The Supreme Judicial Court today upheld a fine of more than $2.6 million against a beer distributor for kickbacks paid to some Boston-area bars to give its beers guaranteed taps, but said that the state commission that oversees liquor laws can't punish a Seaport bar that accepted the bribes because of what it said was a tortured interpretation of those laws.
Reaching back to laws passed in the aftermath of the repeal of Prohibition in the 1930s, the state's highest court said the legislature passed proscriptions against what we now call "pay to play" to prevent large liquor distributors from becoming as influential - both in the marketplace and politically - as they were before Prohibition - and that the state Alcoholic Beverages Control Commission had the power to levy the fine against Craft Beer Guild, LLC of Everett.
But the state's highest court ruled the commission goofed in writing a regulation meant to let it also punish bars that accept such payments and so it overturned the license suspension ordered against what was then the Jerry Remy's on Northern Avenue.
The commission began investigating Craft Beer Guild in 2014 after a Somerville brewery charged bars would not provide taps for its beers without payments.
The commission ultimately ruled, in 2016, that Craft Beer Guild was giving different discounts to six Boston-area bars, in violation of the state law and its regulation based on the law that allows discounts if provided to all customers but bans providing different discounts or payments to specific bars.
Because of the way Craft Beer Guild made the kickbacks - to dummy companies each bar agreed to set up - only the owner of the Jerry Remy's in the Seaport was charged with accepting the payments, because investigators were only able to find proof that the payments had been transferred from its dummy company to the bar company: $20,000 in payments for 20 dedicated taps. The commission set the restaurant's punishment as a three-day license suspension.
The SJC ruled the law is pretty clear about wholesalers discriminating for or against particular bars and upheld Craft Beer Guild's punishment. But the court continued that the way the commission rule was written - in the 1930s - it would make it a crime for a bar owner to pay itself to decide which beers to carry, and that just makes no sense.
As the commission has applied the regulation to Rebel [the company that owned Jerry Remy's], it states: "No licensee [Rebel] shall . . . permit to be given money . . . in any effort to induce any person [Rebel Marketing] to persuade or influence any other person [Rebel] to purchase . . . alcoholic beverages." In other words, in order to apply [the regulation] to a retailer in receipt of inducement money, the commission must find that the retailer intended to persuade itself to purchase a brand of alcoholic beverages. We need not -- and do not -- endorse this tortured reading of the regulation.