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Virginia ABC > About > Media Room > 2019 > National Distributor Fined

National Distributor Fined

October 08, 2019

News Release Contact:

Valerie Hubbard - (804) 204-2327
Email: valerie.hubbard@abc.virginia.gov

National Distributor Fined for Violation of Virginia Wholesale Distribution Laws

(Updated 10/9/2019) - Johnson Brothers Liquor Company, one of the nation’s largest wine, spirits and beer distributors, and Nestor Imports Inc., trading as Riverside Imports, have agreed to pay a total of $51,300 as part of a settlement agreement with the Virginia Alcoholic Beverage Control Authority (ABC), which determined after an eight-month investigation that the companies had violated several of Virginia’s alcoholic beverage distribution laws. The payment, which includes a combined $42,000 in civil penalties and $9,300 for recouped investigation costs, is the largest monetary penalty paid to Virginia ABC in its 85-year history.

The Minnesota-based distribution Johnson Brothers was charged with selling beer and wine in an unauthorized manner, and failing to comply with requirements involving warehouse and inventory procedures. The latter involved a relatively new Virginia law, passed in 2018, which states that all wine and beer sold to Virginia retailers must first arrive at a wholesaler’s premises and “come to rest” for at least four hours. This is an important standard because wine and beer wholesalers collect and remit approximately $80 million annually in alcohol excise taxes, and it is essential that ABC have a dependable mechanism to monitor inventories of wine and beer at wholesale companies in Virginia.

Investigations conducted between October 2018 and June 2019 by a multitude of Virginia ABC Bureau of Law Enforcement personnel revealed that Johnson Brothers was not warehousing beer and wine products prior to delivery to retailers, a requirement of Virginia’s three-tier system for alcohol sales. Receiving and accounting for product at the wholesale level gives ABC an easy and transparent means of tracking alcohol shipments in Virginia and properly collecting taxes levied on the product. Failure to move product through the wholesaler could result in under collection of taxes, inability to track tainted or recalled product and improper manufacturer influence over a retailer.

Riverside Imports, which partners with Johnson Brothers in its Virginia distribution operations, drew charges of unauthorized sale of beer and wine and misuse of its Out of Bond Certificate. Civil penalty fines levied on the import company totaled $14,000, which together with $3,100 in recouped investigation costs.

The violations represent clear deviations from Virginia’s long established three-tier system of distribution requirements, which were put in place as part of a larger set of federal and state rules called, “tied-house laws.” The three-tier system and the tied-house laws that support it are unique to the alcohol industry and are intended to keep a separation between alcohol manufacturers, wholesalers and retailers to prevent unfair competition and public safety problems.

“Virginia ABC is committed to promoting fair and balanced trade practices within the alcohol marketplace,” said Virginia ABC Chief Executive Officer Travis Hill. “Johnson Brothers was found to be ignoring regulations designed to prevent dominance in the market by large-scale players and to maintain independence between the tiers. Virginia ABC’s regulatory activities ensure an even playing field for all those involved in the manufacture, distribution and sale of alcoholic beverages, helping to maximize consumer choice and a diversity of business models. This settlement agreement is an appropriate resolution to the findings of Virginia ABC’s thorough investigation of these distribution operations.”

As part of the settlement agreement, Johnson Brothers and its Virginia partner Riverside Imports accepted 12-month probationary periods in exercising their ABC license privileges.

“We appreciate the cooperation of Johnson Brothers and Riverside Imports in resolving this matter,” said Virginia ABC Chief Law Enforcement Officer Tom Kirby. “We prefer prevention over a charge. Industry participants with questions about Virginia’s alcoholic beverage wholesale distribution laws are encouraged to reach out to their local ABC special agent for guidance.”  

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The Virginia Alcoholic Beverage Control Authority (ABC) is a major source of revenue for the commonwealth, contributing more than $2.2 billion to the general fund in the last five years. Virginia ABC currently operates 384 state stores, and provides alcohol education and prevention programs for people of all ages. Its Bureau of Law Enforcement oversees more than 19,000 ABC licensed establishments. Now marking its 85th year, ABC remains committed to progress and innovation in carrying out its vision of bringing good spirits and excellent service to Virginia.

 

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2019
  • National Distributor Fined