TTB Fines Beer Wholesaler $325,000 for Alleged Pay-to-Play Scheme

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The federal authorities have negotiated a fine totaling a reported $325,000 with Elgin Beverage, a wholesaler of Corona, Old Style and Schlitz beer brands.

The Alcohol and Tobacco Tax and Trade Bureau (TTB), a bureau of the U.S. Department of the Treasury, reached the settlement with Elgin Beverage after the wholesaler allegedly made improper payments for preferred product placement at retail accounts, a form of “pay-to-play” scheme.

The TTB, which controls and collects taxes on trade and imports of alcohol, tobacco, and firearms within the United States, made an announcement that the negotiation was the result of the wholesaler making a total of $10,000 in payments in violation of federal tied-house laws.

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Such payments are a practice termed “exclusive outlet.” The prohibited practice entails a wholesaler paying a retailer to carry their product exclusively. Rivals, therefore, are essentially guaranteed to lose market share.

Earlier this year, Warsteiner was slapped with the largest fine levied against a single company in the TTB’s history: $900,000 for violations of tied-house laws, commercial bribery, consignment (selling back product not moved on a retail floor), and exclusive outlet.

Thomas Hogue, director of congressional and public affairs at the TTB, has reportedly stated that the bureau is currently investigating about 30 additional cases across several states. Hogue has also been reported as stating that 51 trade practice investigations have been pursued since May 2017.

The message from the TTB is clear: Engage in pay-to-play arrangements at your own peril. Exclusive outlet, tied house, commercial bribery, and other schemes will result in large fines and can, in the case of on-premise operators, lead to the revocation of liquor licenses.

Considering that Elgin was fined $325,000 for an alleged $10,000 in improper payments, the TTB is also making it crystal clear that pay-to-play arrangements are simply not worth it.

It's imperative that on-premise operators stay on the right side of the law when working with beer, wine and spirit brands on marketing initiatives. While the brands may face fines, an operator can potentially lose their bar and livelihood. In turn, their employees would also lose their jobs.

Tim Haughinberry, owner of Back Bar USA, will address the topic at the 2019 Nightclub & Bar Show in Las Vegas, taking place March 25 through 27. Do not miss out on this opportunity to gain information that can help you protect your bar, nightclub or restaurant.

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