New Jersey’s two largest wine and spirits wholesalers must pay $4 million each – the largest in Alcoholic Beverage Control history – to resolve findings that they unfairly favored their largest retail customers, Attorney General Gurbir Grewal announced Tuesday.
Twenty retailers statewide will also pay a total of $2.3 million for their part in the discriminatory scheme.
In separate consent orders with the ABC, wholesalers Allied Beverage Group and Fedway Associates agreed to pay record-high monetary penalties and change their business practices to resolve trade violations the ABC’s Enforcement and Investigations Bureaus uncovered during a sweeping two-year investigation.
The wholesalers, which together account for approximately 70 percent of all wholesale wine and 80 percent of all wholesale spirits in New Jersey, unfairly favored 20 of the state’s largest liquor retailers and put smaller retailers at a competitive disadvantage by manipulating the retailer incentive program or RIP, granting credit extensions and interest-free loans, and engaging in other discriminatory practices, the investigation found.
New Jersey Attorney General Gurbir Grewal. OFFICE OF THE ATTORNEY GENERAL / TIM LARSEN
“Simply put, Allied Beverage Group and Fedway Associates rigged the market in favor of a handpicked group of powerful retailers, leaving smaller businesses struggling to compete. The unprecedented monetary penalties imposed reflect the egregiousness of this conduct and the widespread negative impact it had on New Jersey consumers and retailers,” said Attorney General Gurbir Grewal in a prepared statement. “This settlement sends a clear message that we will not tolerate this manipulative and anticompetitive behavior.”
RIPs provide cash rebates for retailers who purchase certain quantities of alcoholic beverages. ABC regulations make RIPs available to all retailers on a non-discriminatory basis by keeping the RIP payments to retailers relatively small, and by not allowing wholesalers to substitute RIPs for interest-free loans.
According to the investigation, Allied Beverage Group and Fedway Associates were giving some retailers a financial advantage by issuing rebates more often and in greater amounts than permitted; as well as failing to wait the required 30 days before issuing rebates, thus allowing retailers to use that money to pay for the orders for which the rebates were issued, which is against ABC regulations.
Those who don’t pay for orders within 30 days are put on an industry-wide cash-only delivery status, so by issuing the early rebates ensured that the chosen retailers would have a ready cash flow to pay for their orders on time, thus giving them an unfair edge over smaller retailers who had to use their own money to pay for their wine and spirits orders before the 30-day window expired.
Both Allied Beverage Group and Fedway Associates falsified records related to RIPs and/or used undocumented gift cards to make cash payments to chosen retailers that were not accounted for, the investigation found.
“Retail incentives are a legitimate marketing tool as long as they are above board and available equally to all retailers. Discriminatory practices like these foster instability in the market by harming smaller retailers,” said James Graziano, acting director of the Division of Alcoholic Beverage Control in a prepared statement. “If left unchecked, the ability of small retailers to remain in business may have been jeopardized and consumers would have less access to retail stores and the specialized product selections that they offer. We will continue to monitor industry practices to ensure an equal playing field in New Jersey’s alcoholic beverage retail industry and hold violators accountable for noncompliance.”
In addition to the required monetary payments, both Allied and Fedway agreed to adopt a corrective action plan; employ a compliance monitor for two years; make upgrades to their computer systems; and facilitate the retirement, resignation and/or termination of certain employees.
The following retailers were charged with ABC violations for involvement in the scheme. Each retailer entered a consent order with ABC to resolve the charges, with the following settlement terms:
- 70 Wine and Spirits LLC, t/a Vingo Wine and Spirits: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- Ashburn Corp., t/a Roger Wilco: $200,000 monetary offer in compromise in lieu of suspension plus corrective action.
- Birchfield Ventures Inc., t/a Joe Canal’s Discount Liquor Market (Woodbridge): $90,000 monetary offer in compromise in l lieu of suspension.
- Birchfield Ventures Inc. t/a Joe Canal’s Discount Liquor Outlet (Lawrenceville): $160,000 monetary offer compromise in lieu of suspension.
- Bernardsville Wine Company LLC t/a Gary’s Wine & Marketplace: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- BLW World Inc., t/a Liquor World of Fort Lee: $110,000 monetary offer in compromise in lieu of suspension.
- Closter Wine and Spirits t/a Gary’s Wine & Marketplace: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- Eclipse LLC, t/a Vingo Wine and Spirits: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- The Hudson Wine Market t/a Hudson Wine Market: $90,000 monetary offer in compromise in lieu of suspension.
- Jelma, Inc., t/a Gary’s Wine & Marketplace: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- Leiham Corp., t/a Bayway World of Liquors: $375,000 monetary offer in compromise in lieu of suspension plus phased-in retirement of manager and other corrective action.
- Meritage Wine Cellars LLC, t/a Vingo Wine and Spirits: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- MM Wine & Spirits Inc., t/a Vingo Wine and Spirits: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- Richard McAdam Inc., t/a Stirling World of Liquor and Stirling Fine Wines: $110,000 monetary offer in compromise in lieu of suspension.
- Somerset Wine Company LLC, t/a Gary’s Wine & Marketplace: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- SVGI Inc., t/a Vingo Wine and Spirits: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- SVGS Inc. t/a Vingo Wine and Spirits: $90,000 (including $62,500 unaccounted for cash seized from the store) monetary offer in compromise in lieu of suspension plus corrective action.
- Vinvingo LLC, t/a Vingo Wine and Spirits: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- VSGI LLC t/a Vingo Wine and Spirits: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
- Vive Naini, LLC, t/a Vingo Wine and Spirits: $90,000 monetary offer in compromise in lieu of suspension plus corrective action.
Representatives from Allied and Fedway did not return a request for comment by press time.
