General Trade Practices FAQs

Our Trade Practices page has links to TTB regulations issued under the Federal Alcohol Administration (FAA) Act trade practice provisions, as well as educational videos that explain four prohibited marketing practices: tied house arrangements, exclusive outlets, commercial bribery, and consignment sales.

TTB regulations issued under the FAA Act trade practice provisions are found in Title 27 of the Code of Federal Regulations:

• Part 6 -- Tied House
• Part 8 -- Exclusive Outlets
• Part 10 -- Commercial Bribery
• Part 11 -- Consignment Sales

The FAA Act trade practice provisions apply to TTB industry members, that is:

• producers, rectifiers, blenders, importers or wholesalers of beverage alcohol (distilled spirits, wine, or malt beverages (as defined by the FAA Act)), or
• bottlers, or warehousemen and bottlers, of distilled spirits.

Tied house and exclusive outlet provisions apply to transactions involving distilled spirits, wine, or malt beverages between an industry member and a retailer.

Commercial bribery and consignment sales provisions apply to transactions involving distilled spirits, wine, or malt beverages between an industry member and a trade buyer, which could be a retailer or wholesaler.

The FAA Act trade practice provisions [link to FAQ 1 above] apply to malt beverage transactions only when the retailer’s or trade buyer’s state law is similar to the FAA Act provision at issue. The similar state law requirement for malt beverages applies to all four unfair trade practices tied house arrangements, exclusive outlets, commercial bribery, and consignment sales. See 27 U.S.C. 205.

TTB takes the position that the term “similar” does not mean that state law must be identical or even substantially the same. When evaluating the requisite similarity, TTB considers the legality of the challenged conduct under any potentially applicable state law. If there is no specific state alcohol beverage law addressing a particular trade practice, TTB looks to other state laws of general applicability, such as business and antitrust laws.

TTB applies a broad interpretation of similarity; however, if the retailer’s or trade buyer’s state law explicitly authorizes the act at issue, the TTB trade practice regulations would not apply when such act involves only malt beverages.

No, TTB does not keep a list of similar state laws. TTB may consider alcohol beverage laws as well as general business laws to determine if the applicable state has a law similar to the TTB trade practice provision at issue. Since state laws are subject to change frequently, it would be difficult for TTB to maintain a current list; however, we do maintain a directory that lists contact information and website links for Alcohol Beverage Authorities in United States where you can get information on state beverage alcohol laws.

No, they do not. Wines under 7% alcohol by volume do not meet the definition of “wine,” in the FAA Act, so the FAA Act trade practice provisions do not apply to practices involving those products.  See 27 U.S.C. 211(a)(6).

No, only practices involving beer made with both malted barley and hops and otherwise meet the definition of “malt beverage” at 27 CFR 7.10 are subject to FAA Act trade practice provisions.

EXAMPLE: The FAA Act trade practice provisions do not apply to transactions involving gluten-free beers made without malted barley or beer-based beverages made from malted barley but not containing hops.  See 27 U.S.C. 211(a)(7) and TTB Ruling 2008-3: Classification of Brewed Products

Yes, under certain circumstances, an FAA Act trade practice violation may occur even when the product never physically leaves the state where it was produced/bottled/imported. See How does TTB show a connection or nexus to interstate or foreign commerce? [link to FAQ 8] for a detailed discussion about how TTB may establish an interstate or foreign commerce connection when evaluating a potential FAA Act trade practice violation.

In order for TTB to prove an FAA Act trade practice violation, it must prove the challenged transaction involved a connection or nexus to interstate or foreign commerce.

In general, to prove exclusive outlet, tied house or commercial bribery violations, TTB must establish a connection or nexus to interstate or foreign commerce through the primary clause and one of the other three jurisdictional clauses contained in 27 U.S.C. section 205(a)-(c). However, for consignment sales violations, TTB need only prove one of the three jurisdictional clauses.

The primary clause provides that the excluded competitor’s products must be sold or offered for sale in interstate or foreign commerce. Because most alcohol beverage products are sold or offered for sale in interstate commerce, this primary clause is generally satisfied in all cases.

The first jurisdictional clause is established if the inducement, requirement, or offer is made in the course of interstate or foreign commerce. This means that the first jurisdictional clause is satisfied if the prohibited conduct crosses state lines.

EXAMPLE: If both the industry member and the retailer have businesses in Florida, but the funds used to induce the retailer to exclude another industry member’s product originate from the industry member’s corporate headquarters in Nevada, TTB would consider those funds to have moved in interstate commerce, satisfying the first jurisdictional clause.

The second jurisdictional clause is established if the industry member engages in the challenged practice to such an extent as to substantially restrain or prevent transactions in interstate or foreign commerce.

EXAMPLE: The second jurisdictional clause would be established if an industry member in New York furnishes an inducement to a retailer in New York, and as a result of the inducement, products offered for sale by an industry member in Connecticut are excluded.

The third jurisdictional clause is established if the challenged practice’s direct effect is to prevent, deter, hinder, or restrict other persons from selling or offering beverage alcohol for sale to a retailer (or trade buyer in the case of commercial bribery or consignment sales) in interstate or foreign commerce.

This clause requires some degree of direct interference with interstate or foreign commerce.

Yes, you can find a list of administrative actions, including suspensions and offers in comprise, on our website at https://www.ttb.gov/fo/administrative-cases.

TTB’s longstanding practice has been to rely on published case law to determine whether violations of the FAA Act are willful.

In reviewing actions to suspend or revoke an FAA Act basic permit, courts have found that the government need not prove intent to defraud or conscious disregard of the statutes or regulations at issue, but still must prove something in addition to the mere fact that the basic permit holder failed to comply with the statutes or regulations upon which the permit is conditioned.

Consequently, TTB prioritizes pursuing cases where we can show one of the following:

• An industry member is found to have actively attempted to conceal or hide the inducement/requirement;
• A specific statute, regulation, or legal precedent (such as a publicly-available judicial opinion) that explicitly prohibits or addresses the challenged conduct;
• TTB or its predecessors explicitly warned or otherwise formally notified the industry member of our position that the challenged conduct is unlawful;
• TTB or its predecessors issued guidance directly addressing the challenged conduct;
• The basic permit holder failed to make any effort to research the legality (or illegality) of the challenged action; or
• TTB or its predecessors resolved (such as through a stipulated suspension or an offer in compromise) similar violations against other industry members.

If you have any questions concerning this or any other guidance related to trade practices, you may send them to tradepractices@ttb.gov.