Manchester Liquor Store Pays $90K Fine In Incentive Scheme

MANCHESTER, NJ — A Manchester Township liquor store is among 20 that have agreed to pay $90,000 in fines to the state for its role in a retailer incentive program that gave it a competitive advantage with credit extensions and interest-free loans.

The fine was among $2.3 million in fines to retail liquor stores that were announced as part of a settlement with two of the largest wholesale liquor retailers in New Jersey who will pay $4 million each to resolve findings that they engaged in discriminatory trade practices, the state Attorney General's office said.

A sweeping two-year investigation by the state Division of Alcoholic Beverage Control uncovered the scheme, Attorney General Gurbir S. Grewal said.

Vingo Wine and Spirits, 1201 Route 70 West in Manchester, agreed to pay $90,000 in lieu of a suspension, plus had to take corrective action.

Wholesalers Allied Beverage Group and Fedway Associates agreed to pay the record-high penalties and change their business practices, Grewal said.

The investigation found Allied and Fedway — which together account for approximately 70 percent of all wine and 80 percent of all spirits sold at wholesale in the state — unfairly favored Vingo (six of the 20 retailers were Vingo locations) and the other large wine and spirits retailers and put smaller retailers at a competitive disadvantage by manipulating the retailer incentive program, granting credit extensions and interest-free loans, and engaging in other discriminatory practices, Grewal said.

"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," Grewal said. "The unprecedented monetary penalties imposed reflect the egregiousness of this conduct and the widespread negative impact it had on New Jersey consumers and retailers."

The incentive programs provide cash rebates paid to retailers by wholesalers for purchasing certain quantities of alcoholic beverages. ABC regulations control the program by making the incentive programs available to all retailers on a non-discriminatory basis, by keeping the payments to retailers relatively small, and by not allowing wholesalers to substitute the payments for interest-free loans.

The investigation found that Allied Beverage Group and Fedway Associates were giving chosen retailers a financial advantage by issuing rebates more often and in greater amounts than allowed. They also failed to wait the required 30 days before issuing rebates, thus allowing those retailers to use that money to pay for the orders for which the rebates were issued, which is against ABC regulations.

Retailers who do not pay for orders within 30 days are put on an industry-wide cash-only delivery status, so the early rebates ensured that the larger retailers would have a ready cash flow to pay for their orders on time, giving them an unfair edge over smaller retailers who had to use their own money to pay for their wine and spirits orders within the required 30-day window. The investigation also found that Allied Beverage Group and Fedway Associates falsified records related to the incentives and/or used undocumented gift cards to make cash payments to chosen retailers that were not accounted for.

Vingo was charged with ABC violations that included accepting the delivery of alcoholic beverages from Allied and/or Fenway on terms that violated ABC regulations; accepting a loan from a wholesaler to pay a wholesaler and/or avoid being placed on cash-on-delivery status; receiving an incentive payment before paying the invoice, receiving a payment in excess of allowed maximum on a product.

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