In a case closely watched by the US beer industry, Massachusetts alcohol officials have determined that a local beer wholesaler owned by Anheuser-Busch is not liable under state anti-pay-to-play rules for giving away nearly $1 million in equipment to beer retailers.
Tuesday’s ruling by the state Alcoholic Beverages Control Commission is the latest example of the agency’s struggle to effectively enforce its prohibition on pay-to-play arrangements, in which brewers and distributors give money or valuable equipment to bars and liquor stores in exchange for dedicated taps or shelf space.
Craft brewers have decried the tactic, saying it allows large companies to squeeze out smaller competitors that can’t afford such incentives.
Investigators at the ABCC last year charged Anheuser-Busch’s wholly owned distribution subsidiary in Medford, August A. Busch & Co. of Massachusetts, with providing coolers to liquor stores and elaborate draft “towers” (or taps) to bars in 2014 and 2015. All told, the equipment was worth $942,200, they said, and went to 441 retailers.
In exchange, the commission wrote in its ruling, “Anheuser-manufactured alcohol beverages were required to be stocked in the draft towers and coolers,” leaving fewer taps and less shelf space available to competitors.
But the ABCC’s three commissioners held that Anheuser-Busch — not the bars and liquor stores — technically retained ownership of the draft towers and coolers and could have removed them at any time.
They also said Anheuser-Busch, not its distribution subsidiary, paid for the equipment. The company’s Medford distributor merely helped facilitate the deals, they ruled.
But a person closely familiar with Anheuser-Busch’s operations in Massachusetts said the parent company and its Medford distributor are effectively one and the same. The person also said that while Anheuser-Busch may have retained ownership of the equipment on paper, it never actually removed coolers or taps from retailers.
In 2016, the ABCC exonerated several Boston bars that had allegedly accepted thousands of dollars in payoffs from a craft beer distributor to stock certain beers on a similar technicality. In that case, the commissioners dismissed the charges because the money from the distributor went to separate marketing and management entities controlled by the bars’ owners, and not to the businesses that held the liquor licenses overseen by the ABCC.
Experts said the Anheuser-Busch decision represented an extraordinarily narrow reading of state alcohol rules.
“I can’t remember the last time I’ve seen this kind of logic applied to the law,” said John Connell, a veteran Massachusetts alcohol lawyer who frequently represents companies before the ABCC. “It’s a very, very, very strict, constructionist interpretation of this regulation.”
Connell said the ruling would likely encourage more incentives between alcohol firms, and could allow large alcohol companies to control which beers are available to consumers. In fact, he added, the ABCC has provided the industry with a road map for getting away with pay-to-play in Massachusetts — as long as the money or equipment passes through a third party, neither the retailer receiving it, nor the brewer or distributor providing it, can be held accountable.
“You might see a lot more of this kind of behavior,” Connell warned.
Critics of the ABCC have long charged that the agency is too beholden to the industry, to consumers’ expense. For example, it is known to frequently overrule municipal licensing boards seeking to suspend the licenses of problematic local bars.
Another problem: the agency has no prosecuting attorney, leaving ABCC investigators who don’t have law degrees to argue against attorneys hired by alcohol companies. Officials in state Treasurer Deborah Goldberg’s office, which oversees the ABCC, said they are seeking additional funds from the Legislature to hire a prosecuting attorney.
A finding against Anheuser-Busch could have encouraged other states to pursue pay-to-play charges against the company, which gave away taps and coolers in hundreds of markets across the country, according to two people familiar with the company’s operations.
Anheuser-Busch argued at a disciplinary hearing in November that the apparent giveaways were not a quid pro quo deal with retailers but a merchandising program intended to put more Budweiser and Bud Light logos in front of consumers.
“Far from some clandestine kick-back scheme,” the Medford distributor “engaged in only a highly visible marketing campaign aimed at increasing recognition of Anheuser-Busch products,” Richard P. Campbell, the company’s attorney, wrote last year in a filing to the ABCC.
The company declined to comment.
In 2016, the ABCC levied a record $2.6 million fine against Craft Brewers Guild, an Everett craft beer distributor the agency said paid at least $120,000 to several Boston restaurant groups to stock its beers. The company is challenging the fine in state court.