Federal Trade Practices: What Every Industry Member Should Know

Federal Trade Practices

What every Industry Member should know

APRIL 10, 201 8 – MIAMI , FL

MAY 9, 2 0 1 8 – SA N FRANCI SCO, CA

JUNE 1 3 , 2018 – CH I C A GO, I L

JULY 1 8 , 2018 – BO S TON, M A

TTB Disclaimer

Notice:

This information is being presented to help the public to understand

and comply with the laws and regulations that the Alcohol and

Tobacco Tax and Trade Bureau (TTB) administers.

It is not intended to establish any new, or change any existing,

definitions, interpretations, standards, or procedures regarding

those laws and regulations.

In addition, this presentation may be made obsolete by changes in

laws and regulations.

Please consult the applicable laws and regulations for the most

current requirements.

Field Operations

Organizational Chart

Field Operations

Intelligence DivisionTax Audit DivisionTrade Investigations Division

TID Organizational Chart

Director

Deputy

Director

PR District

Office

Western II

District

Office

Western I

District

Office

Mountain

District

Office

SE District

Office

NE District

Office

Office of

Special

Operations

Market

Compliance

Office

Market Compliance Realignment

• Market Compliance Office was realigned under

TID.

• Marketplace monitoring and enforcement

functions now under one Division.

• Among other things, MCO now oversees TTB’s

trade practice program.

• Program Manager available to answer your trade

practice questions at TradePr[email protected]v.

New TID Office

• TTB received a $5 million appropriation for FY

2017 and FY 2018 to increase enforcement efforts

for industry trade practice violations.

• New Office of Special Operations under TID

initiates and oversees trade practice

investigations.

– Office consists of 9 Special Operations Investigators

(SOI) and a supervisor.

– Other TID investigators will be assigned to assist.

Overview

• History

• Trade Practice Rules

• TTB Guidance

• Enforcement

• Practical Exercises

HISTORY

History

• Pre-Prohibition problems and excesses

• Prohibition (18th Amendment)

• Repeal (21st Amendment)

• Congress did not want a return to excesses of

Pre-Prohibition problems in the alcohol industry

• Solution

Federal Alcohol Administration

(FAA) Act

Signed into law by President Roosevelt in 1935.

27 U.S.C. 201 et seq. – Goals:

• Keep criminal element out of alcohol industry and maintain

compliance by using permit system (sections 203 and 204)

• Regulate formulation, labeling, and advertising of alcohol

beverages (section 205(e) and (f))

• Regulate promotional and marketing trade practices that

might lead to corruption or excessive consumption (section

205)

• Protect the consumer

FAA Act

Constitutional Authority

Commerce Clause:

• The Congress shall have the power to “regulate

Commerce with foreign Nations and among the

several states …”

─ Interstate commerce nexus for FAA Act — broad

nexus that generally includes commerce activities

between two or more States

FAA Act (cont’d)

Under the FAA Act, producers, importers and

wholesalers of alcohol beverages must register and

receive a basic permit to start operations.

• Importers and wholesalers of malt beverages must

• Producers of malt beverages must file a Brewer’s Notice.

Permits can be revoked, suspended, or annulled.

TRADE PRACTICE TERMS

Trade Practice Terms

Industry Member – an entity regulated by TTB

who is engaged in business as a:

• Distiller, brewer, rectifier, blender or other producer;

• Importer or wholesaler of distilled spirits, wine or

malt beverages; or

• Bottler, or warehousemen and bottler of distilled

spirits.

Does NOT include agency of a State or political

subdivision, or an officer or employee of such agency.

Trade Practice Terms (cont’d)

Trade Buyer – any person who is a wholesaler

or retailer of distilled spirits, wine or malt

beverages.

Trade Practice Terms (cont’d)

Inducement – a thing that persuades or

influences someone to do something

• May include goods, property, financial obligation,

etc.

• Interest in a license with respect to premises of a

retailer

• Paying for advertising or display space

Trade Practice Terms (cont’d)

Exclusion — Element of proof in exclusive

outlet, tied house and commercial bribery

cases:

• i.e., requirement or inducement to purchase

one person’s alcohol must be “to the exclusion,

in whole or in part” of alcohol sold by others

Trade Practice Terms (cont’d)

Exclusion (continued)

Historic interpretation:

• Practice considered a violation of FAA Act if the

induced or required purchases result in retailers

purchasing less of competitors’ alcohol

beverages than they otherwise

would have

Trade Practice Terms (cont’d)

Exclusion (continued)

Current interpretation:

• Requires “something more” than the retailer purchasing

less of a competitor’s products to show exclusion.

Two key cases are:

• Foremost Sales v. ATF, 860 F.2d 229

(7th Cir. 1988)

• Fedway Associates v. U.S. Treasury,

976 F.2d 1416 (D.C. Cir. 1992)

Trade Practice Terms (cont’d)

Exclusion (continued)

Two elements to exclusion:

• The proscribed practice must place retailer

independence at risk by means of a “tie or link”

between industry member and the retailer or by

any other means of industry member control,

and

• Such practice results in retailer purchasing fewer

of competitors’ products than it otherwise

would have.

Trade Practice Terms (cont’d)

Interstate Commerce requirements:

• Primary — Competitor’s products must be sold or

offered for sale in interstate commerce, and

• One of the other three interstate commerce

requirements of 27 U.S.C. 205(a)-(c) must be met.

• Consignment sales have slightly different IC

requirements

Trade Practice Terms (cont’d)

Interstate Commerce requirements (cont’d):

(1) If such requirement is made in the course of

interstate or foreign commerce, or

(2) If such person engages in such practice to

such an extent as substantially to restrain or

prevent transactions in interstate or foreign

commerce in any such products, or

Trade Practice Terms (cont’d)

Interstate Commerce requirements (cont’d):

(3) If the direct effect of such requirement is to

prevent, deter, hinder, or restrict other

persons from selling or offering for sale any

such products to such retailer in interstate

or foreign commerce.

FAA Act

Penultimate clause – 27 U.S.C. 205 (f)

In the case of malt beverages, the provision of the FAA

Act with respect to Trade Practices shall apply to

transactions between a retailer or trade buyer in any

State and a brewer, importer, or wholesaler of malt

beverages outside such State only to the extent that the

law of such State imposes similar requirements with

respect to similar transactions between a retailer or trade

buyer in such State and a brewer, importer, or wholesaler

of malt beverages in such State, as the case may be.

Trade Practice Terms (cont’d)

Similar State Law — If the excluded product is

a malt beverage (beer), there must be a

similar State law to enable application of the

FAA Act:

• Similar means similar, not same

• Broad interpretation of similarity

NOTE: Similar State Law not required for distilled spirits or wine.

TRADE PRACTICES OVERVIEW

Trade Practices Overview

Purposes:

• Prevent wholesaler, importer and

producer control over retailer (and

accompanying corruption and over-

consumption)

• To help keep the playing field level among

industry members

Trade Practices Overview (cont’d)

There are four trade practices that are prohibited for

producers, wholesalers, and importers:

1. Tied House

2. Exclusive Outlet

3. Commercial Bribery

4. Consignment Sales

27 U.S.C. 205

TIED HOUSE

Tied House

It is unlawful for an industry member to

induce, directly or indirectly, a retailer to

purchase alcohol beverages from the industry

member to the exclusion of alcoholic

beverages offered for sale by other persons.

27 CFR part 6

27 U.S.C. 205(b)

Tied House (Cont’d)

Tied House — “Means to Induce”

27 U.S.C. 205(b)(1) through (b)(7)

(b)(1) Acquiring or holding…any interest in any

license (State, county or municipal) with

respect to premises of retailer; or

(b)(2) Acquiring any interest in real or personal

property owned, occupied, or used in the

retailer’s business.

• Note: 100% ownership is not prohibited.

(27 CFR 6.27 and 6.33)

27 CFR part 6

Tied House — “Means to Induce”

27 U.S.C. 205(b)(1) through (b)(7) cont’d

(b)(3) Giving, renting, lending, or selling to retailer,

equipment, fixtures, signs, supplies, money,

services, or other thing of value. – (Except for

27 CFR part 6 Subpart D exceptions).

(b)(4) Paying or crediting a retailer for any

advertising, display or distribution service.

27 CFR part 6

Tied House — “Means to Induce”

27 U.S.C. 205(b)(1) through (b)(7) cont’d

(b)(5) Guaranteeing any loan or repaying retailer’s

financial obligation.

(b)(6) Extending credit to a retailer for a “period of

time in excess of 30 days from the date of

delivery.”

(b)(7) Requiring the retailer to take and dispose of a

certain quota of alcohol beverages.

27 CFR part 6

Tied House — Examples

• Industry member provides free labor to reset

stock on a retailer’s premises (other than stock

offered for sale by the industry member).

• Industry member purchases or rents display,

shelf, storage, or warehouse space from a

retailer (i.e. slotting allowance).

27 CFR part 6

Tied House — Examples

• Industry member pays for live entertainment for

an on-premise retailer in exchange for product

promotion and preferential display space within

the retailer’s premises.

• Industry member informs a retailer that they

must purchase a slow-moving alcohol beverage

product in order to obtain a product that is in

high demand.

27 CFR part 6

Tied House — Subpart D Exceptions

Included among the items listed in the Subpart D

exceptions are:

• Product displays;

• Point of sale advertising materials;

• Consumer tasting/sampling at retail locations;

• Limited equipment and supplies;

• Stocking, rotation and pricing service.

There are limitations and conditions for all Subpart D

exceptions. Generally, any exceptions to 27 U.S.C.

205(b)(3) must be of little value.

27 CFR part 6

Tied House —

Recordkeeping Requirements

27 CFR part 6

For exception to apply, industry members must keep

and maintain records on premises for certain items

furnished to retailers:

• Product displays

• Equipment and supplies

• Samples

• Coupons

• Participation in retailers association activities

• Merchandise

27 CFR 6.81(b)

Tied House —

Recordkeeping Requirements (Cont’d)

27 CFR part 6

Required records must include:

• Name and address of retailer

• Date furnished

• Item furnished

• Industry member’s cost of item

• Charges to retailer (if any)

27 CFR 6.81(b)

Tied House

When does a violation occur?

1. Inducement

• Industry Member to Retailer---unless industry member wholly owns

retailer.

2. Interstate Commerce

3. Exclusion

4. Similar State Law (Malt Beverages Only)

NOTE: If all elements are not established, there is no violation.

27 CFR part 6

EXCLUSIVE OUTLET

Exclusive Outlet

It is unlawful for an industry member to

directly or indirectly require a retailer, “by

agreement or otherwise” to purchase alcohol

from that industry member to the exclusion

of alcohol sold or offered for sale in interstate

or foreign commerce by others.

27 CFR part 8

27 U.S.C. 205(a)

Exclusive Outlet (Cont’d)

• Voluntary industry member-retailer

purchase agreements (Contracts)

• Coercion through acts or threats of

physical or economic harm

27 CFR part 8

Exclusive Outlet - Contracts

Any contract or agreement, written or

unwritten, which has the effect of

requiring the retailer to purchase

alcohol beverage products from the

industry member beyond a single sales

transaction is prohibited.

(27 CFR 8.22)

27 CFR part 8

Exclusive Outlet - Contracts (Cont’d)

(a) An advertising contract between an

industry member and a retailer with the

express or implied requirement to

purchase the advertiser's products; or

27 CFR part 8

Exclusive Outlet - Contracts (Cont’d)

(b) A sales contract awarded on a competitive bid

basis which has the effect of prohibiting the retailer

from purchasing from other industry members by:

(1) Requiring that for the period of the

agreement, the retailer purchase a product or

line of products exclusively from the industry

member; or

(2) Requiring that the retailer purchase a specific

or minimum quantity during the period of the

agreement.

27 CFR part 8

Exclusive Outlet –

Contract Example

ABC-Wholesaler enters into a sales contract with

The Pub, a liquor retailer, in which The Pub agrees

to purchase all of its alcohol beverages exclusively

from ABC to the exclusion of alcohol beverages

offered for sale by others in interstate commerce.

In exchange, ABC will sell its products to

The Pub at a very favorable cost.

27 CFR part 8

Exclusive Outlet

When does a violation occur?

1. Requirement by agreement or otherwise

• Retailer must purchase from industry member

2. Interstate commerce

3. Exclusion (of other industry member’s products)

4. Similar State Law (Malt Beverages Only)

NOTE: If all elements are not established, there is no violation.

27 CFR part 8

COMMERCIAL BRIBERY

Commercial Bribery

It is unlawful for an industry member to induce any

“trade buyer” (wholesaler/retailer) to purchase

alcohol from the industry member to the exclusion

of those sold by others by:

• Commercial bribery; or

• Offering or giving any bonus, premium or

compensation to employees, officers, or

representatives of trade buyer.

27 CFR part 10

27 U.S.C. 205(c)

Commercial Bribery (cont’d)

27 CFR part 10

Commercial Bribery (cont’d)

“Commercial Bribery” under section

205(c)(1) means:

• The practice of sellers paying money or making

gifts to employees or agents to induce them to

promote purchases by their own employers from

the sellers offering the secret inducements.

27 CFR part 10

27 U.S.C. 205(c)

Commercial Bribery (cont’d)

• Things of value given to officers, employees, or

representatives of trade buyers that promote

sales of industry member’s products can

indirectly induce the trade buyers to purchase

more of those products (27 U.S.C. 205(c)(2))

• Note: Industry member may give things of

value to wholesale entity unless wholesaler is

mere conduit to the employees (27 CFR 10.23)

27 CFR part 10

Commercial Bribery - Example

An industry member contacts a purchasing agent

for a chain of restaurants to buy and sell its

alcoholic beverages in exchange for a weekly cash

incentive of $200 to the agent. The purchasing

agent agrees, and secretly receives the payment by

check through the mail and also stops buying a

competitor’s product. The purchasing agent’s

employer doesn’t know anything about it.

27 CFR part 10

Commercial Bribery - Example

(cont’d)

Sales Contests:

• Industry member offers gift or bonus to

trade buyer’s employees to promote sales

of industry member’s products. This sales

contest indirectly induces the trade buyer

to purchase more of those products.

27 CFR part 10

Commercial Bribery (cont’d)

When does a violation occur?

1. Inducement (to employee or representative)

• Industry member to trade buyer (wholesaler or retailer).

2. Interstate Commerce

3. Exclusion

4. Similar State Law (Malt Beverages Only)

NOTE: If all elements are not established, there is no violation.

27 CFR part 10

CONSIGNMENT SALES

Consignment Sales

Unlawful to sell, offer to sell, or contract to sell

alcohol beverages to trade buyer (or for trade

buyer to purchase or offer/contract to

purchase):

• On consignment, or

• Under conditional sale, or

• With the privilege of return, or

27 CFR part 11

27 U.S.C. 205(d)

Consignment Sales (cont’d)

Unlawful to sell (continued):

• On any basis other than a bona fide sale, or

• Where any part of the transaction involves the

acquisition of other wine, distilled spirits, or

malt beverages from the trade buyer

27 CFR part 11

27 U.S.C. 205(d)

Consignment Sales (cont’d)

27 CFR part 11

Consignment Sales Exception

27 CFR part 11

Merchandise returns for ordinary and usual

commercial reasons do not constitute consignment

sales, such as:

• Error in delivery (27 CFR 11.33)

• Defective product (27 CFR 11.32)

• Product unlawful to sell (27 CFR 11.34)

Consignment Sales Exception

(Cont’d)

27 CFR part 11

Ordinary and usual commercial reasons (continued):

• Termination of retail business (27 CFR 11.35) or

wholesale franchise (27 CFR 11.36)

• Change in product (27 CFR 11.37)

• Discontinued product (27 CFR 11.38)

• Seasonal dealer (27 CFR 11.39)

Consignment Sales Exception

(Cont’d)

27 CFR part 11

Merchandise returns for reasons that

are NOT considered ordinary and/or

usual include:

• Overstocked or slow moving products (27

CFR 11.45)

• Seasonal products (27 CFR 11.46)

Consignment Sales - Example

27 CFR part 11

• An industry member (wholesaler, importer)

sells a retailer 300 cases of alcohol beverages

with the understanding that if it is not sold, it

may be returned.

• Importer sells to wholesaler under condition

that wholesaler is not required to pay for

alcohol until sold to retailer.

Consignment Sales

27 CFR part 11

When does a violation occur?

1. Consignment Sale

- To sell, offer for sale, or contract to sell, OR, to purchase,

offer to purchase, or contract to purchase.

2. Interstate Commerce

3. Similar State Law (Malt Beverages Only)

No Exclusion Requirement - if the sale, purchase, offer, or

contract is made in the course of interstate or foreign commerce.

Summary

• Trade Practice Prohibitions:

• Tied House

• Exclusive Outlet

• Commercial Bribery

• Consignment Sales

• All elements of a violation must be present for there

to be a violation.

• Exclusion element is required for all but

Consignment Sales

TTB GUIDANCE

TTB Guidance

Industry Circular 2012-1

Guidance Regarding Industry Members' Participation

in Retail Programs

• Discusses the use of third-party marketing companies.

• Subpart D exceptions are only applicable to the

prohibition of providing things of value under 27 U.S.C.

205(b)(3) and do not apply to other provisions of the FAA

Act.

• Subpart D exceptions cannot be used as a subterfuge to

violate another provision of the FAA Act.

TTB Guidance

Industry Circular 2012-2

Tie-In Sales - An Unlawful Trade Practice

• Tie-in sale is when a industry member requires

a retailer to purchase one product in order to

obtain another product.

• Tie-in sales are prohibited inducements under

27 U.S.C. 205(b)(7).

TTB Guidance

Ruling 2016-1 and FAQs

The Shelf Plan and Shelf Schematic Exception to

the “Tied House” Prohibition, and Activities

Outside Such Exception:

• Allows furnishing a retailer with a recommended

shelf plan or schematic.

• Provides general guidance concerning promotional

activities commonly associated with category

management programs.

• Reminds industry members that if a thing of value is

not specifically exempted in Subpart D, it is an

inducement.

TTB Guidance

Ruling 2017-2 Revised

Freshness Dating and Allowable Returns of Malt

Beverage Products under the FAA:

Malt beverages may be returned under the following

conditions:

• The brewer has pre-established policies and

procedures in place across various product lines that

specify the date the retailer must pull the product;

• Such brewer’s freshness return/exchange policies

and procedures are readily verifiable and

consistently followed by the brewer;

TTB Guidance

Ruling 2017-2 Revised (cont’d)

Conditions (continued):

• The container has identifying markings that

correspond with this date; and

• The malt beverage product pulled by the trade buyer

may not re-enter the retail marketplace.

Trade Practice Proceedings

Consequences

Violations of the FAA Act Trade Practice

prohibitions can result in:

• Criminal charges

• Injunction or consent decree

• Revocation of Basic Permit

• Suspension of Basic Permit

• Offer in Compromise

FAA Act Permit Proceedings

• Permit may be annulled if Secretary finds it

was obtained through fraud,

misrepresentation, or concealment of

material fact.

• Permit may be revoked if permittee

has not engaged in business for more

than 2 years.

FAA Act Permit Proceedings

(Cont’d)

• Permit may be revoked or suspended if

permittee willfully violates any conditions of

its basic permit:

- However, can only be suspended for

first-time violation

• As an alternative to suspension or

revocation, TTB can accept offers in

compromise (27 U.S.C. 207)

Other Proceedings

Violations of FAA Act Trade Practice

prohibitions can result in criminal charges

against any person who violates the Act:

• Misdemeanor

• $1,000 fine for each offense

In consignment sale context, can include the

retailer

Trade Practice Cases

Chicago - Press Release January 2009

─ Glazer’s Distributors of Illinois, Inc. - $225,000

─ Southern Wine & Spirits of Illinois, Inc. - $225,000

─ Wirtz Corporation - $130,000

─ Distinctive Wine & Spirits, LLC - $110,000

─ Johnson Brothers Liquor Company of Illinois - $40,000

─ Vin Divino, Ltd. - $30,000

─ Stoller Wholesale Wine & Spirits, Inc. - $18,000

─ Fine Vines, LLC - $12,000

─ Shaw-Ross International Importers - $10,000

─ Wein-Bauer Distributing, Inc. - $3,000

Trade Practice Cases (cont’d)

Las Vegas – Press Release May 2011

─Diageo North America, Inc. - $650,000

─Pernod Ricard USA, LLC - $300,000

─Moet Hennessey USA, Inc. - $275,000

─Bacardi USA - $262,500

─Future Brands, LLC - $250,000

─E. & J. Gallo Winery - $225,000

Recent Trade Practice Cases

• Offer in Compromise of $450,000 from

MillerCoors, LLC (Consignment Sales)

• Offer in Compromise of $300,000 from

Anheuser-Busch, LLC (Consignment Sales)

• Offer in Compromise of $750,000 from

Craft Beer Guild, LLC (Tied-House)

Most Recent

• Offer in Compromise of $900,000 from

Warsteiner Importers Agency, Inc.

Tied House OIC Trend

$80,300.00

$327,083.33

$750,000.00

$900,000.00

$0.00

$100,000.00

$200,000.00

$300,000.00

$400,000.00

$500,000.00

$600,000.00

$700,000.00

$800,000.00

$900,000.00

$1,000,000.00

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

PRACTICAL EXERCISES

Practical Exercise #1

A Wholesaler enters into a 9-month advertising

contract with Bob’s Racetrack, a retailer. Under the

terms of the contract, Bob’s Racetrack will receive

$50,000 and agrees to purchase the Wholesaler’s

malt beverages throughout the 9-month contract

period. The Wholesaler will be able to put up

signage throughout the racetrack advertising its malt

beverage products.

Practical Exercise #1 (Cont’d)

Is this an exclusive outlet arrangement?

27 CFR 8.22 prohibits:

“Any contract or agreement, written or

unwritten, which has the effect of requiring the

retailer to purchase distilled spirits wine or malt

beverages from the industry member beyond a

single sales transaction.”

Practical Exercise #1 (Cont’d)

Does the practice place retailer independence at

risk?

• Bob’s Racetrack has a continuing obligation to purchase

or otherwise promote the Wholesaler’s product — 27

CFR 8.54(c)

• Bob’s Racetrack has a commitment not to terminate its

relationship with the Wholesaler with respect to

purchase of the Wholesaler’s products — 27 CFR 8.54(d)

• This practice may also hamper the free economic choice

of Bob’s Racetrack to decide which products to purchase

— 27 CFR 8.54(a)

Practical Exercise #2

A Wholesaler enters into a 12-month sales contract

with a retailer of fine wines. Under the terms of the

contract, the retailer agrees to purchase all of its

French burgundy wines exclusively from the

wholesaler for the duration of the 12-month period.

In return, the wholesaler offers a discounted price.

Practical Exercise #2 (Cont’d)

Is this an exclusive outlet arrangement?

The contract clearly requires purchases beyond a

single sales transaction — 27 CFR 8.22

Practical Exercise #2 (Cont’d)

Does this practice lead to exclusion?

This contract requires the purchase of all French

burgundy wines exclusively from the wholesaler.

This is a practice that per se results in exclusion

under 27 CFR 8.52(b).

Practical Exercise #3

A Wholesaler enters into a 12-month contract with

a local tavern that caters to an affluent clientele.

Under the terms of the contract, the wholesaler will

provide several wines at a very favorable price

throughout the contract period. The products are

being supplied on an as-needed basis and there are

no minimum quantity purchase requirements.

Practical Exercise #3 (Cont’d)

Is this an exclusive outlet arrangement?

Contract meets the requirements

of 27 CFR 8.53 – Practice not resulting in exclusion:

• Supply contract for 1 year or less

• Industry member agrees to sell on “as-needed basis”

• No minimum quantity purchase requirements

Practical Exercise #4

Bob’s Imports USA, an importer of alcoholic

beverages, sponsored a 10-day all expense paid trip

to the Bahamas for the top 3 sales people of a

Wholesaler who sold the most Bob’s Rum products

over the 3-month period of June, July, and August

2017. The value of the trip to each winner was

approximately $2,000.

Practical Exercise #4 (Cont’d)

Is this commercial bribery?

• There are no secret payments

27 U.S.C. 205(c)(1)

• “Sales contests sponsored by an industry

member which offer prizes directly or indirectly

to trade buyer officers, employees, or

representatives are inducements within the

meaning of the act.” (27 CFR 10.21 and 10.24)

Practical Exercise #4 (Cont’d)

Does it place the wholesaler’s independence

at risk?

• Could “hamper the free economic choice” of

wholesaler to determine which products to buy

(27 CFR 10.54(a)), or

• Could be considered a continuing obligation to

purchase or otherwise promote the importer’s

product (27 CFR 10.54(c))

Practical Exercise #5

Angelo’s Imports, a beer importer provides tap

systems to a new chain of restaurants in exchange

for its products being offered on tap.

Practical Exercise #5 (cont’d)

Is this an inducement (assuming similar state

law)?

• The industry member is paying for display space

at a retail establishment (27 U.S.C. 205(b)(2) and

4); 27 CFR 6.35 and 6.56)

• The industry member is also furnishing a thing of

value to the retailer (27 CFR 6.41)

Practical Exercise #5 (cont’d)

Is this a risk to the retailer’s independence?

• This is a slotting allowance under 27 CFR

6.152(b)

Practical Exercise #6

Bob’s Distillery, in order to introduce a new whiskey

to the market, enters into an agreement with a

Wholesaler. As part of the agreement, Bob’s

Distillery will accept the return of any product that

doesn’t sell within 90 days.

Practical Exercise #6 (Cont’d)

Is this a consignment sale?

Sale of the whiskey involves the distiller agreeing

to buy back slow moving product from the

wholesaler/trade buyer (27 U.S.C. 205(d); 27 CFR

11.21(c) and 11.45)

Remember: Proof of exclusion is not required for

consignment sale if the sale is made in the course of

interstate commerce

100

Questions?

101

• We are here to answer your questions.

• Additional questions can be submitted in

writing to:

TradePractices@ttb.gov