Rob Pinson, the newest member of Bone’s Alcoholic Beverage Section, recently attended the inaugural Alcohol and Tobacco Tax and Trade Bureau (“TTB”) Expo. Investigators from the Trade Investigations Division of the TTB gave an ominous warning that they are very interested in pursuing “slotting fees”–the paying or crediting retailers for advertising, display space, wall space, etc. The TTB is aware that slotting fees are commonly disguised as “pricing,” and plans to crack down on the practice.
Tied House generally prohibits a trade member from inducing a retailer to purchase alcohol to the exclusion of other brands. Two forms of inducement are of particular interest to the TTB: (1) the giving, renting, lending, or selling to a retailer of equipment, fixtures, signs, supplies, money, services, or other things of value, and (2) slotting. Exceptions are listed in the regulations, but they are usually of limited value or must be sold to the retailer at cost.
Serious Tied House violations can lead to attempts to revoke the basic permit, putting the industry member out of business. The TTB may also impose fines. In addition, local state licensing boards may pursue trade members – including retailers – for participating in prohibited acts under state law. Caution should be used when a potential Tied House situation is presented by an industry member. While the TTB is aware that retailers appear to hold a lot of power over industry members, participating in prohibited activities can nonetheless be prosecuted, despite the fact that the activities are normal for the industry.
