Thursday, February 1, 2018

TTB Goes After Pay-to-Play



The principal Federal regulator for whiskey and other distilled spirits sold in the United States is the Treasury Department's Alcohol Tax and Trade Bureau. In this space, you often read about TTB's role in regulating labeling and marketing practices, but that is not all they do.

For fiscal years 2017 and 2018, Congress has given the TTB $5 million of specific funding for "the costs of programs to enforce trade practice violations of the Federal Alcohol Administration Act."  According to the TTB, trade practice investigations are extremely resource-intensive. They are conducted by investigators and auditors who must obtain evidence through field investigations involving interviews and analyses of business records, and significant attorney support from the Office of the Chief Counsel.

At the top of the TTB's trade practices agenda is pay-to-play.

In July 2017, TTB announced a joint investigation with Florida State Alcohol Authorities in the Miami area. In September it followed with a joint investigation with Illinois State Alcohol Authorities in Chicago, the Quad Cities, and Peoria.  Both investigations are focused on 'pay to play' schemes in which illegal 'slotting fees' are charged. A 'slotting fee' is a sum charged by a retailer which a producer pays to get a product into an account. Since slotting fees are illegal, they are off-the-books and made under the table.

In past trade practices investigations, the TTB has focused on two areas: 'slotting fee' payments for product placement and consignment sales for malt beverages (beer) in the context of 'freshness dating' returns.

Other examples of trade practice violations include Exclusive Outlet (Section 205(a)), Tied-house (Section 205(b)) with seven specific types of means to induce, and Commercial Bribery (Section 205(c)).

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