Beer importer stuck with ‘pay-to-play’ distributor

GLOBE FILE

In an illustration of the unusual laws governing the alcohol industry, state regulators have told a Massachusetts beer importer that it must resume distributing its products through its former wholesaler.

Earlier this month, Belchertown-based Shelton Brothers Inc. sued its distributor, Craft Brewers Guild of Everett, alleging the company was overpricing its products and intentionally allowing them to languish on shelves while aggressively pushing beers from preferred suppliers — including by illegally paying off bars to put those brews on tap.

Shelton Brothers had also notified the state Alcoholic Beverages Control Commission that it intended to stop using Craft Brewers Guild.

But under the state’s controversial “franchise” law, suppliers such as brewers and importers are essentially bound to their distributors unless they can show the company has broken the law, engaged in “unfair preferment,” or failed to “exercise best efforts in promoting the sale” of its brands.

In February, the ABCC imposed a record $2.6 million fine on Craft Brewers Guild for engaging in a “pervasive illegal enterprise” by paying some Boston bars to put certain beers on tap, a practice known as “pay-to-play.” (The distributor is currently challenging the fine in state court.)

But the commission ruled Monday that Shelton Brothers must resume supplying beer to Craft Brewers Guild until it holds a hearing on the attempted separation of the two, expected sometime in 2017.

Craft Brewers Guild said in a statement that it sought the order to provide its retail customers with a “fair flow” of Shelton Brothers products until the case is resolved. The distributor also slammed Shelton Brothers for its history of suing other beer companies and challenging liquor laws.

Shelton Brothers principal Dan Shelton said in a statement that his company was simply following the procedure laid out by the franchise law and that he expected the process to end with the ABCC “reiterating the findings it has already made regarding [Craft Brewers Guild’s] preferential and illegal treatment of larger, wealthier suppliers.”

Also Monday, Craft Brewers Guild asked a state judge to dismiss Shelton Brothers’ lawsuit in Hampshire Superior Court, saying the case should instead be decided by the ABCC.