Alcohol Tax and Trade Bureau Issues Guidance on Rules Related to Category Management

The U.S. Department of Treasury’s Alcohol Tax and Trade Bureau (TTB) is the primary federal regulator of the alcohol industry. The TTB enforces the Federal Alcohol Administration Act (FAAA) which was originally passed in 1935. The FAAA governs various aspects of alcohol industry interactions and requires all wineries, distillers, wholesalers and importers to obtain a federal basic permit in order to engage in commerce. These permits require compliance with federal law 27 USC 205 entitled Unfair Competition and Unlawful Practices.

There are four main “trade practice” areas of focus for the TTB. These are exclusive outlet, tied house, commercial bribery and consignment sales. These laws seek to preserve competition and prevent abusive marketing and a return to the pre-1935 “tied house” system, where there was a vertically integrated sales system. That system of sales in part helped fuel the anger of the Anti-Saloon League which lobbied for passage of the 18th Amendment. The TTB has some history on the FAAA on its website.

Recently the TTB issued a ruling related to the “tied house” area of regulation. Tied house laws prevent industry members from providing items of value to alcohol retailers. The law sets out several specific prohibitions, and the regulations at 27 CFR Part 6. et seq. provide additional guidance and exemptions.

A recent high profile national retailer program proposal on category management attracted the concern and attention of various alcohol industry groups and state regulators. The TTB was asked to provide guidance to the industry.  TTB Ruling 2016-1 restated the existing law, which allows a very limited exception on the prohibition for items of value to a retailer. In 1995, the TTB amended the regulations with 27 CFR 6.99(b) to allow shelf plans and schematics to be provided to a retailer, but the TTB noted that current industry practices and proposals seem to be very far away from the intent and boundaries of the limited exceptions provided in 27 CFR 6.99(b).

The TTB has further provided guidance in the form of helpful Frequently Asked Questions. A PDF of these FAQs  can be found here. These FAQs take a narrow interpretation of what is a recommended shelf plan and schematic within section 6.99(b). They additionally note that the term “category management” or “category captains” are industry terms and are not listed in the statute and regulations. The FAQs highlight that having industry members pay for the labor of the entire store resets is not permitted by the law or exceptions. It also is important to remember that 27 USC 205 prohibits acting “directly or indirectly or through an affiliate.” This would prevent an industry member providing money to do something indirectly what they cannot do directly (e.g. labor).

This and other trade practice enforcement efforts at the TTB and in the states will be a very important issue for all industry members in 2016.


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