Bar and restaurant owners have focused on opening their businesses and what that will look like. However, there are many important questions and concerns that others in the industry have as well. The Alcohol and Tobacco Tax and Trade Bureau (TTB) under the Treasury Department recently issued an update about regulations amidst the changing business circumstances due to COVID-19.
Some have asked the TTB how they will enforce the Federal Alcohol Administration (FAA) Act restricting the sale of alcohol to directly or indirectly induce an alcohol-selling retailer to purchase their products to the partial or full exclusion of other sellers (distiller, winemaker, brewer, rectifier, blender, malt beverage maker). The unfair competition practice applies to the Commercial Bribery and Tied House provisions. These are:
- Tied House: This involves exclusive inducements using the furnishing of products, fixtures, money, services, or other things of value.
- Commercial bribery: This involves bonuses, compensation or premiums or other things of value given directly to employees.
How do they apply?
The TTB sees these applying to the following:
- Product returns: While overstock or slow-moving products typically cannot be returned, alcohol beverages purchased to sell during the event subsequently canceled due to COVID-19 may be returned. Wholesalers and retailers may also exchange the product for cash or credit, even if there was no privilege of return. Producers and sellers, however, are not obliged to accept returns.
- Credit terms extended: Relating specifically to the Tied House provisions, credit after 30 days of delivery is considered a means to induce, but this window is now 120 days.
- Gift cards: Alcohol industry members may donate gift cards as long as their use is not tied to the purchase of alcohol use in specific retailers, bars or restaurants, but they can encourage the user to support their favorite one. There must be a bank logo on this credit or debit card.
- Donating to charities: Payments that support retailers or employees are still generally considered an inducement. However, the TTB will not investigate members who make donations during the shutdown as long as there are no conditions on purchases or use of the giver’s products.
- Hand sanitizer: There is no law against making, selling or giving hand sanitizer, including in combination with beverages or non-beverage items.
Attorneys have updated information
Alcohol industry members may come across questions not answered by this or the TTB’s website. In cases such as these, it is best to speak with an attorney who works with the alcohol industry’s members on compliance and other legal issues.