ALCOHOL LAW ADVISOR
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
category management
Subscribe to category management's Posts

Treasury Responds to Biden Administration Executive Order with Report, Recommendations to Increase Alcohol Industry Competition

by and | Feb 15, 2022 |

On February 9, 2022, the US Treasury Department (Treasury) released a report with recommendations for how the Tobacco Tax and Trade Bureau (TTB), Federal Trade Commission (FTC) and Department of Justice (DOJ) can help drive competition in the beer, wine and spirits markets by stepping up conduct enforcement, adopting creative and nuanced theories of harm in merger reviews and implementing new regulations to decrease the burden on smaller industry participants.

TREASURY REPORT SUMMARY

  • Treasury released a report entitled “Competition in the Markets for Beer, Wine, and Spirits” in response to President Biden’s July 2021 Executive Order 14036 that assesses the current market structure and conditions of competition, including an assessment of threats to competition and barriers to entry.
  • Treasury’s report is based, in part, on hundreds of comments received from industry participants and paints a detailed picture of the current landscape for alcohol beverage distribution and sale across the United States.
  • The report focuses on how changes could benefit smaller participants in the beer, wine and spirits industry. Given that the stated goal of Executive Order 14036 was, in part, “to reduce the trend of corporate consolidation, increase competition, and deliver concrete benefits to America’s consumers, workers, and small businesses,” it is not surprising that the report is focused on analyzing how a shift in enforcement priorities may be able to help eliminate impediments that make it difficult for smaller producers, distributors and retailers to compete with the larger players in the industry. Treasury specifically recommends that TTB cease bringing cases against “smaller industry members whose conduct does not have obvious effects on competition” (i.e., the investigation several years ago against small wineries for ‘consignment sales’).
  • Treasury makes recommendation on enforcement priorities for FTC, DOJ and TTB. To address the market concentration concerns that the report describes, Treasury makes recommendations regarding how the TTB, FTC and DOJ should focus investigations and enforcement of mergers and conduct in each of the three tiers of the beer, wine and spirits markets: producers, distributors and retailers.
  • Many of the recommendations are likely to be pursued given that the Attorney General and FTC Chair were consulted. The report and its recommendations should be considered carefully as a clear indication of the kinds of issues that FTC and DOJ are likely to focus their investigations on in beer, wine and spirits because the report was developed “in consultation with the Attorney General [DOJ] and the Chair of the FTC.”

TREASURY’S KEY RECOMMENDATIONS

  • While there are myriad competition-focused suggestions in the report, we think the areas that are most likely to receive increased focus from FTC, DOJ and TTB are the following:
    • Anticompetitive Conduct: Treasury noted that FTC, DOJ and TTB have generally not brought any conduct cases on many theories of harm for which myriad complaints were received. Treasury suggests that TTB should act on [...]

      Continue Reading


read more

Category Management Practices

by | Sep 26, 2017 | ,

Today’s off-premises retail landscape is dominated by large chains that rely on practices generally known as category management to maximize the profitability of their stores. Some of the activities falling under the category management umbrella require close interaction between the retailer and the producers, importers, or distributors supplying them product. As a result of this interaction, the federal Alcohol & Tobacco Tax & Trade Bureau (TTB) last year issued a ruling indicating that industry members’ participation in category management activities could result in a violation of the tied-house provision of the Federal Alcohol Administration (FAA) Act and the TTB’s corresponding tied-house regulations.

Continue Reading

Originally published in The New Brewer, September/October 2017.



read more

Tied House Laws and Category Management: A Continuing Quandary

by | Mar 18, 2016 | , ,

On March 16, the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) published a list of frequently asked questions expanding further on a ruling issued in February on application of the federal “tied house law” to industry promotional activities, specifically category management practices employed by retailers.

TTB claims that a formal rulemaking to revise its tied house regulations is not necessary: “TTB Ruling 2016-1 merely provides guidance as to the plain meaning of the existing regulation under 27 CFR 6.99(b). It does not change TTB’s longstanding position, nor does it change the meaning of the plain language of this regulatory exception.” So let’s look at the plain language:

The act by an industry member [supplier or wholesaler] of providing a recommended shelf plan or shelf schematic for distilled spirits, wine, or malt beverages does not constitute a means to induce within the meaning of section 105(b)(3) of the [Federal Alcohol Administration (FAA)] Act.

That statement on its face is an open-ended authorization to provide shelf schematics. It says nothing about the products of other industry members or whether the plan is written on a napkin or in a sophisticated IT system that is used for inventory management at hundreds of stores.  (more…)



read more

TTB Issues Ruling on Category Management under Federal Tied-House Statute

by | Feb 12, 2016 | ,

Today the Alcohol & Tobacco Tax & Trade Bureau (TTB) released TTB Ruling 2016-1 (Ruling), addressing category management practices.  The Ruling seeks to clarify TTB’s position toward category management under the federal tied-house statute and regulations, which generally prohibit an alcohol beverage supplier or wholesaler from providing a “thing of value” to alcohol beverage retailers.

The federal tied-house statute and the TTB regulations implementing that provision require TTB to show both an “inducement” of a retailer leading to “exclusion” of competing products for TTB to find a tied-house violation.  TTB regulations also list specific activities that are exceptions to the general rule that providing anything of value to a retailer constitutes an “inducement.”  Those exceptions include shelf schematics.  See 27 C.F.R. § 6.99(b).

Ruling 2016-1 recites the history of the shelf schematics exception and exhibits an element of “buyer’s remorse,” as the narrative suggests that TTB’s predecessor, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), discounted the possibility of abuses that TTB seems to believe are occurring today.  The Ruling then makes it clear that TTB will strictly interpret the schematics regulation as applying only to the schematics themselves, and not “additional services.”  Current category management practices often involve other activities not directly linked to the provision of shelf schematics, although these other activities (at least arguably) relate to developing, creating and updating shelf plans.  Ruling 2016-1 lists the following examples of “additional services” that may prompt TTB scrutiny:

  1. Assuming a retailer’s purchasing or pricing decisions, or shelf stocking decisions involving a competitor’s product;
  2. Receiving and analyzing confidential and/or proprietary competitor information for a retailer;
  3. Furnishing to a retailer market data from third party vendors;
  4. Providing follow-up services to monitor and revise schematics that involve communicating with a retailer’s stores, vendors, representatives, wholesalers and suppliers concerning daily operational matters; and
  5. Furnishing a retailer with human resources to perform merchandising or other functions, with the exception of stocking, rotation or pricing as permitted by TTB regulations.

Ruling 2016-1 does not provide significant guidance on when category management services may lead to the exclusion of competing products.  Instead, the Ruling generally repeats and/or cites to TTB’s exclusion regulations, which were adopted in the mid-1990s.

In short, Ruling 2016-1 provides only modest specific guidance to the industry.  It does, however, signal quite clearly that TTB will likely direct enforcement resources at current category management practices.



read more

Beyond the Basics: Tied-House Policy and Things of Value

by | Apr 9, 2015 | ,

The Fall 2014 issue of Artisan Spirit introduced readers to the unusual and rather complicated legal concepts arising from the “tied-house” laws.  It covered the general concepts of:

a) separating the retail tier from the upper tiers of the industry
b) federal and state regulation in this area
c) the federal scheme prohibiting “inducements” leading to “exclusion”
d) cross-tier ownership prohibitions
e) restrictions on upper-tier assistance to retailers

This new article, published in the Spring 2015 issue of Artisan Spirit, takes readers a little deeper into the subject of tied-house laws by pondering the policy behind them and examining some hot topics on what constitutes prohibited “thing of value” assistance to retailers.  But remember that tied-house laws exist on the federal and state level, and that each state has the authority to enact its own particular variations on the tied-house concept.  While a few states simply adopt federal law, most have enacted their own statutes and regulations, leading to substantial variations between the laws of different states.  As a result, no article could possibly capture all the complexities involved, and distillers should seek their own counsel before making a particular investment or running a particular marketing program.



read more

BLOG EDITOR

Alva C. Mather

STAY CONNECTED

Subscribe

TOPICS

ARCHIVES

RankedInChambersUSA 2022