Experienced And Knowledgeable With Both The Alcohol beverage Industry And The Law

TTB Schematics Ruling

by | Feb 12, 2016 | alcohol beverage law, TTB

The TTB released a 2016 Ruling clarifying its interpretation of 27 CFR 6.99. This section permits the following:

§ 6.99 Stocking, rotation, and pricing service. (a) General. Industry members may, at a retail establishment, stock, rotate and affix the price to distilled spirits, wine, or malt beverages which they sell, provided products of other industry members are not altered or disturbed. The rearranging or resetting of all or part of a store or liquor department is not hereby authorized. (b) Shelf plan and shelf schematics. The act by an industry member of providing a recommended shelf plan or shelf schematic for distilled spirits, wine, or malt beverages does not constitute a means to induce within the meaning of … the Act.

TTB has been investigating this practice, generally as it relates to big box stores and national chains, and found that some industry members were providing schematics as well as additional services that far exceed the exception in § 6.99(b). “These additional services constitute ‘things of value’.”

For instance, in addition to providing a schematic, a wholesaler provided labor to clean and reset the retailer’s shelves to conform with the schematic, and regularly maintained the shelves and cold boxes. In exchange, the retailer allowed the wholesaler to assign favorable shelf space to its products and denied the same positions for the wholesaler’s competitors.

If additional services result in exclusion of a competitor’s product, in whole or in part, such that it places the retailer’s independence at risk, this would be a violation. TTB says, “a shelf plan or shelf schematic provided under this exception is a simple sales tool offering [regardless of their complexity] options as to how an industry member thinks a retailer’s shelves should appear.”

Practices that are not exempted by 27 CFR 6.99(b) but that may result in TTB scrutiny and investigation include:

(1) Assuming, in whole or in part, a retailer’s purchasing or pricing decisions, or shelf stocking decisions involving a competitor’s products;

(2) Receiving and analyzing, on behalf of the retailer, confidential and/or proprietary competitor information;

(3) Furnishing to the retailer items of value, including market data from third party vendors;

(4) Providing follow-up services to monitor and revise the schematic where such activity involves an agent or representative of the industry member communicating (on behalf of the retailer) with the retailer’s stores, vendors, representatives, wholesalers, and suppliers concerning daily operational matters (such as store resets, add and delete item lists, advertisements and promotions);

(5) Furnishing a retailer with human resources to perform merchandising or other functions, with the exception of stocking, rotation or pricing services of the industry member’s own product, as permitted in § 6.99(a) of the TTB regulations.

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The foregoing was prepared as general information. It is not meant to provide legal advice granting any specific matter and should not be acted upon without professional counsel. If you have questions or require additional information regarding these or other related matters, please contact Malkin Law, P.A. This material may be considered attorney advertising under certain rules of professional conduct.