Last week, TTB reported that the agency suspended six (6) alcohol beverage permits between December 2018 and January 2019 for violations of Consignment sale provisions of the Federal Alcohol Administration Act. Four wine wholesalers and two wineries faced a one-day stipulated permit suspension; a fifth wholesaler who was under investigation opted to surrender its permit. As reported by TTB, the suspensions and surrender resulted from investigations through a joint effort with the California Department of Alcoholic Beverage Control in March 2018. Some more details can be found here.

Consignment sales are illegal at the federal level; engagement in Consignment Sales can also be illegal at the state level. Federally, 27 CFR § 11.21 states that it is unlawful for an industry member to “sell, offer for sale, or contract to sell to any trade buyer, or for any such trade buyer to purchase, offer to purchase, or contract to purchase any products a) on consignment; or (b) under conditional sale; or (c) with the privilege of return; or (d) on any basis other than a bona fide sale; or (e) if any part of the sale involves, directly or indirectly, the acquisition by such person of other products from the trade buyer or the agreement to acquire other products from the trade buyer.” In the cases disclosed by TTB, industry members engaged in consignment sales of wine to trade buyers who were not required to pay for the wine until the wine was sold to retailers.

TTB sees consignment sales as an unlawful trade practice that is used to gain an unfair competitive advantage in the industry. In some instances, engaging in consignment sales can restrict or limit consumer choices.

Other types of unlawful trade practices—including exclusive outlet, tied house, and commercial bribery—are also regulated at the federal level and can carry significant financial penalties and risk suspension or surrender of a permit. Industry members should be aware that many of these unlawful trade practices are also regulated at the state level.

For more information on wine or alcohol law, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.