Public Service Announcement: The Ttb Is Stepping Up Enforcement

Posted: May 07, 2019

This is a public service post for people in the U.S. wine (and spirits, and beer and cider) industry. The TTB is stepping up enforcement, and might be coming to look at your records soon. And they won't be as friendly about it in the past.

Starting in fiscal year 2017, Congress gave the TTB (the federal Alcohol and Tobacco Tax and Trade Bureau) $5 million per year specifically for enforcement. At the beginning the agency mostly used that money for educational seminars, to try to warn industry members against breaking the law. But lately the TTB is cooperating with state law enforcement agencies in an aggressive manner that the industry is not accustomed to.

Beverage attorney Kim Corcoran told me that agents seized 30 boxes of records from one winery.

"The TTB and the industry have had a pretty healthy relationship over the years," Corcoran said. "They come, they look at the books, and they say, 'Hey, don't do this.' And then if you do it the next year, you get fined. This is really changing the relationship between the TTB and the wineries. It's going to set up a much more adversarial relationship."

Corcoran also said that the TTB is now cracking down on practices they let slide in the past, especially in the area of wineries providing kickbacks to distributors or retailers. It's illegal in the U.S. for a winery to pay a distributor or retailer to carry its product, but many of them do under other guises, such as delivering 110 cases while charging for only 100 (this is called a "heavy pallet.")

"That is something that the TTB has known about for years and years and for whatever reason, allowed to be carried out for many years," said Jeremy Little, Corcoran's partner at the Santa Rosa law firm CPMR. "The consolidation of that side of the business has allowed distributors to write the rules. To get your wine into Chicago or Phoenix, you have to play by the rules that the distributors set."

"Because if you don't, there's another winery next door that will do that," Corcoran said. "Unless you've got 100% DTC (direct to consumer), you have to deal with this. You do what the distributors tell you to do."

TTB spokesman Thomas Hogue said the TTB is indeed stepping up enforcement, and moreover that it's something that members of the alcohol industry asked for.

By W. Blake Gray
April 28, 2019
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