Others Call For Increased Investigation Into Pay-to-Play

In a follow up to the first article regarding the ABCC investigating pay-to-play, Dan Adams of the Boston Globe reports that legislators, including Governor-elect Charle Baker, believe the state should “beef up its oversight of the liquor industry” if the ABCC finds the industry is engaging in illegal trade practices.

Currently, the ABCC’s enforcement budget is less than half of what it was seven years ago.

This issue is a great example of the difference between the alcoholic beverage industry and other food or beverage industries, particularly in Massachusetts. Because of the regulations on alcoholic beverages, some that date back to Prohibition, small local breweries face greater government restrictions to get to end users as compared with other products that may be stocked by bars, restaurants, or retailers. Local and small brewers have fewer options and a higher barrier to entry into the marketplace.

There are a few different Massachusetts regulations that prohibit this practice known as pay-to-play. A regulation against “inducements” states that no licensee “shall give or permit to be given money or any other thing of substantial value in any effort to induce any person to persuade or influence any other person to purchase…a particular brand of…beverage.” This is used to prevent one business in the industry from offering anything outside of the product itself to persuade another to commit to their product.

Massachusetts regulations also prohibit selling or offering to sell any beverage at  price less than invoiced cost. A situation which may occur if a retailer or bar is receiving a discount on products under a pay-to-play scenario.

Suppliers are also prohibited from offering inducements through price discrimination as outlawed by M.G.L. c. 138 s. 25A.

Craft breweries in Massachusetts are still soaring. In a recent article by James Fallows regarding Jim Koch, of Sam Adams beer, some startling facts are used to show the growth of the industry:

  • In 1971 there were less than 150 breweries, of any size, in the country.
  • That number went down by almost 50 breweries by 1984.
  • Now that number is over 3,000 and there are new breweries constantly being born across the country.
In the article Koch says the spread of craft beer is good for America, and Fallows agrees noting a link he has seen between a city’s craft beer scene and a young and entrepreneurial spirit.