Craft Beer Guild Pays TTB $750,000 to Settle Pay-to-Play Violations

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The Alcohol and Tobacco Tax and Trade Bureau (TTB) today announced it has accepted a $750,000 payment from Craft Beer Guild, LLC, a Massachusetts-based beer distributor, following its own investigation into allegations that the wholesaler violated state and federal laws prohibiting illegal inducements and unfair trade practices.

According to a press statement issued by the TTB — which is responsible for enforcing the provisions of the Federal Alcohol Administration Act (FAA Act) — the Craft Beer Guild payment is the “largest offer in compromise” the agency has ever recovered from a single industry member for trade practice violations.

Last May, Massachusetts alcohol regulators accused Craft Beer Guild, a subsidiary of the Sheehan Family Companies, with offering cash and other incentives to retailers in exchange for guaranteed retail placement, an illegal practice known in the beer industry as ‘pay-to-play.’

In its own statement, Craft Beer Guild confirmed that the $750,000 “offer in compromise” was connected to the Massachusetts Alcoholic Beverages Control Commission’s (ABCC) investigation, which began in 2014.

The payment to the TTB, however, is separate from a $2.6 million fine that Craft Beer Guild paid the Massachusetts ABCC earlier this year. Craft Beer Guild is currently appealing that decision and has asked the Massachusetts Superior Court for relief.

In an interview with Brewbound, Tom Hogue, the TTB’s director of congressional and public affairs, stressed the importance enforcing provisions designed to restrict unfair competition and unlawful practices.

“We take this type of thing very, very seriously,” he said. “There are a whole lot of new entrants — many small businesses — and now, perhaps more than ever, it is important to make sure they have a level playing field.”

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Hogue wouldn’t comment any potential investigations into other alcohol companies, but noted that the agency’s scrutiny of Craft Beer Guild was not a “one-off” incidence.

“We will be continuing our efforts in this area,” he said.

In its statement, the TTB vowed to investigate alcohol industry members who participate in the practice of making illegal payments to retailers “in exchange for favorable product placement and shelf space,” also known as “slotting fees.”

“This sort of pay to play activity is incompatible with fair competition and will be actively investigated by TTB,” the agency wrote.

The TTB currently has about 60 investigators nationwide, Hogue said, but could step up its enforcement efforts if $5 million of additional funding currently recommended by both the House and Senate appropriations committees is approved by Congress for fiscal 2017.

Today’s TTB announcement is the latest on Massachusetts’ long, drawn-out pay-to-play saga that began in October, 2014 when Dan Paquette, the founder of now-defunct Pretty Things Beer and Ale Project, publicly criticized Boston bar owners for participating in the illegal practice.

Just last week, beer importer Shelton Brothers filed a lawsuit against Craft Brewers Guild alleging that it lost $1.7 million in sales as a result of the company’s inducement tactics.

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