of Rule above.

No small business economic impact statement has been prepared under chapter 19.85 RCW. Proposal is exempt under RCW 19.85.025(2); therefore a small business economic impact statement is not required.

RCW 34.05.328 does not apply to this rule adoption. This agency does not choose to make section 201, chapter 403, Laws of 1995, apply to this rule adoption.

Hearing Location: The Heathman Lodge, 7801 N.E. Greenwood Drive, Vancouver, WA 98662, (360) 254-3100, on April 12, 2002, at 9:30 a.m.

Assistance for Persons with Disabilities: Contact Shirley Corbett by April 1, 2002, TDD (360) 486-3637, or (360) 486-3447.

Submit Written Comments to: Susan Arland, Rules Coordinator, P.O. Box 42400, Olympia, WA 98504-2400, (360) 486-3466, fax (360) 486-3625, by April 1, 2002.

Date of Intended Adoption: April 12, 2002.

February 25, 2002

Susan Arland

Rules Coordinator

OTS-5444.1


AMENDATORY SECTION(Amending WSR 98-08-011, filed 3/18/98, effective 7/1/98)

WAC 230-12-330   Availability of gambling equipment and related products and services--Prices--Contracts--Discounts--Restrictions -- Exceptions.   Manufacturers and distributors shall make their products and services available to all licensees without discrimination. Except as authorized by this section, gambling equipment, devices, related paraphernalia or supplies, and services shall be offered to any licensee wishing to purchase such, for the same price and terms. The following restrictions, procedures, and exceptions apply to prices and terms related to sales of gambling-related products or services:


((What are the restrictions on prices of gambling products and services?)) Pricing shall be consistent - exceptions.


(1) Discriminatory prices are prohibited. Prices are considered discriminatory when identical or similar items or services are offered to different persons for a different price or under different terms or conditions: Provided, That prices set under the following criteria shall not be considered discriminatory:

(a) Prices that are established in advance and available for review by the commission and customers prior to accepting a sales order utilizing such. For purposes of this section, prices are deemed to be established and available when they have been mailed or transmitted by facsimile to the commission at least forty-eight hours prior to completing sales transactions or accepting orders for products or services;

(b) Separate and different price schedules established by manufacturers or distributors for transactions conducted with licensees at different marketing levels when such prices are progressively lower at each marketing level above the operator level;

(c) Prices that are based upon the delivery location of an item or service. If the price of an item or service is based upon "free on board" (FOB) terms at a specific location, such price may be varied based upon delivery at a different location, if such is justified by objective evidence. The burden of proof regarding such price differentiation is borne by the seller. Such prices are subject to all other requirements of this section; and

(d) Short-term price reductions or "sales" by manufacturers or distributors are authorized when every licensee is afforded an opportunity to participate. For purposes of this section licensees will be deemed to have been afforded an opportunity to participate when:

(i) All prices and terms are clearly posted at all sales outlets for the benefit of operators and provided to all customers serviced by mobile sales representatives;

(ii) Manufacturers provide full details of the sale to all licensed distributors, including prices and terms, at least forty-eight hours prior to accepting orders for products or services being offered at a sale price. Such notice shall be by mail or telephone facsimile; and

(iii) Any limitations or conditions of the sale are clearly stated in advertisements or notices for such sale.


((Can licensees enter into contracts that either require or restrict use of gambling-related products or services?)) Contracts restricting sales not allowed.


(2) Except as set forth in WAC 230-12-230, licensees shall not enter into contracts that directly or indirectly restrict the distribution or use of gambling equipment, devices, paraphernalia, supplies, or services: Provided, That holders of proprietary rights to products or services that have been gained through patents, copyrights, trademarks, or other similar rights bestowed by state or federal law or by courts shall be allowed to enter into license agreements with manufacturers that restrict the ability to manufacture or distribute products or services if all other requirements of this section are met. The following transactions are prohibited:

(a) An operator or distributor shall not agree to deal in, purchase, sell, lease, or operate any particular brand or brands of gambling device or equipment to the exclusion of any other brand of gambling device or equipment;

(b) A manufacturer or distributor, or licensed representative or employee thereof, shall not sell or offer to sell, lease, or loan any gambling-related product, service, or merchandise if such is contingent upon the purchase or order of another product, service, or merchandise; and

(c) Except as set forth in this subsection, no person shall enter into any agreement, express or implied, that prohibits a person from selling or providing any gambling-related product or service within a particular geographic area: Provided, That -

(i) Licensed manufacturers, distributors, and service suppliers may enter into such agreements with its licensed representative; and

(ii) An operator may enter into an agreement with a licensed service supplier that is supplying only management or consulting services when such agreement only restricts the service supplier from supplying the same or similar services to other operators within a specified geographic area.


((Are discounts allowed?)) Discounts.


(3) Manufacturers and distributors may offer discounts of base prices that are authorized by this section when such discounts are nondiscriminatory. For purposes of this title, discounts will be deemed to be nondiscriminatory when:

(a) Offered to all licensees on the same terms;

(b) The scheme upon which the discount is based is in writing and submitted to the commission at least forty-eight hours prior to being offered;

(c) The discount applies ((only to a single sales transaction and does not relate to a level of sales made over a period of time)) to multiple sales transactions, which are made over a period of time not to exceed one week. For purposes of this section, one week shall be defined as seven consecutive days; and

(d) The level of a discount is based only upon any of the following criteria:

(i) The amount of product sold or the dollar value of the sale;

(ii) Whether the purchaser makes full payment in cash at time of sale;

(iii) Whether the purchaser makes final payment for a transaction within a predetermined time period for sales made under "trade account" terms; and

(iv) Any other structure or terms, subject to preapproval by the director. The manufacturer shall pay for the approval process and any additional requirements necessary to assure compliance with this section.


((Can manufacturers or distributors elect to limit their sales to a specific market level?)) Limiting sales to specific market levels.


(4) A licensed manufacturer or distributor may elect to limit sales of products and services to licensees at any marketing level. For purposes of this section, marketing levels are defined as manufacturer, distributor, and operator. If a manufacturer or distributor elects to make sales to any licensee at a marketing level, sales must be made to all licensees at the same level: Provided, That if the distributor is in violation of WAC 230-12-340, the manufacturer shall not be required to make sales to that distributor: Provided further, That transactions between a manufacturer and distributor, when both are owned and operated by the same persons, are considered internal to that business. For purposes of this section, internal transactions are not considered sales at a different marketing level. All other restrictions of this section apply to such sales. For example:

(a) A licensed manufacturer may elect to sell or provide products and services only to distributors; or

(b) A licensed distributor may elect to sell or provide products and services only to operators.


((Can manufacturers or distributors establish minimum purchase requirements?)) Minimum purchasing requirements not allowed - exceptions.


(5) Manufacturers or distributors shall not set minimum purchase requirements for any product or service, except as authorized below:

(a) Minimum purchase requirements are not allowed for purchases made under prepaid or cash on delivery (COD) terms: Provided, That manufacturers may establish and charge a reasonable fee for services to handle an order for products or services below a specified level, if such policy is in writing and provided to distributors prior to accepting orders;

(b) Minimum purchase restrictions may be set for transactions between manufacturers and distributors that are conducted using trade account terms, as authorized by WAC 230-12-340;

(c) Discounts may be set based upon a minimum purchase amount as authorized by subsection (3) of this section; and

(d) Minimum purchase restrictions may be placed on products being offered for a bargain or "sale" price if a bargain or "sale" price is established for any and all levels of purchases under such terms.


((Are there restrictions on the sale of nongambling products or services sold to licensees by manufacturers or distributors?)) Sales of nongambling products and services.


(6) A manufacturer or distributor shall not grant licensees, nor shall such licensees accept, more favorable prices, credit terms, or other arrangements than those extended to nonlicensed persons purchasing identical or similar nongambling goods or services. The price of nongambling goods or services sold to licensees shall be in conformity with the open market price in the locality where sold. The terms of such sales shall not exceed those normally granted in accordance with the customary business practice of the particular trade in the locality where such sales are made.


((Do the restrictions set forth in this section apply to class III transactions?)) Transactions with tribal casinos.


(7) This section shall not apply to transactions conducted with tribal governments operating class III casinos under tribal/state compacts or with management companies operating such casinos on the behalf of tribal governments.

[Statutory Authority: RCW 9.46.070(11). 98-08-011, 230-12-330, filed 3/18/98, effective 7/1/98. Statutory Authority: RCW 9.46.070 (14) and (20). 97-20-026, 230-12-330, filed 9/22/97, effective 1/1/98.]

OTS-5445.1


AMENDATORY SECTION(Amending Order 365, filed 10/9/98, effective 1/1/99)

WAC 230-12-340   Sale of gambling equipment, devices, supplies, paraphernalia, and related services -- Credit prohibited -- Exceptions.   The use of credit in the sale of gambling equipment, devices, related supplies or paraphernalia, and services is prohibited. Except as authorized by this section, all sales of such shall be transacted on a cash basis. The following definitions, restrictions, and procedures apply to this section:

(1) ((For purposes of this section,)) All licensed manufacturers and distributors may sell gambling equipment such as dispensers, bingo blowers, roulette wheels, etc., and gambling-related support equipment through capital lease agreements or other financing arrangements to operators subject to the following conditions and requirements:

(a) The cost of a single item, or group of similar and related items included in the sale, exceeds one thousand dollars;

(b) The term of the contract does not exceed forty-eight months;

(c) All terms of the contract are in writing and copies of such agreements are provided to the commission within thirty days of execution;

(d) The manufacturer or distributor retains only a security interest in the item sold and cannot obtain any ownership interest in the licensee, or exercise any control over the use of the item in the licensed activity;

(e) The amount of payments is not based on the size or level of gambling activity and is determined by use of a standard amortization schedule for the term and stated interest rate;

(f) The interest rate charged by the contract is set at the time of sale and does not vary during the term of the contract; and

(g) The contract does not require the purchaser to directly or indirectly purchase any other products or services from the seller.


Definitions.


(2) The following definitions only apply to subsections (3) through (9) of this section:

(a) "Manufacturers and distributors" refers only to the manufacturers and distributors of pull-tabs, punch boards, and bingo supplies.

(b) A "cash basis" means full payment is received by the seller on or before actual delivery of the product or service to the purchaser;

(((b))) (c) A "trade account" is a payment system that allows distributors to place orders for inventory or services from manufacturers or distributors and to make payment for such within a specific period of time after shipment of the product or completion of the service;

(((c))) (d) "Prescribed time period" is the maximum period of time a distributor has to pay for purchases of goods or services made under trade account terms prior to being restricted to cash basis terms. The time period begins when a product is shipped or service completed and ends on the date payment is actually delivered to the manufacturer or distributor, or if delivered by the U.S. mail, the U.S. postmark date of the envelope containing the payment. For purposes of this section, prescribed time period means no later than sixty days after shipment of the products or completion of the services ((for all sales made on or after January 1, 1998)).


Authorized transactions.


(((2))) (3) For purposes of this WAC title, the following transactions are authorized and shall not be deemed as credit or loans of money when applicable requirements are met:

(a) Purchases of goods and services from manufacturers or distributors when paid for by checks that meet the requirements of WAC 230-12-350;

(b) Purchases of goods or services by distributors from manufacturers or other distributors when utilizing trade account terms and the requirements of subsection (((3))) (4) of this section are followed;

(c) Promissory notes between manufacturers and distributors for payment of debts incurred prior to the effective date of this section ((when such notes are issued under the conditions set forth in this section));

(d) Purchases made under capital lease agreements when the requirements of this section are followed;

(e) All transactions between manufacturers or distributors and tribal governments or companies certified to manage class III gambling activities operated under a tribal/state compact are exempt from all provisions of this section;

(f) Charitable or nonprofit organizations licensed to conduct bingo may purchase bingo cards and bingo supplies from distributors and/or manufacturers and receive such without making immediate payment if payment is made, by check or cash, no later than thirty days after delivery of the product. If the distributor or manufacturer does not receive payment within thirty days, they must immediately restrict the licensee to sales on a cash on delivery basis until payment is received. Licensees paying for bingo supplies on terms other than a cash basis must document on the purchase invoice the date paid and the check number; and

(g) The sales of nongambling equipment, fixtures, supplies, or commodities to licensees are exempt from all provisions of this section when the requirements of WAC 230-12-330 are met.


Trade account conditions.


(((3))) (4) Manufacturers and distributors may allow distributors to establish "trade accounts" to purchase gambling-related inventory or services without making immediate payment under the following conditions:

(a) Trade account terms, if offered to any distributor, shall be made available to all distributors without discrimination: Provided, That trade accounts may be restricted to distributors that:

(i) Meet objective credit criterion established by a manufacturer or distributor. Such criterion must be in writing, available to the commission for review, and provided to any distributor upon request. A manufacturer or distributor may include a distributor's payment history as a part of the trade account approval criterion;

(ii) Meet minimum purchase requirements established by the manufacturer: Provided, That the minimum purchase requirement shall not be greater than five hundred dollars per transaction;

(b) Trade account terms shall not allow a manufacturer or distributor to gain any ownership or financial interest in a licensee. This section is not intended to prohibit or restrict a manufacturer or distributor from gaining a security interest in inventory sold for credit, as authorized by the Uniform Commercial Code: Provided, That this section shall not allow a manufacturer to obtain an interest in inventory sold by any other manufacturer under trade account terms;

(c) A distributor shall make full payment for all goods or services purchased under trade account terms within the prescribed time period. Failure to pay within the prescribed time period may be deemed solicitation of credit by the distributor.


Procedures for past due accounts - notification and sales restrictions.


(((4))) (5) When a distributor fails to pay for goods or services purchased under trade account terms within the prescribed time period, the creditor manufacturer or distributor shall comply with the procedures set forth below. Failure to comply with these procedures may result in the manufacturer or distributor being deemed to have extended credit to the distributor. The following procedures must be followed when a distributor fails to make required payments:

(a) Notify the delinquent distributor ((and the commission)) of failure to pay by telephone no later than the end of the next business day;

(b) Restrict sales of all goods and services to the delinquent distributor no later than the end of the third business day after the default: Provided, That sales may be made to a delinquent distributor on a cash basis only;

(c) Notify the commission and all licensed manufacturers and distributors in writing by letter, facsimile or e-mail no later than the end of the fifth business day after default. Written notification shall include at least the following:

(i) The distributor's name;

(ii) The invoice or shipping order numbers involved in the transaction;

(iii) ((The dollar amount of the delinquent account;

(iv))) The date the item was shipped or service was provided; and

(((v) A statement of whether the distributor has filed a complaint regarding billings and whether the amount owed is in dispute;

(vi) Any agreements between the parties to clear the debt, including terms, payment schedule, and any third party guarantors of the debt;

(vii) The interest rate or service charge, if such is charged;

(viii) Whether a security interest in the inventory or any other assets of the licensed distributor or individual owners of the distributor has been obtained or is in effect; and

(ix) Any other information requested by the commission.

(5) If the director does not receive notice that the debtor distributor has corrected the conditions which caused the default prior to the end of the seventh business day after initial notice was received, all licensed manufacturers and distributors will be notified that such distributor has been restricted to cash basis terms. Initial notification shall be by telephone or facsimile on the next business day, followed by written notification within ten days. The manufacturer or distributor shall immediately notify the commission by telephone or facsimile upon receipt of payment. If notified prior to the end of the seventh business day after initially notifying the commission, the director will stop all proceedings and allow the reporting manufacturer or distributor to continue trade account terms without taking further action.

(6) Upon receipt of notification from the commission that a distributor has been restricted, manufacturers and distributors shall immediately cease sales, shipments of products, and providing of services to the delinquent distributor on other than a cash basis.

(7) Any distributor that has been restricted by the director under this section shall remain restricted until all delinquent accounts with any reporting manufacturer or distributor are current and the director has been notified of such. The director shall utilize the following guidelines and procedures for removing trade account sales restrictions:

(a) First delinquent payment within a calendar year - The director shall notify all manufacturers by telephone or facsimile no later than the next business day after receiving notification that a delinquent distributor is current and that trade account sales may continue. Written notification shall be made within ten days; or

(b) Second and subsequent violations within a calendar year - The director may restrict a distributor to a cash basis for a period not to exceed sixty days beginning on the date of notification that a delinquent distributor is current. In this event, the director shall notify the delinquent distributor and all manufacturers and distributors in writing of the date when trade account terms may be continued.

(8) Gambling-related products or services purchased by distributors prior to January 1, 1998, shall be paid in full no later than March 31, 1998. Any distributor failing to comply with this requirement shall be restricted to making purchases on a cash basis until all such accounts are paid in full. The director shall utilize the procedures set forth in subsections (5), (6), and (7) of this section to impose or remove restrictions imposed under this subsection: Provided, That creditor manufacturers and distributors may convert amounts owed by distributors at January 1, 1998, into a promissory note utilizing the procedures and restrictions set forth in this section.

(9) Manufacturers and distributors who elect to convert amounts owed from distributors at the effective date of this section to a promissory note shall utilize the following procedures and restrictions:

(a) Written notification of conversion to a promissory note, including a copy of such note, must be received by the commission no later than March 31, 1998;

(b) The promissory note shall not grant the manufacturer the ability to influence the management of the distributor's business: Provided, That in the case of legal bankruptcy, the terms and conditions of a bankruptcy order shall govern;

(c) The promissory note shall amortize the balance owed over a certain period that does not exceed sixty months;

(d) Manufacturers or distributors electing to grant promissory notes authorized by this section shall make such provisions available to all distributors with outstanding balances at the effective date of this section under the same conditions and terms;

(e) Terms of the promissory note shall require the following:

(i) Minimum monthly payment of the principal;

(ii) Interest rate, if any is imposed;

(iii) Full description of all collateral; and

(iv) Adequate details of the procedures to be followed for late payments and/or default;

(f))) (iv) Any other information requested by the commission.


Cash only sales to delinquent distributors.


(6) Upon receipt of notification from the manufacturer that a distributor has a delinquent account, manufacturers and distributors shall immediately cease sales, shipments of products, and providing services to the delinquent distributor on other than a cash basis.


Notification of payment on past due accounts.


(7) The manufacturer shall notify the commission and all manufacturers and distributors in writing by letter, facsimile or e-mail, no later than the next business day after receiving payment from the delinquent distributor for the outstanding account. Trade account sales may then resume with all manufacturers.

(8) The distributor that was placed on a credit hold shall notify the commission in writing by letter, facsimile or e-mail, no later than the next business day after payment has been made to the manufacturer in which they were delinquent.


Failure to pay promissory notes.


(9)
A creditor manufacturer or distributor shall immediately notify the commission if a distributor fails to abide by the terms of the promissory note and the process being pursued to correct the situation. ((The director may, depending upon circumstances, impose restrictions set forth in subsections (5), (6), and (7) of this section on purchases under trade account terms for the delinquent distributor.

(10) Licensed manufacturers and distributors may sell gambling equipment such as dispensers, bingo blowers, roulette wheels, etc., and gambling-related support equipment through capital lease agreements or other financing arrangements to operators subject to the following conditions and requirements:

(a) The cost of a single item, or group of similar and related items included in the sale, exceeds one thousand dollars;

(b) The term of the contract does not exceed forty-eight months;

(c) All terms of the contract are in writing and copies of such agreements are provided to the commission within thirty days of execution;

(d) The manufacturer or distributor retains only a security interest in the item sold and cannot obtain any ownership interest in the licensee, or exercise any control over the use of the item in the licensed activity;

(e) The amount of payments is not based on the size or level of gambling activity and is determined by use of a standard amortization schedule for the term and stated interest rate;

(f) The interest rate charged by the contract is set at the time of sale and does not vary during the term of the contract; and

(g) The contract does not require the purchaser to directly or indirectly purchase any other products or services from the seller.))

[Statutory Authority: RCW 9.46.070. 98-21-009 (Order 365), 230-12-340, filed 10/9/98, effective 1/1/99. Statutory Authority: RCW 9.46.070 (14) and (20). 97-20-026, 230-12-340, filed 9/22/97, effective 1/1/98.]

OTS-5448.1


AMENDATORY SECTION(Amending Order 402, filed 6/19/01, effective 7/20/01)

WAC 230-30-106   Punch board and pull-tab flares restrictions -- Standards -- Substitute flares.   The following restrictions, standards, and procedures apply to the use of flares and substitute flares:


Only manufacturers to produce flares - exception.


(1) Except as set forth in subsection (6) of this section, the flare advertising prizes available from the operation of any punch board, or any series of pull-tabs, shall be made by the manufacturer only and shall not be altered by any operator or distributor;


One flare per game.


(2) No person shall place or have out in public view more than one flare advertising the prizes available from the operation of any punch board, or from any series of pull-tabs;


Displaying flares.


(3) Flares shall be placed as follows:

(a) Only upon the upper face, or on the top of any punch board; or

(b) In plain view and in the vicinity of any pull-tab dispensing device or container. If the flare is not attached to the dispensing device or container, a numerical or alphabetical reference shall be included directly on the flare and dispensing device or container clearly indicating which flare corresponds to which series.


Standards for flares.


(4) Flares shall meet the following standards:

(a) Flares must clearly set out each of the prizes available and the numbers or symbols which win each prize. For progressive jackpot series, the progressive jackpot meter board shall be considered a supplement to the flare. Reference to such shall be made on the flare;

(b) Flares must set out the winning numbers or symbols for prizes of over twenty dollars in cash, or merchandise worth more than twenty dollars at retail, in such a manner that each may be easily and clearly deleted or marked off as each prize is won and awarded. For the purposes of this subsection the retail value of a merchandise prize shall be the amount actually paid by the licensed operator plus fifty percent of that actual cost;

(c) The cost to the player for each punch or pull-tab shall be clearly posted on the flare;

(d) The manufacturer shall clearly set out on the flare the series number assigned to that punch board or pull-tab series by the manufacturer. For pull-tab series, this number shall be clearly displayed on the face of the flare. This series number shall not be altered by the distributor or operator;

(e) The flare shall contain the Washington state identification and inspection services stamp number assigned to the board or series, as required by WAC 230-08-017;

(f) For pull-tab series, the total number of pull-tabs originally in the series shall be clearly disclosed on the face of the flare. ((Effective July 1, 1997,)) The following flares shall prominently display the ticket count in one-half inch size lettering on the flare;

(i) Any newly designed flare;

(ii) Any previously designed flare for pull-tab series with a ticket count over six thousand, which has not yet been packaged;

(g) Flares must contain the manufacturer of the board or series. A stamp, seal, or label which identifies the manufacturer may be substituted if the commission has been informed of such prior to its use.


Bonus pull-tab flares.


(5) Additional standards for bonus pull-tab flares:

(a) The manufacturer shall develop and use at least twenty-five different versions of flares (face sheets) for each form number of a bonus series. Flares which contain prizes that are determined after the player receives the corresponding winning chance shall be constructed so that it is impossible to determine the prizes prior to removing the prize covering, in any manner or by any device. Face sheets shall be utilized in such a manner so as to ensure random distribution during the manufacturing and packing process;

(b) The middle or advance level shall be labeled with the term "ADVANCE SECTION" with a minimum one-quarter inch size lettering;

(c) The top tier level shall be labeled with the term "BONUS SECTION" with a minimum one-quarter inch size lettering;

(d) The number of winners which could be awarded in the top tier level shall be clearly noted on the flare with a minimum three-eighths inch size lettering. In addition, the number of winners and the number of advances in each advance level shall be clearly displayed;

(e) All prizes for each advance and bonus level shall be clearly displayed so that only the winners within the possible combinations are shown. Where applicable, the word "OR" shall be used to illustrate the possible combinations in which the bonus prizes can be won. Duplicate references to prizes shall not be shown on the flare.


Substitute flares.


(6) A substitute flare may be utilized on punch boards or pull-tabs, unless otherwise restricted by commission rules, provided all the requirements of this subsection are met:

(a) Distributors may apply manufacturer-produced substitute flares to punch boards and pull-tab series;

(b) Licensed operators or distributors may make and use substitute flares on punch boards and pull-tab series which offer merchandise or combination merchandise-cash prizes.

(c) The responsibility for ensuring the substitute flare meets the requirements set forth in this section shall rest with the manufacturer, distributor, or operator who changes the original flare and attaches the substitute flare.

(d) All substitute flares must comply with the requirements of subsections (4) and (5) of this section;

(e) All substitute flares shall have the Washington state identification and inspection services stamp number and series number assigned to the punch board or pull-tab series permanently recorded in ink on the face of the substitute flare;

(f) The original manufacturer's flare shall be permanently defaced so it is unusable and the substitute flare shall be attached to the original manufacturer's flare so that the original Washington state identification and inspection services stamp and series number can be accessed for inspection;

(g) For flares converted from cash prizes to combination merchandise-cash prizes, at least fifty percent of the total value of prizes offered shall be merchandise; and

(h) Substitute flares which offer merchandise, or combination merchandise-cash, must utilize numbers, not symbols, to denote winners. ((The winning numbers on the substitute flare shall be selected from the winning numbers on the flare made by the manufacturer, or from the optional numbers placed on the back of the board by the manufacturer. Prizes must be assigned to the winning numbers consecutively, starting with the highest value prize being assigned the lowest available winning number.)) The substitute flare shall be constructed as follows:

(i) Winning numbers shall be selected from the flare made by the manufacturer, or from the manufacturer's designated winning numbers on the punch board;

(ii) The highest valued prize(s) shall be assigned to the lowest available winning number(s); and

(iii) The second highest valued prize(s) shall be assigned to the next lowest available winning number(s) and shall be repeated until all prizes are consecutively assigned winning numbers, based on their value: Provided, That if the substitute flare is made by a licensed distributor, the winning numbers may be selected sequentially from the original flare made by the manufacturer.


Happy hour pull-tab games.


(7) In addition to prizes established by manufacturers, pull-tab licensees may increase prizes or add additional prizes to punch boards or pull-tab series under the following conditions:

(a) Such prizes shall be cash or merchandise;

(b) The manufacturer's flare shall not be changed;

(c) Full details of the prizes, including requirements to qualify, shall be disclosed to players by means of an additional sign or notice that is permanently attached to the manufacturer's flare;

(d) The increase or additional prizes must be added to every prize that is within a tier or section of the flare;

(e) Documentation regarding all additional prizes shall be stapled or otherwise permanently attached to the winning punch or pull-tab for which such a prize is awarded. Minimum documentation shall include a description of the prize awarded and the name of the winner; and

(f) Bona fide charitable or nonprofit organizations shall limit games authorized in subsection (7) of this section to only one game in play at any point in time.

[Statutory Authority: RCW 9.46.070. 01-13-089 (Order 402), 230-30-106, filed 6/19/01, effective 7/20/01; 98-15-074 (Order 359), 230-30-106, filed 7/15/98, effective 1/1/99. Statutory Authority: RCW 9.46.070 (5), (6), (11), (14). 97-14-012, 230-30-106, filed 6/20/97, effective 7/21/97. Statutory Authority: RCW 9.46.070 (1)-(4), (7), (8), (11), (12), (14), (20) and 9.46.110 (3), (4). 95-23-109, 230-30-106, filed 11/22/95, effective 1/1/96. Statutory Authority: RCW 9.46.070(8), 9.46.0325 and 9.46.070. 93-10-005 (Order 238), 230-30-106, filed 4/21/93, effective 7/1/93. Statutory Authority: RCW 9.46.070 (8), (11) and (14). 89-11-048 (Order 192), 230-30-106, filed 5/16/89. Statutory Authority: RCW 9.46.070 (11) and (14). 87-24-016 (Order 173), 230-30-106, filed 11/23/87. Statutory Authority: RCW 9.46.070(10). 79-09-029 (Order 91), 230-30-106, filed 8/14/79; Order 43, 230-30-106, filed 11/28/75.]

Washington State Code Reviser's Office