AB-InBev Being Investigated for Bribing Massachusetts Beer Sellers

Anheuser-Busch has been hit with another investigation into alleged unlawful practices involving incentivizing retailers to sell its alcohol brands, including Budweiser. The allegations of “pay-to-play” come after a report released by the Massachusetts Alcoholic Beverages Control Commission (ABCC) claimed an Anheuser-Busch subsidiary provided more than 400 Massachusetts retailers with close to $1 million in free equipment.

ALSO: Wicked Weed Co-Founder Walt Dickinson on the Backlash Following His Sale to AB-InBev[1]

The ABCC report states that based on financial records obtained from Anheuser-Busch distribution and sales subsidiary, August A. Busch & Co., the company gave bar equipment such as draft systems, coolers, and refrigerators totaling a value of $942,200 to 442 alcohol retailers in Massachusetts in 2014 and 2015.

The equipment includes 70 Budweiser Signature Draft Towers, worth up to $3,500 (and which, according to the AB InBev website, increase sales of Budweiser[2] beer by 12 percent on average); and 500 Budweiser-branded refrigerators, prices of which range from $500 for basic units to as much as $5,700 for advanced units with video displays, according to the ABCC report.

MORE: How Much is Enough? A Craft Brewer's Response to Sam Adams' Jim Koch[3]

Giveaways of this nature are unlawful in that they persuade consumers to purchase certain alcohol products without fair competition from other alcohol brands (for example, from smaller brands unable to provide such gifts, like craft brewers). According to the ABCC, the practice violates section 204 CMR 2.08[4] of Massachusetts General Laws, which states:

“No licensee shall give or permit to be given money or any other thing of substantial value in any effort to induce any person to persuade or influence any other person to purchase, or contract for the purchase of any particular brand or kind of alcoholic beverages, or to persuade or influence any person to refrain from purchasing, or contracting for the purchase of any particular brand or kind of alcoholic beverages.”

The report comes just two months after California’s Department of Alcoholic Beverage Control (ABC) of Sacramento announced that it reached a $400,000 settlement[5] with Anheuser-Busch for unlawful business practices with retailers there, involving one of the largest penalty fines in the agency’s history.

However, Anheuser-Busch claims that they provided these materials lawfully, and that they ceased providing the materials (like draft systems and coolers) to retailers as soon as the ABCC investigation began.

In an official statement from the company, Gemma Hart, ‎VP communications, Anheuser-Busch, said, “We have been working with the Massachusetts ABC since they first raised questions about permissible trade practices by wholesalers within the state. We believe that we lawfully provided branded point-of-sale items to retailers and plan to contest these allegations. We take trade practice compliance seriously and are committed to following the law.”

In addition to this statement, a source at A-B who is closely familiar with the case told Men’s Journal, “The ABC[C] is alleging in the report that the times we gave the [coolers and draft systems] away, the items [were] of substantial value. Our position is that we believe we were giving these things away lawfully. At the time [the investigation began], we were openly providing these branded point-of-sale items to retailers. When they started asking about it, we stopped providing them to retailers.”

Another point of contestation, according to the source, is that the term “substantial value” has never been defined by law in Massachusetts, nor by the ABCC. “When we were giving these items to retailers, we had no reason to believe they approached or exceeded these values,” the source said.

The allegations against Anheuser-Busch are one of several recent “pay-to-play” scandals in the state. In November 2016, Massachusetts-based independent beer importer Shelton Brothers filed a lawsuit against Craft Beer Guild[6] of Boston (a distributor owned by Sheehan Family Companies), alleging that the wholesaler’s “unfair and illegal” practices cost its company $1.7 million in sales.

That same month, the Alcohol and Tobacco Tax and Trade Bureau (TTB) announced it had accepted a $750,000 payment from Craft Beer Guild, following an investigation into the wholesaler for illegally incentivizing retailers, as reported by beer industry news website, Brewbound.[7]

Also worth noting is that the Massachusetts Treasurer's office deployed a task force earlier this year to examine Massachusetts’ decades-old alcohol laws[8].

“As I said, we believe what we were doing was lawful and we will contest these allegations,” the A-B source told MJ. A-B plans to contest the allegations at a public hearing scheduled to take place June 20, 2017.

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