United States: 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.

CBG raised several arguments on appeal, each of which the court rejected.

  1. The ABCC's finding of a violation of the Regulation was based on errors of law and lacked substantial evidence.

As an initial matter, the Regulation, which was promulgated under the Statute, prohibits a licensee from giving money or any other thing of substantial value to induce a person to influence another person to purchase, or refrain from purchasing, a brand of alcohol beverages. CBG argued that the Massachusetts Legislature withdrew statutory authority for the Regulation in 1970, when it repealed former subsection (b) of the Statute. This subsection had prohibited a supplier from granting a discount, rebate, free goods, allowance or other inducement, except for certain quantity discounts.

The court recognized that the 1970 repeal implicitly withdrew authority for a broad regulation generally prohibiting discounts by a licensee, but stated that the Regulation remains valid, as the Legislature did not intend to preclude the ABCC's enforcement of the Statute's anti-discrimination provision. Significantly, the court acknowledged that applying the Regulation to "prohibit discounts regardless of price discrimination" would improperly restate the repealed statutory provision and would exceed the ABCC's authority. The court also found that the Regulation is currently effective, although its application is limited by the partial repeal of the Statute.

  1. The ABCC's finding of a violation of the Statute was improper.

CBG argued that the ABCC did not find sufficient facts to establish a violation of the Statute's anti-discrimination provision. Specifically, CBG argued that in order to violate the Statute, two sales at two different prices must occur at the same time. However, the court found that the sales need not be contemporaneous in order to give rise to a violation.

CBG also argued that its payments to third parties did not support a finding of a violation; Yet the court noted that at least one of the parties that CBG paid was a retailer, so CBG made at least one payment directly to a retailer. Moreover, the court opined, consideration given to a "closely-related third party" in exchange for acts by a retailer constitutes consideration to both parties.

Finally, CBG argued that the payment of rebates does not constitute price discrimination, as the repealed provision of the Statute expressly prohibited rebates (accordingly, the remaining provision of the Statute does not inherently include such a prohibition). In response to this argument, the court broadly construed the concept of price discrimination to include "all aspects of price, including the net price after rebate."

  1. The ABCC's exoneration of retailers while finding CBG liable was arbitrary and capricious.

With respect to the retailer that received a direct payment from CBG, the court stated, the ABCC did find a violation on the part of that retailer. With respect to the other retailers, the court found that because those retailers neither paid nor accepted monetary payment—which the regulation requires—they were not liable under the regulation. The court accordingly found that ABCC's differential treatment of CBG and the retailers was not arbitrary and capricious.

  1. The ABCC committed procedural error in taking administrative notice of certain facts.

The ABCC took administrative notice of certain records in its files without providing notice to the parties or giving them an opportunity to contest the noticed facts, which a Massachusetts statute requires. Although the court acknowledged that the ABCC violated the statute, the court found that CBG cannot obtain relief without a showing of prejudice to its substantial rights, which the court found CBG failed to do.

  1. The 15-month suspension imposed on CBG was a Due Process violation and was arbitrary and capricious.

Citing the ABCC's broad authority to determine remedies and enforcement and the court's inability to interfere with this authority in most circumstances, the court found the penalty appropriate.

  1. CBG's penalty should not have included gross receipts from its operations outside Massachusetts.

CBG challenged the method of calculating the payment it made to the ABCC in lieu of suspension, arguing that it should not have had to include gross receipts from operations outside Massachusetts. CBG apparently included its New Hampshire operations in the penalty calculation on the instruction of the ABCC's general counsel. CBG did not seek the full ABCC's view as to whether this calculation was proper. Because there was no final ABCC decision on this issue, the court declined to consider the issue due to lack of jurisdiction. However, the court suggested that a penalty calculation based on a licensee's ability to pay, including taking into account its business in other jurisdictions, is "rationally related to imposing a sufficiently stiff sanction to deter misconduct."

Whether CBG will appeal the court's decision remains to be seen. For now, the decision serves as a strong affirmation of the ABCC's authority to enforce trade practice restrictions (even by reviving long-dormant regulations to do so) and to impose substantial penalties on alleged violators of those restrictions. The decision also demonstrates the disparate treatment members of different tiers of the industry often receive in trade practice matters. Although the retailers here participated willingly in the "pay-to-play" scheme with CBG, the retailers predominately were let off the hook due to the wording of the applicable statutory and regulatory provisions, which shielded the retailers that received indirect benefits from CBG through third-party management companies.

Massachusetts Court Upholds Record $2.6M Fine against Beer Distributor

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.