BON APPÉTIT MAGAZINE SHINES LIGHT ON PAY-TO-PLAY SCHEMES
Popular culinary publication Bon Appétit recently published a story that shines a bright light on certain alleged “pay to play” schemes in New York. In “Bribes, Backdoor Deals, and Pay to Play: How Bad Rosé Took Over,” writer and sommelier Victoria James describes certain actions allegedly taken by wine suppliers (wineries and wholesalers) in order to get their wine on the list at coveted restaurants. While some of the activities described in the article may be permissible under certain marketing-related tied house exceptions, others cross the line into commercial bribery and violations of tied-house laws. Take for example the text of an email James cites at the beginning of her article:
FROM: Wine account salesperson
TO: Victoria James, Cote Korean Steakhouse
Subject: Opportunity?
…I wanted to see if you were around next week to try some wines and see if there is any opportunity for our brands in Cote. It would be my pleasure to put together a proposal for you that includes funding for the location…
Federal and state tied house laws generally prohibit a producer or wholesaler from providing funding to a restaurant (or an employee of a restaurant) in exchange for wine placement. The primary purpose of these laws is to minimize the potential for unfair business practices in the industry and protect against social ills such as over-consumption. James, however, highlights another downside of tied-house violations: “an outbreak of sh&**# rosé on wine lists everywhere.” In other words, restaurant patrons are losing out when suppliers engage in pay-to-play schemes.
Recently, both federal and state authorities have turned their attention and enforcement resources to weed out these types of activities. As we noted last year, TTB has announced enforcement actions in both Chicago, Massachusetts, and Florida, and in December, the New York State Liquor authority announced a $3.5 million penalty against a major wholesaler that had been providing illegal gifts and services to retailers to induce them to carry certain products.
Given the attention TTB, state alcohol beverage agencies, and (now) the popular press are giving to “pay to play” schemes in the alcohol beverage industries, alcohol beverage suppliers should take steps to ensure their sales and marketing efforts are in line with applicable tied-house laws.