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The Washington State Liquor and Cannabis Board (WSLCB) recently handed down a violation notice to Anheuser-Busch that promises to set the beer behemoth back $150,000. The WSLCB issued the administrative violation in response to an elaborate investigation that revealed that Anheuser-Busch had entered into an illegal agreement of exclusivity with two concert venues in Seattle, the Showbox and the Showbox SoDo.

According to the WSLCB Narrative and Evidence Report, the investigating officers determined that the two venues only sell beer available through the Anheuser-Busch distributor. That alone is not illegal. Suspicious, perhaps, but not illegal.

Also according to the report, a manager at the Showbox SoDo told two undercover WSLCB agents that the venue had “an exclusive agreement with Budweiser” and is only able to offer products supplied by the “Budweiser” distributor. Investigators uncovered evidence substantiating the statement and issued an administrative violation. As in many other states, in Washington such an agreement is prohibited by state law. These types of laws are often referred to as tied-house laws.

The Showbox and Showbox SoDo are operated by AEG Live NW, the regional subsidiary of Anschutz Entertainment Group (AEG), an international sporting and music entertainment presenter. Another AEG venue, Marymoor, was also mentioned in the WSLCB Narrative and Evidence Report, referring to the venue for the summer concert series at Marymoor Park in Redmond, WA. Also named, Wolfgang Puck Catering, which provides catering services to those venues.

At the core of the investigation, two WSLCB officers utilized a ruse. The two agents posed as customers interested in renting Showbox SoDo for an event.

“As Officer Reschan and I were continuing to gather information required for the booking of an event, I casually inquired of [the manager] as to what type and brands of beer [the] establishment offered,” said officer Kraig Seltzer in the WSLCB Narrative and Evidence Report. “[The manager] replied by indicating several brands of beer, all of what appeared to be distributed by [the Anheuser-Busch distributor].”

“It was at this point in the conversation that I asked if it were possible to obtain a keg of Coors Light beer. [The manager] immediately and abruptly countered that they were unable to supply Coors Light beer as the event center and their caterer (Wolfgang Puck Catering) maintained an “exclusive” agreement with “Budweiser”. They are only able to offer for sale only products solely supplied by the “Budweiser” distributor.”

Washington State laws prohibit beer manufacturers and distributors from engaging in quid-pro-quo exclusivity agreements. That is, a brewery or its distributor cannot exchange goods, services or money for the exclusive right to sell beer at a licensed premises.

In the course of the investigation, the WSLCB obtained a copy of a sponsorship agreement between Anheuser-Busch and AEG Live NW covering the Marymoor Park entertainment venue. The contract was dated April 5, 2015 and covered the period March 1, 2015 through December 31, 2016. The contract also included both The Showbox and Showbox Sodo venues.

The agreement showed that A-B was the “Official Beer Sponsor” at the aforementioned AEG Live NW venues. According to that agreement, “AEG may not allow any public promotion of any other beer supplier/distributor at events, private or otherwise held at the venues unless the performing artist has a national beer sponsor.”

In short, AEG Live NW guaranteed this exclusivity in exchange for A-B signing on as the venues’ official beer sponsor, though the financial terms of that deal were not disclosed.

Allegations of such wink-wink, nudge-nudge deals between large, licensed venues and big beer companies are not unusual. At the very least, it is believed to be common in the industry. Virtually everyone working in the beer sales industry has anecdotes about such illegal practices. The Washington Liquor and Cannabis Board invites the public to report liquor law violations of any type via the agency’s website at http://www.liq.wa.gov/enforcement/report-violation.

Anecdotes and allegations are one thing, but in order for the WSLCB to act, more is required and a legitimate case must be built.

When Washington legalized marijuana the WSLCB was given the task of managing and enforcing a new set of laws in addition to the existing liquor laws. Hence the name change from Liquor Control Board to Liquor and Cannabis Board. Given that, it’s easy to imagine WSLCB agents being overwhelmed. For the enforcement agency, and the states 300-plus comparatively small breweries, this must be considered a win.

It is likely that if the Washington State Liquor and Cannabis Board had unlimited financial and human resources, we would hear about these kinds of violations on a weekly basis. The fact that it happened is not news. The fact that someone got caught, and that the WSLCB was able to build a viable case against the violators, makes this newsworthy.

The actual violation: Undue Influence/Providing Money or Money’s Worth: Goods or Services Over $1,500.

The actual penalty: $150,000 and three-day suspension, or $150,000 plus $1,000 in lieu of suspension.

See the WSLCB Narrative and Evidence Report and the corresponding violations here.