Heineken has agreed to pay the federal government $2.5 million to settle allegations of slotting fee practices in Miami, the U.S. Alcohol and Tobacco Tax and Trade Bureau (TTB) announced last month.
It's the largest settlement ever accepted by the TTB, according to agency spokesman Thomas Hogue, and the latest one stemming from a joint investigation between state and federal law enforcement agencies in Miami in the summer of 2017.
The investigation spanned several more states, including Washington and New York, and involved the use of specialists such as auditors, Hogue says.
Slotting fees, also known as "pay to play," are a type of illegal scheme that pays retailers to push certain products at the exclusion of others. Hogue says a "thing of value" is involved.
In this case, according to the TTB, Heineken provided some retailers with its BrewLock draft system, a technology patented by the beer company that can only be used with specially designed Heineken kegs. Hogue says the system forced retailers to purchase Heineken products.
Heineken either provided BrewLock to retailers at no cost or reimbursed them for the cost of the system, according to Hogue. The payments came in the form of credit card swipes that were unrelated to the system to hide the payments. The TTB also accused Heineken of disguising slotting fee payments as permissible activities, such as consumer sampling, that never happened.
New Times reached out to Heineken USA for comment but hasn't heard back yet.
Hogue couldn't specify what the credit card charges were, or how many and which retailers were involved. Not only did this case involve a "thing of value," it restricted what came out of retailers' taps,
The practice reduces consumer choice and edges out the competition. "We're trying to get everybody to be compliant," Hogue says. "Let the marketplace decide instead of paying to play."
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Slotting fee operations have been a TTB focus in recent years due to the growth of alcoholic producers in the U.S., Hogue told New Times in 2017. In 2017 and 2018, the agency received $5 million from Congress to increase enforcement efforts.
The settlement shouldn't be characterized as a fine or penalty, Hogue says, because the TTB doesn't have the authority to impose either. Instead, it's an "attempt to settle in lieu of permit action," and the amount was voluntarily agreed upon by both Heineken and the TTB.
Hogue says the agency's normal course of action is to revoke a company's industry permit, but a settlement can be reached before that happens. The money is put into the U.S. government's general fund.
"Any industry member that's subject to an investigation, they can come up to us at any point and reach a settlement agreement," Hogue says. "The settlement has to change behavior and has to have a deterrent effect. It can't be just the cost of doing business or else you're going to go back and do it again."