The world’s largest beer company is at the center of the latest pay-to-play scandal in Massachusetts. As first reported by the Boston Globe, state regulators have charged Anheuser-Busch with giving away nearly $1 million worth of equipment—including branded refrigerators, draft towers, and more—to hundreds of retailers as an illegal incentive to serve its products in place of competing brands. For its part, AB says it did, in fact, provide merchandise to retailers, but believes it did so lawfully. As such, the company plans to contest the allegations. A hearing is scheduled for June 20.
WHY IT MATTERS
The charge follows a 14-month investigation by the state’s Alcoholic Beverage Control Commission (ABC), which based its findings on financial records belonging to August A. Busch, a wholly owned AB distributorship in Medford. In the report, which was obtained by GBH, the agency says the company provided, among other things, “70 Budweiser signature draught towers valued at $3,000-$3,500 each; 103 coolers valued at $500-$700 each; 358 coolers valued at $850-$1,250 each; 12 coolers valued at $1,560 each; and 47 coolers valued at $5,700 each.” All told, the wholesaler allegedly provided $942,200 worth of merchandise to 441 retailers free of charge from 2014-2015.
The specifics of those numbers will likely play a key role in the company’s argument against the charges. Specifically, Massachusetts bans brewers and wholesalers alike from gifting retailers anything of “substantial value” as a means of exerting influence. However, “substantial value” isn’t defined. In turn, a source familiar with the company says it “had no reason to believe that the coolers [and other merchandise] approached or exceeded this undefined threshold.”
“The ABC alleges these items are of substantial value,” the source, which asked not to be identified, says. “[The company’s] argument is this: that term, ‘substantial value,’ was never defined.”
Smaller craft brewers in the area—as in, those that claim injury from these types of practices—would likely contend that, while $1 million might not be substantial to a company like AB, it would be for the average brewery. As Rob Burns, co-founder of Night Shift and president of the Massachusetts Brewers Guild told the Globe, “I see these places with branded coolers, branded umbrellas – those are expensive. I couldn’t afford to give away five umbrellas to every bar that sells our beer.”
Reached by GBH, Gemma Hart, AB’s vice president of communications, gave GBH the following statement:
“We have been working with the Massachusetts ABC since they first raised questions about permissible trade practices by wholesalers within the state. We believe that we lawfully provided branded point-of-sale items to retailers and plan to contest these allegations. We take trade practice compliance seriously and are committed to following the law.”
This is the third time in a year, though, that Anheuser-Busch has found itself being charged with offering illegal inducements. This time last year, the AP reported the company was fined $150,000 after it paid two Seattle concert venues an “exclusive promotional fee to secure a place for its products at the events and block out competitors.” More recently, this past March, the company reached a $400,000 settlement with regulators in California after an investigation revealed AB wholesalers had been illegally paying for refrigerators, television sets, and draft systems at Southern California retailers.
Meanwhile, the pay-to-play issue in Massachusetts has been an explosive one in recent years. It all started in 2014 when Dann Paquette, owner of the now defunct Pretty Things, alleged the practice was rampant and regulators didn’t have the resources to crack down. In turn, the state vowed to investigate, and ultimately hit Craft Brewers Guild, a distribution company in Everett, with a $2.6 million fine in lieu of a license suspension. Earlier this year, State Treasurer Deborah Goldberg convened a task force charged with reevaluating how the state’s liquor industry is run in hopes of updating unclear and outdated laws.
Bars and packies got free equipment to push Budweiser, state says [Boston Globe]