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Massachusetts Court Upholds Record $2.6M Fine against Beer Distributor

Earlier this month, a Massachusetts state trial court judge issued a decision in the matter of Craft Beer Guild LLC d/b/a Craft Brewers Guild v. Alcoholic Beverages Control Commission. The court upheld a decision by the Alcoholic Beverages Control Commission (ABCC) finding violations of Massachusetts’ trade practice laws by a large beer distributor. The case originated in the Fall of 2014, when a craft brewer alleged on Twitter that a Boston retailer had removed the brewer’s brands from the tap because suppliers and distributors were paying retailers in exchange for those retailers carrying their brands. The ABCC launched an investigation that culminated in administrative charges against Craft Beer Guild LLC d/b/a Craft Brewers Guild (CBG) for violations of Massachusetts’ anti-price discrimination statute (Mass. Gen. Laws ch. 138, § 25A(a)) (the Statute) and an ABCC regulation prohibiting inducements by licensees (204 Code Mass. Regs. § 2.08) (the Regulation).

After a hearing, the ABCC found that CBG violated the Statute and the Regulation based on its alleged implementation of schemes with multiple retailers and third-party management companies working on behalf of the retailers to provide payments in exchange for the retailers committing tap lines to CBG’s brands. The payments allegedly involved fictitious invoices issued by the third-party companies to CBG, as well as CBG’s payment of at least $120,000 to the retailers and/or third-party companies.

In lieu of a suspension, CBG paid a record-setting fine of more than $2.6 million to settle the violations. CBG then appealed the ABCC’s decision in March 2016. In June 2017, CBG filed a motion for judgment on the pleadings. The Massachusetts trial court held a hearing in September 2017, and then a few weeks later issued the order denying the motion, dismissing CBG’s complaint and affirming the ABCC’s decision against CBG. (more…)




Local Wholesaler-Retailer Dispute Has Federal Implications

On August 14, the U.S. District Court for the Southern District of Mississippi issued an opinion finding that state regulations bolstered one antitrust claim and hindered another in an ongoing dispute between a northern Mississippi convenience store chain, Major Mart, and an Anheuser-Busch InBev (ABI, a/k/a “Red Network”) distributor, Mitchell Distributing Company.

In Mississippi, by statute, like those of many other states, beer manufacturers must designate exclusive sales territories for each brand.  Mitchell holds the exclusive right to sell ABI brands to retailers in the counties in which Major Mart operates its 11 convenience stores.

The relationship between Mitchell and Major Mart started to break down in 2010, when Major Mart claimed that it was receiving inaccurate and confusing price information from Mitchell.  Major Mart asked Mitchell for compensation of lost profits due to the incorrect pricing information.  Mitchell denied the request, and Major Mart decided later to remove ABI displays and signs, lower the prices of competitors’ products, and reduce the cooler space allocated to ABI in some of its stores.  According to Major Mart’s complaint, Mitchell retaliated by (1) demanding shelving allocation that represented ABI’s market share of approximately 70 percent, (2) demanding price parity with competing products of ABI, (3) changing its deliveries to Major Mart stores to once a week so as to fill up Major Mart’s coolers and storerooms, leaving no room for competitor products and (4) delivering on Fridays so that Major Mart stores would not have cold beer on the “best selling day of the week.”

After litigation was first initiated, the parties reached a settlement in 2011, agreeing that Mitchell would increase its deliveries to at least twice per week and Major Mart would reconsider shelf space allocation and increase prices on competing brands of beers to the same price as ABI products.  This temporary resolution, however, failed when Major Mart did not reallocate its shelf space.  In response, Mitchell once again cut deliveries to one day per week and thereafter began to provide sales coupons and promotional giveaways exclusively to Major Mart’s competitors.  Major Mart also claimed that Mitchell delivered beer that was close to the end of its shelf-life, replaced fresher beer Major Mart had with older beer and missed deliveries during key dates, including July 4 and just as students were returning to college.  Eventually, Major Mart sued.

Major Mart alleged that Mitchell engaged in monopolization and attempted monopolization in violation of the Sherman Act and price discrimination in violation of the Robinson-Patman Act.  In response, Mitchell filed a motion for summary judgment asserting that the Sherman Act did not apply, as (1) Mitchell’s actions were immunized by the State Action Doctrine—the principle that the Sherman Act does not apply to states acting in their capacities as sovereigns—and (2) Mitchell’s actions, which occurred solely in Mississippi, did not affect interstate commerce—as required for Sherman Act jurisdiction.

Quickly discarding the State Action Doctrine assertion, the court noted that to qualify as a state’s action, conduct must be “undertaken pursuant to [...]

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