Massachusetts to hit Craft Brewers Guild with 90-day license suspension for "pay to play" deals

Discussion in 'New England' started by Jason, Feb 12, 2016.

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  1. Jason

    Jason Founder (8,103) Aug 23, 1996 Massachusetts
    Staff

    Here is an update ...

    Link to latest Boston Globe Article
    http://tinyurl.com/ht6zd7r


    Past threads about this subject:

    Boston bars charged with violating "pay-to-play" rules
    http://www.beeradvocate.com/communi...rged-with-violating-pay-to-play-rules.331019/

    Massachusetts beer distributor charged in 'pay-to-play' probe
    http://www.beeradvocate.com/communi...tributor-charged-in-pay-to-play-probe.286438/

    Massachusetts authorities launch intensive investigation into "pay-to-play" in beer industry.
    http://www.beeradvocate.com/communi...ion-into-pay-to-play-in-beer-industry.227209/

    Pretty Things goes to town on "pay to play" in Massachusetts
    http://www.beeradvocate.com/communi...-town-on-pay-to-play-in-massachusetts.218980/
     
    jmdrpi, jaydoc, rjp217 and 2 others like this.
  2. Jason

    Jason Founder (8,103) Aug 23, 1996 Massachusetts
    Staff

    Well ... that escalated quickly. 90 days without these brands not being distributed.

    https://www.craftbrewersguildma.com/portfolio

    And for a brand that called it out and is no longer with them ... if they can't overturn this, 90 days is going to piss off a lot of people.
     
    F2brewers likes this.
  3. huuvola

    huuvola Initiate (130) Oct 29, 2005 Massachusetts

    These were the most enlightening parts, for me.

    -1- Remember Gordon Wilcox's "inferior product" letter to Dann of Pretty Things? He's a real sweetheart, ain't he?
    -2- Interesting to hear more about Pretty Things role. Explains more about why Dann would've been angry about the whole situation.
     
  4. HuskyHawk

    HuskyHawk Initiate (0) Jun 5, 2014 Massachusetts

    So how would that work? I'd assume that any of those brands could go elsewhere in this situation. It would make more sense for CBG to pay the fine or get an injunction and appeal. 90 days hurts too many innocent breweries.
     
  5. SveNss0N

    SveNss0N Initiate (0) Feb 16, 2014 Massachusetts

    The folks at Burke and Atlantic must be so happy right now
     
    beergrrl likes this.
  6. ZDSmith87

    ZDSmith87 Initiate (0) Jul 18, 2014 Massachusetts

    Wow, if this goes through it's going to have a lot of negative impacts in this area. Wonder how big the fines were on those bars?
     
  7. JGLittle

    JGLittle Initiate (0) Mar 24, 2012 Massachusetts

    That was pretty brazen and calculated at the same time. Break the rules deal with the fallout.
    I wonder if anyone else will get busted. Can't be an isolated instance.
     
    yourchoice likes this.
  8. Sweatshirt

    Sweatshirt Disciple (307) Jan 27, 2014 New Hampshire
    Trader

    I think people being pissed off over this is something that is needed to really shine a light on 'pay to play' and how grimey it is. I hope it doesn't get overturned.
     
    jlordi12, Dopen993, Pahn and 2 others like this.
  9. emount91

    emount91 Initiate (0) Aug 28, 2015 Connecticut

    that's a lottttttt of popular brands, yikes.
     
  10. braineater

    braineater Initiate (120) Dec 24, 2005 Massachusetts

    I think you missed this part of the article:

    "The long suspension may also be intended as a warning to other businesses with state alcohol licenses; officials said the ABCC is investigating at least four other allegations of pay-to-play."
     
    BostonJourno, Pahn and F2brewers like this.
  11. emannths

    emannths Aspirant (221) Sep 21, 2007 Massachusetts

    They have the option to pay a fine equal to 90 days of revenue, so it's unlikely that they'd actually have to (or choose to) shut down operations.

    I wonder if any brands will use this as cause for breaking their distro agreements. I know the Mass Brewer's Guild has been making a lot of noise on that front recently. If this isn't considered "cause," I don't know what is...
     
  12. emannths

    emannths Aspirant (221) Sep 21, 2007 Massachusetts

    TBD. Article says they'll argue their cases "later this month."
     
    BostonJourno and ZDSmith87 like this.
  13. dwmetsfan13

    dwmetsfan13 Initiate (167) Jul 22, 2013 Massachusetts
    Trader

    I feel like I'm missing something - what's the difference between Craft Brewers Guild paying bars to stock their beers (i.e., pay to play, which is illegal) vs. just charging less for each keg (which I presume would be OK)?
     
  14. WarbyJones

    WarbyJones Initiate (101) Jan 11, 2014 Maine
    Trader

    So... only craft breweries engage in pay-to-play and the macros don't???
     
  15. TheBeerShop

    TheBeerShop Initiate (0) Jul 23, 2012 Massachusetts

    Wow... just wow...


    I'm willing to bet it will settle with a fine... Craft rep's 100+ brands... most locked in contract (if not all), who have shark lawyers that aren't connected to any of this who would be affected by the suspension. In the end I'm guessing a Fine will be fine..

    It's a weird situation. All other industries follow this type of practice. It takes money to make money. I'm not condoning it... just saying we live in a society where our politicians spend 40-60% of their day doing this very same thing...fundraising to approve ideas that make people money.

    It sucks all around because even with a fine, we the shops and you the consumers will end up paying for it in our own ways too. I only hope it brings light to the industry as a whole, and everyone can move past this.
     
    BostonJourno likes this.
  16. emannths

    emannths Aspirant (221) Sep 21, 2007 Massachusetts

    Price discrimination is illegal in MA--you can't charge different prices to different customers. You can do things like quantity discounts, but the discount available to everyone.
     
  17. dwmetsfan13

    dwmetsfan13 Initiate (167) Jul 22, 2013 Massachusetts
    Trader

    Ah that makes sense then. Thanks!
     
  18. WarbyJones

    WarbyJones Initiate (101) Jan 11, 2014 Maine
    Trader

    Still why not just lower prices across the board for everyone then? I'm sure an across the board price point exists that is equivalent with what they pay out.
     
    emount91 likes this.
  19. emannths

    emannths Aspirant (221) Sep 21, 2007 Massachusetts

    I agree. It's probably a combination of factors. One may be that they may see some bars as "high profile" and their brands' presence there would help marketing efforts. Another may be a race-to-the-bottom thing, where once a bar asks for (or is offered) bribes to stock a particular brand, all the other brands have to offer similar incentives to stay competitive. But if you're selling to a bribe-demanding bar, why offer them a post-bribe price if you don't have to?
     
    BostonJourno likes this.
  20. PaulB

    PaulB Initiate (0) Sep 3, 2002 Massachusetts

    I hope the fine is passed on to us consumers, already paying some of the highest craft beer prices in the US
     
  21. cyclonece09

    cyclonece09 Meyvn (1,081) Aug 5, 2008 Maryland

    Macro has expensive lawyers to make sure things are minimized.
     
    SouthAtholSuds likes this.
  22. TheBeerShop

    TheBeerShop Initiate (0) Jul 23, 2012 Massachusetts

    Yeah, its bad with beer, but F*CKING Terible with wine.. there's a dozen wines that I as a customer can buy 1 bottle of at INSERT_BIG_BOX_STORE for $8.99 and my as a business my absolute best price in $12 each if we buy a 50 CASE DROP!!! I'm not an expert on the MGL but its against the law to sell a alcohol for cheaper than you buy it for. But that doesn't seem to mean the case 1 price?

    IMHO, this outcome only further benefits national chain stores. I'll give you an example. This pay to pay practice may be illegal in MA, but it's not in every state. So lets say INSERT_BIG_BOX_STORE has 10 stores in a state that does allow these kickbacks, there isn't anything stopping them from working a deal with a supplier, or brewery, or winery, or distro to get kickbacks in the legal state, for the sales in the illegal state. That my friends, is the way big business works... Its not easy being the small guy.....

    my 2 cents.
     
  23. CraftMass

    CraftMass Initiate (0) Feb 12, 2016

    Yesterday, the ABCC issued a ruling which imposed upon Craft Brewers Guild either a 90 day suspension or a fine. We are in the process of reviewing the decision with our legal counsel. Regardless of which option we exercise, there will be no disruption in our business and we will continue our high level of service to our valued customers. Thank you for your support.
     
  24. Rysk22

    Rysk22 Initiate (167) Nov 12, 2014 Massachusetts

    Not sure how the contracts work, but this could be a great opportunity for Craft Collective to come in and save the day!
     
  25. emannths

    emannths Aspirant (221) Sep 21, 2007 Massachusetts

    I don't think that's true. I think the MGLs say you can't sell it for less than the minimum retail price, which you should already have in your store:
    https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXX/Chapter138/Section25C
     
  26. braineater

    braineater Initiate (120) Dec 24, 2005 Massachusetts

    Please elaborate.
     
    DarthCerevisiae likes this.
  27. Rysk22

    Rysk22 Initiate (167) Nov 12, 2014 Massachusetts

    It appears that the Craft Brewers Guild brands will be without distribution for 90 days (pending they don't appeal/pay the massive fine). At face value it would seem that this would nullify some contracts (I'm no lawyer but I do watch It's Always Sunny). So I was suggesting that an up-and-coming distributer like Craft Collective could lend these brands a hand... (it's certainly not that easy)
     
  28. emannths

    emannths Aspirant (221) Sep 21, 2007 Massachusetts

    There's no way they don't pay the fine in lieu of suspension. If they take the suspension, they lose 90 days of revenue and their pipeline dries up. If they take the fine, they just lose 90 days of revenue.
     
  29. Smokingtony

    Smokingtony Initiate (0) Nov 14, 2014 Texas

    Very interesting to think of the consequences this could have on some of the smaller breweries in terms of production and labor needs. I won't jump to any conclusions, but the possibilities are extensive.
     
  30. Smokingtony

    Smokingtony Initiate (0) Nov 14, 2014 Texas

    I think the macros just do it smarter. No paper trail or direct cash exchange. These guys fucked up.
     
    LuskusDelph likes this.
  31. robNSB

    robNSB Devotee (403) Oct 6, 2009 Massachusetts
    Premium

    Great Charlie Reference!
     
  32. Pahn

    Pahn Meyvn (1,422) Dec 2, 2009 New York

    hearty lols all around about this. don't feel bad for any involved: stop this shit.
     
  33. SunDevilBeer

    SunDevilBeer Zealot (591) May 9, 2003 Massachusetts

    Yes, and more $$$ for ABCC staffing and activities/investigations! Just what MA needs, more regulation and oversight.
     
  34. Auror

    Auror Zealot (585) Jan 1, 2010 Massachusetts

    Yeah you either shut down for good or you pay the fine. Make revenue for 4 quarters and pay a fine of 1 quarter or shut down for 1 quarter and make revenue for 3 quarters. Shutting down is the same loss of revenue as the fine, so you're paying the fine off of either 3 quarters or 4 quarters of revenue. The math isn't equal (4x - x vs. 3x - x). Not to mention all the other damage of employees out of work, losing brands, etc. by taking the suspension. Plus Craft Mass' parent company presumably has enough money for the fine, but it won't be cheap. $25 million+ I think?
     
  35. dwmetsfan13

    dwmetsfan13 Initiate (167) Jul 22, 2013 Massachusetts
    Trader

    I think your math is off unless I'm misinterpreting something.
    • Shutting down means 3 quarters of revenue but no fine (3x)
    • Paying the fine means 4 quarters of revenue with a fine (4x-x = 3x)
    At any rate, I agree that you don't shut down and then come back since the math is equivalent.
     
  36. TheBeerShop

    TheBeerShop Initiate (0) Jul 23, 2012 Massachusetts

    Right, like I said I'm not an an expert in the MGL.... But I do know you have to file a form to close out (IE close down) and clear out the inventory...
    http://www.mass.gov/abcc/forms.htm
    http://www.mass.gov/abcc/pdf/forms/special permit for liquidation of inventory.pdf

    But this is a whole other topic... lets know derail the subect.
     
  37. Auror

    Auror Zealot (585) Jan 1, 2010 Massachusetts

    Yeah you're right. Duh. Too much beer killed my brain cells.
     
    Pahn likes this.
  38. rjp217

    rjp217 Meyvn (1,145) Apr 24, 2012 Massachusetts

    [​IMG]

    Twitter response.
     
  39. Pahn

    Pahn Meyvn (1,422) Dec 2, 2009 New York

    so even if their license is suspended for 90 days there won't be a disruption in their business? what does that mean, they sell old stock and don't buy new? the fuck?
     
  40. emannths

    emannths Aspirant (221) Sep 21, 2007 Massachusetts

    The Globe says they were offered a fine in lieu of suspension.
     
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