It Doesn't Pay for a Brewery to Pay-to-Play
In February 2016, the Massachusetts Alcoholic Beverages Control Commission (ABCC) issued a ruling against the largest distributor of craft beer in Massachusetts for its role in paying retailers tens of thousands of dollars to carry its beers and freeze out competitors. The penalty - a 90-day (actually 15 months but remainder waived if no violations in 2 years) suspension of their license or pay a fine. In Massachusetts, a fine is often equal to about half the profits the distributor would have made during the suspension. Last week, the distributor chose the fine, reported to be $2.6 million.
Rule 43(A)(2) of the Rules of the Liquor Control Commission prohibits breweries and wholesale distributors from offering or giving to any retailer or wholesalers
"any premiums, gifts, discounts based on quantity of sales or any other reason, cash discount sales, rebates, or kickbacks, either in money, merchandise, or thing of value."
If an Ohio brewery engages in pay-to-play, the State can revoke or suspend their permit, or in lieu of a suspension, issue an order allowing the brewery to elect to pay a fine for each day of the suspension as follows:
- If no violation in the past 2 years, $100-200 fine per day of suspension
- If one violation in the past 2 years, $200-400 fine per day of suspension
- If two violations in the past 2 years, $300-no cap fine per day of suspension
- If more than two violations in the past 2 years, $500-no cap fine per day of suspension (State and not the brewery elects whether a fine will be permitted in lieu of suspension)
Lawyers in Massachusetts argued the regulations were rarely enforced and even invalid given attitudes toward alcohol have changed since prohibition. According to the Boston Globe, "the ABCC commissioners rejected those arguments, saying the rules are still in effect and that [the distributor] knew it was breaking the law."
No matter when the laws were created, breweries are still charged with knowing, understanding and following the laws. The failure to do so may ending up costing you.
Contact OBC with any questions.