USA: Heineken USA to pay record $2.5 million fine to settle trade practice violations

The Alcohol and Tobacco Tax and Trade Bureau (TTB) announced on April 2 the acceptance of a record $2.5 million offer in compromise from Heineken USA Incorporated for alleged trade practice violations outlined in the Federal Alcohol Administration (FAA) Act, Brewbound reported.

Heineken USA’s (HUSA) payment is the largest offer in compromise that the federal agency has ever accepted, TTB spokesman Thomas Hogue confirmed to Brewbound.

According to the TTB, HUSA supplied alcohol retailers with its proprietary “BrewLock” draft systems at no cost between August 1, 2015, and March 26, 2019.

HUSA also reimbursed retailers who purchased the so-called “patented” and “revolutionary” on-premise technology through “disguised” credit card transactions.

Through its investigation — which began in Florida as a joint operation between the Florida Division of Alcoholic Beverages and Tobacco, and later expanded to the state of Washington and New York City – the TTB determined that Heineken was in violation of the FAA Act, specifically subsection 205 “unfair competition and unlawful practices.”

In a press release, the TTB said the BrewLock systems were designed to only dispense products packaged in unique kegs used by HUSA, which subsequently induced retailers into purchasing offerings made by the global brewing entity.

Additionally, the TTB accused Heineken’s U.S. importing arm of making “slotting fee payments” to retailers, and disguising those transactions as “permissible activities” such as consumer sampling experiences that never actually occurred.

HUSA hired third parties to make some of the slotting payments, the TTB also alleged.

For its part, HUSA confirmed that it had reached a “settlement agreement” with the TTB, but it stopped short of confessing to breaking the law.

“The settlement doesn’t admit to any violation of the law, and Heineken USA has been and remains committed to legal compliance in everything we do,” HUSA spokesman Bjorn Trowery wrote to Brewbound. “As part of our agreement, we are introducing an enhanced and robust compliance program and establishing an internal audit process.”

HUSA officials declined to offer additional comments.

Last year, the TTB accepted $900,000 from Ohio’s Warsteiner Importers Agency Inc., which at the time represented the largest fine ever levied on a U.S. alcohol company. Warsteiner was accused of engaging in illegal tied house, commercial bribery and exclusive outlet violations during a similar period (January 1, 2015, through April 19, 2018).