Boston distributor, Craft Brewers Guild, suspended and fined for pay-to-play practices

Paying to have your beer on tap in a bar, shelling out money to ensure space in a refrigerator or even giving extra inventory or equipment to a restaurant or pub to earn favor and discriminate against other beer brands is downright wrong. It’s called pay-to-play, and unfortunately, it’s not that uncommon. In fact, in Boston, it’s just considered good business. While the three-tier system is supposedly a safeguard against illegal practices from the alcohol makers themselves, the business model is still open to plenty of abuse — by macro-focused beverage wholesalers, by craft beer distributors and by the bars and restaurants actually selling the suds to the public.

Last Friday, the Massachusetts Alcoholic Beverages Control Commission was set to hand down a big 90-day license suspension to a beer distributor that paid Boston bars tens of thousands of dollars to carry its beers and stiff the competition. And what was the name of said wholesaler?

The Craft Brewers Guild (which shadily sounds like an association to us, not a distributor).

According to an excellent article from the Boston Globe:

At a hearing in September, Craft Brewers Guild admitted to state regulators that it had engaged in so-called pay-to-play, giving bars between $1,000 and $2,000 annually for each tap handle they dedicated to a beer distributed by the Everett-based company. However, its attorneys argued that the little-enforced ban on pay-to-play is legally invalid because of long-ago changes to the state’s byzantine alcohol regulations.

Pay-to-play is providing compensation (either monetary or goods in excess of a certain value) to establishments in order to secure the right to serve alcoholic beverages, most often to the exclusion of competitors. That practice is illegal under Federal Alcohol and Tobacco Tax and Trade Bureau (TTB) laws. In essence, an illegal monopoly is created as the larger producers and distributors are the ones accused of being willing and able to provide these payments to keep startup companies out of lucrative establishments. Massachusetts and Boston specifically have a long history with pay-to-play practices. We made a big to-do about it and the Massachusetts Alcoholic Beverages Control Commission specifically back in 2014. People paid attention, but then (as evidenced by the case above) things went back to normal. From that article two years ago, which seems eerily similar:

While these actions are illegal, some remain skeptical that the Massachusetts Alcoholic Beverages Control Commission (ABCC) investigation will lead to any significant changes in the industry. The recent allegations and rumors flying around the internet claim that this is a widespread practice; however, past formal complaints to the ABCC have been limited and the issuance of violations for offenses has been non-existent. This could mean one of two things: Either the practice is not as widespread as some would believe or proving a violation of the regulations is very difficult. The ABCC, similar to many state regulatory bodies, does not have adequate resources (14 investigators who both review the license applications and conduct investigations into violations by licensees) to conduct major investigations into actions that do not deal directly with public safety or affect the general public. Additionally, “pay-to-play” allegations usually involve a private arrangement between the individual providing the unlawful compensation and the individual accepting it, neither of whom would be willing to admit wrongdoing.

Basically, it’s hard to catch someone doing this, especially when resources are limited and big money is greasing palms. According to the Boston Globe article above, the Craft Brewers Guild spent “approximately $120,000 to pay kickbacks to 12 retail licensees throughout the Boston area and went to great lengths to hide its knowingly unlawful conduct.” The Craft Brewers Guild LLC is a subsidiary of the Sheehan Family Co., a multi-state beer wholesaler headquartered in Massachusetts. Yep, multi-state. So we’ll just assume it’s a national problem and not just a Boston or a Sheehan Family Co. problem. When it came to craft beer, the Craft Brewers Guild sold major indie brands like Yuengling, Lagunitas Brewing Co. and Wachusett Brewing Co., and as you might expect, “The Guild” was notably unhappy with the final decision. To the Boston Globe:

“We are disappointed in the decision that was handed down by the ABCC,” a spokesman [for the Craft Brewers Guild] wrote. “We are currently evaluating all our available options.”

The company has the option to pay a fine equal to 90 days of revenues instead of shutting down for the same period — an amount that probably would total millions of dollars. It could also appeal the ABCC ruling in state court, where a judge could uphold the punishment, reduce it, overturn it or send the matter back to the commissioners for a rehearing.

Just remember: It’s not just big money that can be considered pay-to-play. Free beer equipment, extra inventory and unlawful agreements of all sorts fall in the same category. Let us recount the story from co-owner of Idle Hands Craft Ales LLC Chris Tkach from this excellent article via Chris Crowell:

Tkach said his company has never paid to have his beer stocked, or was asked to. However, Tkach recounted an incident this year where a bar manager in Waltham said he had no room to stock Idle Hands because a distributor of competing beers had provided free keg equipment in exchange for reserving more tap handles.

“I asked if we could continue to be on tap, and the bar manager said, ‘No, this distributor bought all new [equipment] for us, and we have to dedicate those lines to them,’” said Tkach, who declined to name the bar.