More oversight of beer industry urged amid pay-to-play allegations
Prominent Beacon Hill officials suggested Massachusetts should beef up its oversight of the liquor industry if state regulators find that brewers, distributors, and retailers are engaging in illegal trade practices that promote some beer brands and freeze out others.
Legislators and incoming state officeholders, including Governor-elect Charlie Baker, were responding to a report in the Globe Friday that the Massachusetts Alcoholic Beverages Control Commission is investigating the so-called practice of pay-to-play in the beer industry, in which companies pay for, or demand payment for access to bar taps in pubs and restaurants and shelf space at stores.
The ABCC has just 14 inspectors to police the entire alcohol industry in Massachusetts, at a time when the beer business has grown dramatically, and its modest enforcement budget of $150,000 is less than half its funding seven years ago.
ABCC chief investigator Frederick Mahoney declined to comment on whether the agency has enough money and inspectors.
But several legislators questioned how the ABCC, with so little money and so few inspectors, can adequately investigate unfair trade practices without neglecting its enforcement of life-and-death issues of underage drinking and bars that serve patrons too much alcohol.
“It’s not right for them to have to make that choice,” said Paul Brodeur, a Democratic state representative from Melrose who serves on the Legislature’s Joint Committee on Consumer Protection and Professional Licensure, which oversees the alcohol industry.
“When you have a law, you either have to fund it or you have to take it off the books,” he said.
The committee’s chairman said he would consider pushing for more funding for ABCC if the agency finds beer companies have engaged in unfair trade practices.
“We [legislators] had discussions earlier this year about whether we’re putting enough resources to the ABCC. It’s an open question,” said John Scibak, a Democrat from South Hadley.
Scibak said he has often heard stories from small brewers about being turned away from bars because of suspect practices.
“I want to make sure consumers get access to beers, but I’m particularly sensitive to the large number of small breweries we have in Massachusetts, because those are jobs,” he said. “They may be small today, but they could become the next Sam Adams — if there’s a level playing field.”
Baker, too, said Friday he was concerned that small brewers are being unfairly barred from retailers because they cannot afford to bid against industry giants for the limited space at bars and stores.
“Protecting small businesses from unfair practices and ensuring regulators have the tools they need to perform the most vital functions, such as stopping underage drinking, is important to the governor-elect,” a spokesman for Baker said in a statement.
Incoming Treasurer Deb Goldberg, whose office oversees the ABCC, said she supported the agency focusing its “limited” resources on dangerous offenses.
But her office said Goldberg would back the ABCC in cracking down on any beer businesses found to have broken the law.
“If the ongoing investigation reveals distributors, brewers, or retailers have engaged in any illegal activity, Deb will urge the ABCC to take swift, decisive action,” Goldberg’s office said in a statement.
Pay-to-play is common and legal in other industries: major soda companies routinely lock up restaurants to the exclusion of competitors, for example, and grocery stores often charge suppliers “slotting fees” for prime shelf space.
But the practice is forbidden in the beer industry, which is governed by its own separate, intensive system of regulations.
Most alcohol laws in the United States date to the end of Prohibition in 1933, when anxiety over the social ills associated with alcohol ran high. Lawmakers in Massachusetts and most other states came up with a three-tiered system to keep breweries from dominating distributors and retailers.
That prevented the creation of so-called tied houses — bars that only serve beer from one brewery — which they feared would drive up prices and limit competition and consumer choice.
In Massachusetts, pay-to-pay play is banned by a law that says alcohol distributors cannot offer different prices to different retailers, and an ABCC regulation against distributors giving retailers inducements.