Time for a Conversation About Pay to Play
Source: Wine & Spirits Daily
June 5, 2018
“Everyone in this room probably knows pay to play is rampant in the industry,” said Vicky McDowell, industry veteran and former chief of the Presidents’ Forum of the Distilled Spirits Council, during the recent NABCA conference. “It’s a major issue and it’s a mess.”
No tier is exempt from the bad behavior, and while it largely goes unaddressed, it creates an uneven playing field in the long run, she continued.
It’s no easy task getting industry members to go on the record about pay-to-play practices, but Vicky said suppliers are “very concerned” about pay to play, and they talk about it in private between themselves and distributors.
The problem is that industry members don’t have much of an appetite for a discussion with lawmakers on how to change the pay-to-play laws because they’re not sure if it will open a can of worms.
The TTB knows this is an issue, and has begun ramping up enforcement efforts in recent years, more recently teaming up with state regulators to curtail illegal practices. Recall, there are three large-scale ongoing investigations: a pay-to-play investigation in both Florida and Illinois, and an investigation into consignment sales in California.
Vicky said it is likely that TTB will continue increasing settlement amounts because “they want to change behavior.” They feel the settlements they’ve handed down in the past haven’t been very effective.
You may recall, one of the most noteworthy settlement cases was around 2008-2009 when the TTB accepted offers in compromise of $800,000 from 10 distributors in Illinois who were accused of providing “money or things of value” to a retailer. And $2 million in total from suppliers as a result of a second investigation into slotting fees for casinos.
The ink wasn’t even dry in Las Vegas before the violations resumed, said Vicky.
All three tiers need to work together with regulators to correct pay-to-play practices, and “the cost of getting caught has to be more than.the cost of doing business,” she said.
Stay tuned for more perspectives from this talk during the NABCA annual conference. But in the meantime, send any thoughts on the topic to emily@winespiritsdaily.com