TTB Issues Circular Regarding Trade Practice Guidelines

One of the biggest news stories in the beverage alcohol industry over the last year or two has been the intensified enforcement of trade practice violations by the federal Trade and Tax Bureau (TTB).

An industry circular posted by the TTB on Friday, November 8, 2018 points to the agency’s current engagement with this trend of enforcement, and provides all beverage alcohol suppliers and wholesalers guidance on what activities they should avoid in order to remain in compliance with federal rules. Increased enforcement has been a developing topic since early 2017, when the TTB first received an additional $5 million in appropriations from Congress to expand its investigations activities. For the TTB, trade practices violations were seen as a critical area of rules and regulations that required intensified education and enforcement.

As the circular indicates, despite these increased efforts by the TTB, the agency continues to see “significant and widespread” violations of trade practice rules. According to the circular, the violations that it sees includes such activities as (quoted from the circular, but not a complete list) :

  • Industry members paying fees or providing other things of value to retailers in exchange for display space or shelf space (including designated tap space), commonly referred to as slotting fees.  In some cases, such payments are hidden in the company’s books as payments for samplings that never take place.
  • Industry members and retailers altering invoices in an effort to conceal the nature of inducement payments.
  • Industry members and retailers altering invoices in an effort to conceal the nature of inducement payments.
  • Industry members illegally operating without a valid Federal permit due to not timely reporting changes of ownership, management, or control over their operations.

Trade practice rules are intended to create fair competition and equal access within the beverage alcohol industry. They prevent certain actors from using their established wealth and presence in the market from getting unfair edge over other members of the industry. As the circular says, “[The TTB] believe[s] that the industry as a whole has the ability and desire to operate within the law.“

The circular includes encouragement for industry members to undergo a voluntary disclosure with the TTB for any violations the industry member may have committed. By voluntarily disclosing, an industry member will mitigate whatever action the TTB may take against them for the violation.

The TTB takes its role in enforcing trade practice violations seriously, especially with the additional resources it has had in recent years to engage in enforcement actions. Industry members would do well to also take the TTB’s actions seriously and ensure that they remain in compliance with the federal rules that govern their license.

We at ShipCompliant by Sovos recommend everyone to read this circular and review the federal (and relevant state!) rules regarding trade practice, and take any necessary action to get compliant and stay compliant.

 

 

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