The federal TTB issued its first 2016 ruling (2016-1) announcing its efforts to identify non-compliance with tied house rules prohibiting breweries, wineries, cideries, distilleries and wholesale distributors from directly or indirectly influencing retailers to purchase product. This includes giving/lending/renting/selling equipment, signs, supplies or services to alcohol retailers.
There are some recognized exceptions, most notable, that craft beverage manufacturers or wholesale distributors can legally stock, rotate and price products for a retailer provided competitor products are not disturbed. The TTB listed several practices that it believes go beyond the permissible exception:
- Participating in the retailer’s purchasing, pricing or shelf stock decisions regarding competitor’s products
- Receiving and analyzing confidential and proprietary information about a competitor
- Furnishing third party market data to the retailer
- Furnishing things of value to a retailer participating in decisions and communications with suppliers about daily operational matters, including advertising and promotions
- Performing other services for the retailer of any kind except stocking, rotating or pricing its own products
- Voluntary payments to wholesalers by the retailers for the rotating, stocking and pricing services
Thus, where a retailer seeks out the expertise of distributors in making purchasing decisions to manage a category of product, it could run into trouble with unintended violations for tied house laws. The TTB allows limited advisory services concerning shelf displays to maximize sales with the provision of shelf schematics for a category of beverage (vodka or beer, for example). It does not extend the exemption to other decisions and practices in the retailer’s operations. It is okay to provide a shelf display schematic, but to be involved in its implementation or monitoring, or providing product sales data that could influence purchasing decisions would be a clear violation.
This latest ruling just underscores how complicated selling alcohol can get. If you have specific questions about your arrangements with retailers and other business practices, we highly recommend that you consult your personal legal representative.