Fifteen Liquor Suppliers Settle Marketing Probe

ALBANY, N.Y. -- Fifteen national suppliers of wine and liquor have paid $2.3 million to settle an investigation into the use of rebates and gifts to obtain unfair preferential treatment from retailers and restaurants, officials said Monday.

The illegal incentives can result in higher prices and limit choices for consumers, Attorney General Eliot Spitzer said in announcing the settlement. Liquor wholesalers reached a similar settlement two months ago.

Under the agreement, some of the largest suppliers operating in New York, including such well-known brands as Gallo, Bacardi and Jim Beam, agreed to ban the use of preferential discounts, rebates, allowances, cash and gifts to buy favor for their products. The incentives, which Spitzer said totaled $9 million from 2003 through 2005, went to some of the biggest retailers.

``As a result of these supplier and wholesaler agreements, the illegal schemes that benefited a favored few have ended,'' Spitzer said. ``The result is that thousands of smaller stores, bars and restaurants will now be able to compete on a level playing field.''

The incentives violate provisions of the state Alcohol Beverage and Control Law aimed at making sure such inducements don't affect marketing decisions. To skirt the law, retailers set up display and advertising companies to accept payments from suppliers and wholesalers, Spitzer said.

In the settlement, suppliers agreed that they wouldn't subsidize illegal marketing schemes orchestrated by wholesalers.

Some suppliers contacted Monday did not respond to requests for comment, but Banfi Products Corp. said it had cooperated fully with Spitzer's investigation.

``Banfi is pleased the business environment has changed in accordance with the law, and that all industry members will conduct their efforts on a level playing field,'' the company said. Another company, Diageo North American Inc., said the deal would encourage ``fair industry sales practices.''

Wesley Kinnear, attorney for Skyy Spirits, said the settlement would affect the way suppliers do business nationwide.

``People look to New York,'' he said. ``It's very important in the wine and spirits world ... and Eliot Spitzer gets a lot of attention.''

In August, the state's eight largest wine and liquor wholesalers agreed to pay $1.6 million and adopt reforms to prohibit wholesalers from favoring select retailers with gifts and discounts not available to smaller businesses. Many of the practices were first chronicled in The Buffalo News.

Besides Banfi, Diageo and Skyy Spirits LLC, the settlement announced Monday involves Bacardi USA Inc., Brown-Forman Corp., Constellation Brands Inc., E&J Gallo Winery, Future Brands LLC, Absolut Spirits Co. Inc., Jim Beam Brands Co., Kobran Corp., Moet Hennessy USA Inc., Pernod Ricard USA LLC, Remy Cointreau USA Inc., Sidney Frank Importing Co. Inc.

As attorney general, Spitzer, a Democrat, has forced reforms on Wall Street and the insurance industry in recent years and is heavily favored to win election as governor next week.

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