Heineken USA to Pay Record $2.5 Million Fine to Settle Trade Practice Violations

The Alcohol and Tobacco Tax and Trade Bureau (TTB) today announced the acceptance of a record $2.5 million offer in compromise from Heineken USA Incorporated for alleged trade practice violations outlined in the Federal Alcohol Administration (FAA) Act.

Heineken USA’s (HUSA) payment is the largest offer in compromise that the federal agency has ever accepted, TTB spokesman Thomas Hogue confirmed to Brewbound.

According to the TTB, HUSA supplied alcohol retailers with its proprietary “BrewLock” draft systems at no cost between August 1, 2015, and March 26, 2019.

HUSA also reimbursed retailers who purchased the so-called “patented” and “revolutionary” on-premise technology through “disguised” credit card transactions.

Through its investigation — which began in Florida as a joint operation between the Florida Division of Alcoholic Beverages and Tobacco, and later expanded to the state of Washington and New York City – the TTB determined that Heineken was in violation of the FAA Act, specifically subsection 205 “unfair competition and unlawful practices.”

In a press release, the TTB said the BrewLock systems were designed to only dispense products packaged in unique kegs used by HUSA, which subsequently induced retailers into purchasing offerings made by the global brewing entity.

Additionally, the TTB accused Heineken’s U.S. importing arm of making “slotting fee payments” to retailers, and disguising those transactions as “permissible activities” such as consumer sampling experiences that never actually occurred.

HUSA hired third parties to make some of the slotting payments, the TTB also alleged.

For its part, HUSA confirmed that it had reached a “settlement agreement” with the TTB, but it stopped short of confessing to breaking the law.

“The settlement doesn’t admit to any violation of the law, and Heineken USA has been and remains committed to legal compliance in everything we do,” HUSA spokesman Bjorn Trowery wrote to Brewbound. “As part of our agreement, we are introducing an enhanced and robust compliance program and establishing an internal audit process.”

HUSA officials declined to offer additional comments.

Last year, the TTB accepted $900,000 from Ohio’s Warsteiner Importers Agency Inc., which at the time represented the largest fine ever levied on a U.S. alcohol company. Warsteiner was accused of engaging in illegal tied house, commercial bribery and exclusive outlet violations during a similar period (January 1, 2015, through April 19, 2018).

The TTB’s press release is included below.

TTB Accepts $2.5 Million Offer in Compromise for Trade Practice Violations

Washington, D.C. — TTB has accepted a $2.5 million offer in compromise from Heineken USA Incorporated (Heineken) for alleged violations of the Federal Alcohol Administration (FAA) Act.

This investigation initially developed out of the joint operation conducted with the Florida Division of Alcoholic Beverages and Tobacco (ABT), Miami District Office, and subsequently expanded to cover alleged unlawful activities in Washington State and New York City. TTB thanks the Florida ABT, the Washington State Liquor and Cannabis Board, and the New York State Liquor Authority for partnering with us on this investigation.

Specifically, TTB alleges that Heineken provided some retailers with BrewLock draft systems at no charge and reimbursed other retailers for the cost of purchasing BrewLock draft systems.

Reimbursements were disguised as unrelated credit card charges (also known as swipes.) Because BrewLock is a patented draft system developed by or for Heineken that only works with specially-designed kegs used by Heineken, TTB alleges that the system both obligated and induced the retailers to exclusively purchase Heineken products.

TTB alleges that Heineken made slotting fee payments to retailers and disguised those unlawful payments as payments for permissible activities (such as consumer sampling) that never actually occurred. TTB also alleges that Heineken used third parties to pay for additional slotting fees to retailers.

TTB remains committed to putting an end to anti-competitive practices that hurt law-abiding businesses and prevent consumers from enjoying a wide selection of products.

Please visit www.ttb.gov for additional information on prohibited trade practices or to see this and other offers in compromise that have been accepted.

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