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Consignment sales, or sales which are predicated on an obligation to pay a supplier for goods only once goods are sold, are strictly prohibited in the alcoholic beverage industry. The prohibition of consignment sales is not only found in Tennessee statutes and in the rules of our Tennessee Alcoholic Beverage Commission, but consignment sales are also prohibited on the federal level.
The Federal Alcohol and Tobacco Tax and Trade Bureau (“TTB”) recently took action and suspended the permits of four California wholesalers and two wineries for engaging in consignment sale activity. According to the TTB, here is what went down:
CONSIGNMENT SALES RESULT IN MULTIPLE PERMIT SUSPENSIONS
Between December 2018 and February 2019, four California wine wholesalers and two California wineries each served one-day stipulated permit suspensions for violations of the consignment sales provisions of the Federal Alcohol Administration Act. An additional California wine wholesaler that was also under investigation opted to surrender its permit.
These six stipulated suspensions and one surrender all resulted from investigations that developed out of the joint operation that TTB conducted with the California Department of Alcoholic Beverage Control in March 2018.
The four wholesalers who served suspensions are A&M Wines, Monticelli Brothers, Pavi Wines, and MB Vogelzang Vineyards. The two wineries who served suspensions are Six Sigma Winery and Tamber Bey Vineyards. Homage Vineyards surrendered its permit.
Specifically, these industry members engaged in consignment sales of wine to a trade buyer(s) who were not obligated to pay for the wine until after it had been sold to retailers. Consignment sales arrangements, like other unlawful trade practices, are used to gain an unfair advantage over law-abiding industry members and ultimately limit consumer choice.
Relevant documents related to the suspensions can be found on our Field Operations Administrative Casespage.
We are committed to creating a level playing field for law-abiding industry members of all sizes. Industry members who engage in anti-competitive practices damage other law-abiding businesses and prevent consumers from enjoying a wide selection of products.
Please visit TTB.gov for additional information on prohibited trade practices.
It is becoming well-known throughout the industry that TTB enforcement is up. Whether your business has location changes, ownership changes, or any other business change that requires notice to, or approval from, the TTB, there is no time like the present to come clean. In our experience, industry members find themselves in a much better and more forgiving position if they voluntarily approach the TTB with changes, notices or corrections, as opposed to non-compliance being discovered by the TTB through an audit or inspection.
If you have any questions about regulatory requirements pertaining to your business, please do not hesitate to contact us.
Last modified: February 18, 2019
