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New Jersey’s Two Largest Spirits Wholesalers and 20 Retailers to Pay Total of $10.3 Million over Discriminatory Trade Practices
New Jersey’s two largest wine and spirits wholesalers both have been hit with $4 million penalties after being found to have engaged in discriminatory trade practices that unfairly favored their largest retail customers, according to an announcement by Attorney General Gurbir S. Grewal and the Division of Alcoholic Beverage Control.
In addition, 20 retailers in New Jersey will pay a total of $2.3 million in penalties for their part in the trade practices.
Wholesalers Allied Beverage Group and Fedway Associates agreed to pay the record-high penalties and change their business practices to resolve trade violations uncovered during a two-year investigation by ABC’s Enforcement and Investigations Bureaus, the announcement said.
The two wholesalers together account for approximately 70% of all wine and 80% of all spirits sold at wholesale in New Jersey, and the investigation found they unfairly favored 20 of the State’s largest wine and spirits retailers, putting smaller retailers at a competitive disadvantage by manipulating the retailer incentive program, or RIPs, granting credit extensions and interest-free loans, and engaging in other discriminatory practices.
RIPs provide cash rebates payed to retailers by wholesalers for purchasing certain quantities of alcoholic beverages; ABC regulations control the program by making RIPs available to all retailers on a non-discriminatory basis, by keeping the RIP payments to retailers relatively small, and by not allowing wholesalers to substitute RIPs for interest-free loans.
The investigation found that Allied Beverage Group and Fedway Associates were giving chosen retailers a financial advantage by issuing rebates more often and in greater amounts than allowed. They also failed to wait the required 30 days before issuing rebates, thus allowing those retailers to use that money to pay for the orders for which the rebates were issued, which is against ABC regulations.
Retailers who do not pay for orders within 30 days are put on an industry-wide cash-only delivery status, so the early rebates ensured that the larger retailers would have a ready cash flow to pay for their orders on time, giving them an unfair edge over smaller retailers who had to use their own money to pay for their wine and spirits orders within the required 30-day window.
The investigation also found that Allied Beverage Group and Fedway Associates falsified records related to RIPs and/or used undocumented gift cards to make cash payments to chosen retailers that were not accounted for, per the announcement this week.
Both entities agreed to adopt a corrective action plan; employ a compliance monitor for two years; make upgrades to their computer systems, and facilitate the retirement, resignation and/or termination of certain employees.
Retailers are similarly required to take corrective action and pay penalties. Below are the retailers that were charged with ABC violations, along with their settlement terms:
