Elgin Beverage negotiated a $325,000 fine with federal regulators who say the Bartlett firm improperly paid retailers, seeking preferred placement of its products.
H. Lee Murphy
December 13, 2018
Elgin Beverage, a Bartlett-based beer distributor, has been fined by federal authorities for making improper payments to retail accounts seeking preferred placement of its products.
A wholesaler of Corona, Old Style and Schlitz brands, Elgin negotiated a fine of $325,000 for the infractions with the U.S. Department of the Treasury’s Alcohol & Tobacco Tax & Trade Bureau. The settlement was announced in a recent notice from the agency, which said the payments, totaling $10,000, occurred more than two years ago.
The payments, apparently to multiple retailers, were designed to win promotion of Elgin’s malt-beverage products to the exclusion of competing brands, the bureau said. It amounted to a practice called exclusive outlet, asking retailers to carry Elgin’s products and thus guaranteeing rivals would lose market share. Federal tied-house laws, designed to limit the influence any alcohol distributor can have over the retail tier, prohibit such payments.
Joseph Jasica Sr., CEO of Elgin Beverage, did not return phone calls or emails seeking comment. The Tax & Trade Bureau said Elgin offered the $325,000 fine to settle the case, and it was accepted by the agency. Such voluntary cash offers are common in these cases, Tom Hogue, the bureau’s director of congressional and public affairs, told Wine-Searcher News, which first reported the story. Hogue declined to reveal the names of the retailers that accepted Elgin’s payments.
More follow-up fines are likely to be levied by the Illinois Liquor Control Commission, according to one industry watcher. Sean O’Leary, a Chicago lawyer who writes a blog on liquor issues, said, “I’m sure there will be some kind of state sanction, though it’s not likely to be as large as the federal fine.” Officials at the state agency could not be reached for comment.
O’Leary added that Elgin was almost certainly discouraged by advisers in trying to challenge the fine. “For a small company to go to court against the TTB, it would likely cost them more than the $325,000 fine. It’s easier just to settle and be done with it,” he said.
Liquor sales laws in Illinois are under scrutiny: The U.S. Supreme Court is scheduled to hear arguments in Byrd v. Tennessee Wine & Spirits Retailers on Jan. 16, with an opinion likely from the court before summer. The case is testing laws in Illinois and other states that forbid the shipment of alcohol to individuals from out-of-state retailers.
“Judges rarely vote along ideological lines in liquor distribution cases like these,” O’Leary says. “So it’s difficult to predict how the case will come out.”