© TTB

The enforcement agency has had a busy first half of the year.

The US enforcement agency has collected almost $1 million from a beer company.

It's been a big year already for federal agencies when it comes to dishing out fines – and a painful one for the recipients.

In the past year, US enforcement agencies – such as the Washington DC-based Alcohol Tobacco Tax and Trade Bureau (TTB) – have had a field day tracking down and fining major suppliers and importers that have violated the well-entrenched laws of the American three-tier, drinks sales system.

The agency's renewed focus is thanks to additional funding and the TTB's continued desire to root out illegal activity. In the past few years some major suppliers have been fined for a variety of illegal activity. One of the biggest busts included a $1.9 million payment received from six industry members – including Bacardi, Diageo, Gallo, Future Brands, Moët Hennessy and Pernod Ricard – for a multi-level, pay-to-play arrangement with Harrah's, a Las Vegas casino in 2011.

Since the repeal of Prohibition in 1933, a number of seemingly archaic – yet legally fair – laws have been in place to prevent suppliers from bribing operators for preferential shelf or bar space or otherwise incentivizing them to buy their specific product.

There is, unfortunately, a long history of well-funded suppliers "donating" funds, at times personnel and sometimes marketing assets – which could at times be construed as a "great night out at a lovely restaurant" – to key on- and off-premise operators that has long been tolerated, and stacks the cards unfavorably against smaller wine industry players with limited budgets.

Last month, Warsteiner, a German-owned brewery based in the Sauerland region in the German state of Westphalia with a greater Cincinnati-based American importer – the Warsteiner Importers Agency – was fined a record $900K for violations of Tied House Laws (which restrict entities from doing business on multiple levels of the sales system); commercial bribery; consignment (which entails selling back product not moved on a retail floor); and exclusive outlet, a situation in which a supplier forces a retailer to buy its products. Both the German beer company and its American importer declined to comment for this story.

Specific accusations, according to Thomas Hogue, director of congressional and public affairs at the TTB, include Warsteiner Importers having "paid for or provided equipment for dedicated draft lines [or tap handles] in retail establishments … and Warsteiner Importers Agency Inc. paid for or sponsored events in exchange for exclusivity arrangement".

This is all part of a series of new laser-focused enforcements that a newly revitalized TTB is undertaking, a comment that Hogue shared in a recent story on Wine-Searcher.

"The emphasis on trade practice investigations declined over the years at ATF," Hogue says, talking about when it was part of the Bureau of Alcohol, Tobacco and Firearms. The bureau was later reorganized to become part of the Department of the Treasury – because of its tax-collecting functions – and the TTB was officially created in 2003.

What is unusual about the Warsteiner case is that there were no straight-forward pay-to-play implications leveled against the beer company – which is generally part of the accusation – according to Virginia-based legal consultant Rob Tobiassen, who worked as chief legal counsel at the TTB for many years. "It is not entirely clear what is going on here," he adds. A pay-to-play legal violation is one of the most common, can include a number of different legal infractions, and has long been on the TTB's radar as they fine more companies for what can be a less-than-ethical sales approach to the US wine market.

To date there have been 51 trade practice investigations initiated by the TTB since May of last year, according to Hogue. That is an impressive number, given what seemed to be the somewhat recent tolerance of many recent infractions of the three-tier system.

As the largest players – be they importers, major corporate marketers or wholesalers – get bigger, the entities that legislate them in Washington DC are ramping up their forces to ensure that they continue to do business in the proper ways. Whether the current American system of drinks sales is effective – or logical – is grist for another story or two, but as long as it is in effect legal kudos to the TTB for not allowing the big boys to impose their products – and sales goals – on operators.

Warsteiner, as a large beer manufacturer, has a long history of market violations in several countries. The German parent company was "one of five or six brewers that were fined over 100 million euros in 2014 for price fixing in Germany", adds Jon Moramarco, a Napa-based partner of wine data analyst Gomberg & Fredrikson.

Given the current fine, "it is only speculation but the level of the offer in compromise could be due to the size of the parent [company] and past compliance issues internationally". He adds that the TTB might be trying to make a serious statement given the company's prior violations and its renewed focus on setting the slates strait.

In the end the goal of such investigations and fines, according to Hogue, is to "ensure a level playing field, so any action we take to resolve alleged trade-practice violations is going to have to be more than just the cost of doing business".

Hopefully, going forward US marketers will respect the existing laws before they try to change them.