States are easing restrictions on booze regs across the country. The federal government is getting involved too. Here’s a good example: The issued Industry Circular 2020–3 on May 8, 2020, clarifies the applicability of the trade practice provisions of the Federal Alcohol Administration (FAA) Act and TTB regulations during the COVID-19 public health emergency. The guidance is in effect only from March 1, 2020, through September 30, 2020.
The FAA Act and regulations promulgated thereunder govern the relationships between the three tiers of the alcoholic beverage industry and consist of four prohibited trade practices: tied-house, exclusive outlet, commercial bribery and consignment sales. All four provisions work together to restrict Industry Members (suppliers, including brewers, and wholesalers) from directly or indirectly inducing Trade Buyers (retailers and wholesalers) to exclusively purchase alcoholic beverages from such Industry Member to the exclusion of others. Inducements may include giving gifts, donations or other payments to Trade Buyers or their employees, extending credit beyond 30 days or selling product on consignment with the privilege of return for other than ordinary and usual commercial reasons, such as errors in delivery or defective or discontinued product. TTB has temporarily relaxed some of the provisions of the FAA Act and regulations during the COVID-19 crisis to assist industry members.
Industry Circular 2020-3 provides that, through September 30, 2020, the following actions are permissible:
- Trade Buyers may return alcoholic beverage products they purchased to sell during events which were cancelled based on COVID-19 concerns, provided the products were not initially purchased or sold with the privilege of return.
- Trade Buyers who have closed or substantially reduced operations due to COVID-19 shelter-in-place and stay-at home-recommendations may return alcohol beverage products for cash or credit against outstanding indebtedness as long as the original sale was not made with the privilege of return.
- Industry Members are not required to accept any products returned by Trade Buyers.
- Industry Members may extend credit terms from 30 days to up to 120 days, provided sales are in compliance with the consignment rules.
- Industry Members may purchase gift cards from a retailer or retailer group and provide those pre-paid gift cards to people in need, including consumers, provided the cards are not tied to an alcoholic beverage retailer, retailer group or restaurant. Industry Members may encourage consumers to use the gift cards to support retailers of the consumer’s choice but may not provide any cards to Trade Buyer officers, employees or representatives.
- TTB will not investigate Industry Members who make donations to charities that support alcohol beverage retailers or their employees, provided that such donations are not conditioned on purchases of, or shelf space for, the industry member’s products.
- Industry Members may sell hand sanitizers directly to consumers or provide hand sanitizers, free of charge, directly to consumers and may sell alcoholic beverage products in combination with non-beverage items.
While the TTB has provided some flexibility in its interpretation of federal trade practice rules during the COVID-19 public health emergency, TTB regulated entities must also check their state and local alcohol beverage laws, regulations and emergency orders to ensure compliance with those provisions as well, which may differ from the TTB guidance provided above.
Caroline O’Connell is an attorney in Husch Blackwell LLP’s Washington, D.C. office and helps alcohol beverage clients across the nation navigate licensing, labeling and marketing compliance issues in a heavily regulated sector.
Emily Lyons is an attorney in Husch Blackwell LLP’s Washington, D.C. office and is a member of the firm’s Alcohol & Beverage team.