Massachusetts Wholesaler Caught Paying to Play Now Paying to Stay

Austin Ray
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THE GIST
A Massachusetts judge has upheld a lofty fine levied against a prominent distribution house caught operating an illegal pay-to-play scheme, denying the company’s appeal of an earlier ruling, The Boston Globe reports. As a result, Craft Brewers Guild—part of the Sheehan family network of wholesalers—is on the hook for $2.6 million for offering different prices to different bars for the same products in a prohibited anti-competitive practice known as “price discrimination.” The company initially accepted the unprecedented fine, as handed down by the Massachusetts Alcoholic Beverages Control Commission (ABCC), in lieu of a 90-day license suspension. The decision represents the latest, but not the final, chapter in the scandal which, since erupting, has rocked the state’s industry at large.

WHY IT MATTERS
Three years ago this month, Dann Paquette, founder of the now-defunct Pretty Things Beer, took to Twitter to publicly air his grievances about the rampant nature of illegal inducements in the Commonwealth. Since then, the industry has undergone dramatic change because of it. Most notably, the state vowed to crack down on the practice, a held promise that ultimately led to this week’s events. But the pay-to-play saga in the Bay State is far from resolved.

For starters, Craft Brewers Guild could prolong its own stay in the broader ordeal by appealing Suffolk Superior Court Judge Douglas H. Wilkins’ affirmation of the state’s initial ruling (The Globe reports that the company has not yet decided if it plans to). However, this is all much bigger than the misdeeds of any one company. Rather, it highlights systemic rot.

Earlier this spring, we reported that Anheuser-Busch was similarly charged in Massachusetts with giving away $1 million worth of equipment—including branded refrigerators and draft towers—to hundreds of retailers. The Globe reports today that, in light of the Craft Brewers Guild ruling, the world’s largest beer company will now have a harder time defending itself. Most likely, the company now won’t be able to use as its defense a decades-old repeal of discount bans (as the Guild did), because, even if discounts are legal, discriminatory discounts are not. This material fact, The Globe notes, is at the heart of the latest ruling.

Conversely, the decision is a positive for others. First and foremost, it’s a tangible win for the state, which last year convened a task force dedicated to tackling the corruption and inequities inherent within the regulatory framework of the alcohol industry. But it’s a proof-of-concept win for Night Shift Distributing, which was literally launched by Night Shift Brewing as a response to said corruption, and has been adding brands to its own portfolio of late. And hell, it’s even a win for brewers in the state who have for years now been fighting for more legal freedom to switch wholesalers. They can point to outdated rules, with confidence now—illegal shenanigans that support their cause.

All that said, it still feels like there’s plenty more to be unpacked three years after the industry, and previously indifferent regulators, began to unknot the tangled web in which they all reside. Something tells us we’ll be reporting further details to this story soon.

—Dave Eisenberg