Heineken USA (HUSA) has agreed to pay a USD 2.5 million record fine for alleged violations of the Federal Alcohol Administration (FAA) Act. The Alcohol and Tobacco Tax and Trade Bureau (TTB) announced on Tuesday last week, that it has accepted an offer in compromise from HUSA.
The TTB alleged that Heineken provided some retailers with BrewLock draft systems at no charge and reimbursed other retailers for the cost of purchasing those systems. Reimbursements were disguised as unrelated credit card charges.
Because BrewLock is a patented draft system developed by or for Heineken that only works with specially-designed kegs used by Heineken, TTB alleged that the system both obligated and induced the retailers to exclusively purchase Heineken products. TTB claimed that Heineken made slotting fee payments to retailers and disguised those unlawful payments as payments for permissible activities such as consumer sampling that never actually occurred. TTB also said that Heineken used third parties to pay for additional slotting fees to retailers.
The settlement in an offer in compromise and doesn't necessarily imply wrongdoing. “The settlement doesn’t admit to any violation of the law, and Heineken USA has been and remains committed to legal compliance in everything we do,” HUSA spokesman Bjorn Trowery told Brewbound.
The company did not say if the announced slash of 15 percent of its overall workforce in the United States (inside.beer, 6.3.2019) was related to the recent investigation.
The fine is the largest ever levied on a U.S. alcohol company.
In December last year, Eagle Brands, a Miami-based distributor of Budweiser beer, has agreed to pay a USD 1.5 million settlement to the TTB for paying retailers to "carry and promote its products to the exclusion of competing products" between May 2015, and April 2018. The payments were disguised as banquet events, credit card payments for rebates, or consumer samplings, the TTB said. In addition, TTB accused Eagle Brands to provide draft systems that were to be used only for their own products.
In May last year, Cincinnatti-based Warsteiner Importers Agency already paid a fine of USD 900,000 for allegedly being engaged “in illegal tied house, commercial bribery and exclusive outlet violations committed in order to compromise a retailer’s independence” between January 2015 and April 2018, according to the TTB. Warsteiner allegedly paid for equipment for dedicated tap lines in a so-called “pay-for-play” arrangement and for sponsored events in exchange for exclusivity for its products, trade practices which are legal and common in Warsteiner’s home country Germany.
All of the forementioned alleged actions violate rules of the Federal Alcohol Administration, a government agency created in 1935 to regulate the alcohol industry after the repeal of Prohibition. Its creation established a three-tier system of manufacturer, wholesaler, and retailer of alcoholic beverages.