[Federal Register Volume 59, Number 80 (Tuesday, April 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10041]


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[Federal Register: April 26, 1994]


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DEPARTMENT OF THE TREASURY
Bureau of Alcohol, Tobacco and Firearms

27 CFR Parts 6, 8, 10 and 11

[Notice No. 794]
RIN 1512-AB10

 

Unfair Trade Practices Under the Federal Alcohol Administration 
Act (93F-003P)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of 
the Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: ATF is proposing to amend trade practice regulations under the 
Federal Alcohol Administration (FAA) Act on tied-house, exclusive 
outlets, commercial bribery, and consignment sales by adding standards 
for enforcing the ``exclusion'' element where appropriate and by 
revising other regulations as the result of an agency review and an 
industry petition. Under the FAA Act, ``exclusion, in whole or in part, 
of distilled spirits, wine, or malt beverages, sold or offered for sale 
by other persons'' is a necessary element of a violation of the tied-
house, exclusive outlets or commercial bribery provisions. Recent court 
rulings have raised questions concerning ATF's traditional 
interpretation of the term ``exclusion''. ATF intends to use rulemaking 
to (1) promulgate a framework for establishing ``exclusion,'' (2) 
identify promotional practices which result in retailer control, (3) 
identify promotional practices which result in exclusion under the Act, 
and (4) identify those practices for which there is no likelihood that 
exclusion will result and for which the Bureau will not take action 
(safe harbors). Other regulatory amendments are also made as a result 
of an ATF review of the regulations and an industry petition submitted 
in 1992.

DATES: Written comments must be received by June 27, 1994.

ADDRESSES: Send written comments to: Chief, Wine and Beer Branch, 
Bureau of Alcohol, Tobacco and Firearms, P.O. Box 50221, Washington, DC 
20091-0221; Notice No. 794.
    Copies of written comments in response to this notice of proposed 
rulemaking will be available for public inspection during normal 
business hours at: ATF Reference Library, Office of Public Affairs and 
Disclosure, Room 6300, 650 Massachusetts Avenue NW., Washington, DC 
20226.

FOR FURTHER INFORMATION CONTACT: Marjorie Ruhf, Wine and Beer Branch, 
650 Massachusetts Avenue NW., Washington, DC 20226; telephone (202) 
927-8230.

SUPPLEMENTARY INFORMATION:

The Federal Alcohol Administration Act

    The Federal Alcohol Administration Act (hereinafter referred to as 
FAA Act or Act) provides for Federal regulation of the alcoholic 
beverage industry. The FAA Act contains particular restrictions that 
are unique to the alcoholic beverage industry and reflects Congress' 
concern with a variety of trade practices and abuses that took place 
before, during and immediately after Prohibition. This notice of 
proposed rulemaking focuses on four parts of the statute, Exclusive 
Outlet (27 U.S.C. 205(a)), Tied-House (27 U.S.C. 205(b)), Commercial 
Bribery (27 U.S.C. 205(c)), and Consignment Sales (27 U.S.C. 205(d)). 
The supplementary information is divided into two sections. The first 
section deals with the subject of exclusion, and the second section 
covers other changes proposed as a result of an internal review of 
trade practice regulations and an industry petition.

Exclusion

    One element which is necessary for these practices to result in 
violation of Federal law is ``exclusion, in whole or in part, of 
distilled spirits, wine, or malt beverages, sold or offered for sale by 
other persons.''
    Although exclusion is not defined in the FAA Act or in the current 
implementing regulations at 27 CFR parts 6, 8 and 10, ATF has, in the 
past, held that ``exclusion in part'' includes causing retailers to 
purchase less of a competing brand than they otherwise would have 
bought.
    In a recent decision, however, Fedway Associates, Inc., et al. v. 
United States Treasury, Bureau of Alcohol, Tobacco and Firearms 
(Fedway), 976 F.2d 1416 (DC Cir. 1992) the United States Court of 
Appeals for the District of Columbia Circuit, held that Congress had 
intended something more than just a retailer purchasing less of a 
competing brand than it otherwise would have and for a violation to 
occur there must also be a tie or link between a supplier and retailer 
that at least threatens the retailer's independence.
    The court based this conclusion on several points. The court said 
``exclusion'' means to exclude a rival product from the marketplace by 
some direct action of the violator. Merely taking some action which 
influences a retailer not to purchase a rival product is not exclusion 
under the Act if the retailer's response is the result of a free 
economic choice. This interpretation of exclusion as meaning the 
shutting out or expelling of a rival's product, according to the court, 
is consistent with conduct addressed by the Act such as tied-house, 
commercial bribery and exclusive outlets. Any broader interpretation 
would, in the view of the court, likely result in restriction of pro-
competitive activities.
    The Fedway court was concerned that ATF enforcement actions could 
hinder legitimate competitive activities. Consequently, the opinion 
states that if ATF suspects a particular practice places retailer 
independence at risk then the agency must provide substantial support 
backing up its suspicion. This substantial support is especially 
necessary where the anticompetitive nature of the means to induce is 
``nowhere apparent on its face.''
    Factual or substantive proof is necessary, the court stated, to 
ensure that the Government does not take an overly-broad enforcement 
posture in its efforts to prevent potential threats to retailer 
independence and risk outlawing conduct that fosters a competitive 
alcohol market. In the Fedway proceeding, the court held this factual 
basis was not met because the only datum or evidence presented was the 
fact that certain retailers purchased less of a rival product.
    In summary, the court offered the following guidance about this 
statutory element:

    Congress, we are satisfied, used ``exclusion'' to indicate 
placement of retailer independence at risk by means of a ``tie'' or 
``link'' between the wholesaler and the retailer or by any other 
means of wholesaler control.
    [We demand] a factual showing that retailer independence is 
potentially threatened. . . .
    [ATF should] take reasonable account of both policy interests 
underlying the [trade practice] provisions. . . . that the alcohol 
industry requires special oversight and regulation. . . . and the 
value of pro-competitive wholesale promotions. This value derives 
not only from the traditional benefits of competition in terms of 
lower prices and improved quality, but also . . . from the fact that 
a competitive alcohol market helps deter the formation of a corrupt 
black market.
    Finally, in arriving at a reasonable interpretation of 
``exclusion''. . . the Bureau must take care to distinguish 
rationally between those promotions it decides are lawful and those 
it decides are not.

Proposed Regulations

    The proposed amendments and additions to the regulations on the 
subject of exclusion follow a framework which ATF believes is 
consistent with the statutory interpretation of exclusion adopted by 
the Fedway court as well as similar concerns previously raised in 
Foremost Sales Promotions, Inc. v. Director, Bureau of Alcohol, Tobacco 
and Firearms, 860 F.2d 229 (7th Cir. 1988) (Foremost). The courts in 
both Fedway and Foremost found that ``exclusion'' as used in the FAA 
Act cannot occur without a relationship or arrangement between the 
industry member and the retailer which directly or indirectly threatens 
the retailer's independence.
    ATF proposes to amend regulatory parts of title 27 CFR relating to 
exclusive outlet (part 8), tied-house (part 6), and commercial bribery 
(part 10), by adding new subparts on exclusion. Even though the 
exclusive outlet provision was not involved in the Fedway or Foremost 
decisions, the provision is impacted by the decisions since the 
provision requires the showing of exclusion in order for a violation to 
arise.
    ATF proposes to describe exclusion, in whole or in part, of 
distilled spirits, wine or malt beverages sold or offered for sale by 
others as occurring (1) when a practice places retailer independence at 
risk by means of a tie or link between the industry member and retailer 
or by any other means of industry control over the retailer, and (2) 
such a practice by an industry member, whether direct, indirect, or 
through an affiliate, results in the retailer purchasing less that it 
otherwise would have of a competitor's product. The proposed 
regulations will contain a set of criteria by which ATF will determine 
the existence of the first element. These criteria include the duration 
of the practice or promotion, the degree to which a practice involves 
an industry member in the day-to-day operations of a retailer, and, in 
some cases, the non-discrimination feature of the practice where it is 
available to all retailers. Exclusion will exist when ATF can establish 
the presence of both of these elements.
    In addition, ATF proposes to identify certain practices which it 
believes, by their very existence, place retailer independence at risk. 
When such practices are undertaken, ATF would determine through the 
course of an investigation whether the other exclusionary element set 
forth above is present.
    In addition, ATF proposes to revise and consolidate several of the 
provisions contained in Subpart D of Part 6 of the current regulations 
which find that certain practices will not result in exclusion under 
the FAA Act (that is, safe harbors). The classification of these 
practices is intended to provide guidance to the regulated industry so 
that legitimate product marketing programs can be developed without the 
uncertainty of a potential Federal enforcement action. Legitimate 
product marketing encourages competition, by large and small businesses 
alike, on the basis of price, product quality and service.
    ATF emphasizes that the revision of the trade practices regulations 
is an ongoing process. Any interested person may petition for a rule 
change, under 27 CFR 71.41(c).

Exclusive Outlet

    Section 105(a) of the FAA Act makes it unlawful for an industry 
member to require, by agreement or otherwise, any retailer engaged in 
the sale of alcoholic beverages to purchase any such product from such 
person to the exclusion in whole or in part of alcoholic beverages sold 
or offered for sale by other persons in interstate or foreign commerce, 
provided one of the three interstate or foreign commerce jurisdictional 
clauses is met.
    Retailer independence is threatened in an exclusive outlet 
arrangement when the ability of the retailer to decide which brands of 
alcoholic beverages to purchase is restricted or impeded. In the Fedway 
context, the question is whether any restriction negates the retailer's 
free economic choice or has been imposed by the industry member.
    In that regard, the proposed regulations identify two practices 
that clearly result in exclusion under section 105(a) of the Act. The 
first practice involves purchases of distilled spirits, wine, or malt 
beverages by a retailer as a result, directly or indirectly, of a 
threat or act of physical or economic harm by the selling industry 
member. The second practice involves contracts between an industry 
member and a retailer which require the retailer to purchase distilled 
spirits, wine or malt beverages from that industry member and expressly 
restrict the retailer from purchasing, in whole or in part, such 
products from another industry member. In both situations, exclusion of 
a competitor's products results directly from the arrangement or the 
contract without any action by the retailer. Further, ATF views an 
exclusive outlet arrangement as including a situation where the 
retailer offers exclusivity privileges and the industry member accepts 
that offer. In other words, it does not matter whether the requirement 
originates with the industry member or the retailer; rather, the 
requirement is within the exclusive outlet prohibition so long as it is 
part of the bargain.

Tied-House

    Section 105(b) of the FAA Act makes it unlawful for an industry 
member to induce through any of the following means, any retailer 
engaged in the sale of alcoholic beverages to purchase any such 
products from such person to the exclusion in whole or in part of 
alcoholic beverages sold or offered for sale by other persons in 
interstate or foreign commerce, provided one of the three 
jurisdictional clauses is met:
    (1) By acquiring or holding any interest in any license with 
respect to the premises of the retailer; or
    (2) By acquiring any interest in real or personal property owned, 
occupied, or used by the retailer in the conduct of the business; or
    (3) By furnishing, giving, renting, lending, or selling to the 
retailer, any equipment, fixtures, signs, supplies, money, or other 
things of value, subject to the exceptions prescribed by regulations, 
having due regard to public health, the quantity and value of articles 
involved, established trade customs not contrary to the public interest 
and the purposes of the subsection; or
    (4) By paying or crediting the retailer for any advertising display 
or distribution service; or
    (5) By guaranteeing any loan or repayment of any financial 
obligation of the retailer; or
    (6) By extending to the retailer credit for a period in excess of 
the credit period usual and customary to the industry for the 
particular class of transactions as ascertained by the Secretary and 
prescribed by regulation; or
    (7) By requiring the retailer to take and dispose of a certain 
quota of any of such products.
    Retailer independence can be threatened in a tied-house arrangement 
between an industry member and a retailer when the arrangement involves 
a continuing business relationship which restricts the retailer's 
ability to make free economic choices on which brands of products to 
purchase. In effect, competition is restricted because the retailer who 
is dependent on or tied to an industry member cannot make free and 
rational business choices on whether to make a current purchase from 
another industry member based on current business considerations such 
as consumer demand or lower prices offered by the competition.
    The proposed regulations identify threats to a retailer's 
independence which include: A wholesaler's use of partial ownership of 
a retailer to control the retailer's purchases of alcoholic beverages, 
sales where the wholesaler conditions the purchase of one distilled 
spirits product on the retailer purchasing another distilled spirits 
product at the same time, and wholesaler control over the retailer 
through controlling the resetting of the products on a retailer's 
premises.
    Slotting fees are also included in this proposed category. These 
fees are paid to a retailer in order to obtain premium shelf space. 
Data and information on the effect of such fees is requested, rather 
than solely statements of preference by a particular industry member.
    As discussed in the material relating to consignment sales, the 
prohibition on other than a bona fide sale is defined to include sales 
in connection with which the industry member bears the cost of display 
by purchasing or renting a trade buyer's shelf space to be occupied by 
such products. Accordingly, slotting fees in these situations are 
within the consignment sale proscriptions. Comments are sought on 
whether the slotting fee should be addressed in both tied-house and 
consignment sale regulations or are more appropriately covered by only 
one of the provisions.
    With respect to the practices listed in proposed Sec. 6.152, ATF 
will be required to determine whether the practice results in the 
retailer purchasing less than it otherwise would have of a competitor's 
product.
    The proposed regulations also identify certain practices that will 
not result in exclusion. These are the practices allowed under the 
regulatory exceptions to the tied-house provisions (safe harbors). For 
instance, the proposed regulations recognize that certain retail 
activities of a temporary nature, such as weekend events and community 
festivals, are also so minor in the retail marketplace so as not to 
justify Federal intervention. (Revisions to these regulatory exceptions 
are also proposed in this notice and discussed in detail below.)

Commercial Bribery

    Section 105(c) of the FAA Act makes it unlawful for an industry 
member to induce through any of the following means, any trade buyer 
engaged in the sale of alcoholic beverages, to purchase any such 
products from such person to the exclusion in whole or in part of 
alcoholic beverages sold or offered for sale by other persons in 
interstate or foreign commerce, provided one of the three 
jurisdictional clauses is met:
    (1) By commercial bribery; or
    (2) By offering or giving any bonus, premium, or compensation to 
any officer, or employee, or representative of the trade buyer.
Commercial bribery situations involve the receipt of money or a premium 
by an officer, employee, or representative of the trade buyer. Payment 
made directly to business entities (i.e., the corporation, partnership, 
or individual owning the business) for the use of the business does not 
constitute a commercial bribe. The independence of the trade buyer is 
threatened in a commercial bribery situation because the officer, 
employee, or representative of the trade buyer is making a purchasing 
decision as a result of the money or premium received personally and 
not based on business or marketing factors which further the interests 
of the trade buyer itself.
    The proposed regulations identify promotional conduct by an 
industry member that involves the payment of money or another premium 
to an employee or representative of a trade buyer without the knowledge 
of the trade buyer as practices under the Act that place retailer 
independence at risk. The Fedway court noted that previous case law 
upheld as actionable these types of payments. These payments were 
viewed as anti-competitive because one competitor gained a competitive 
advantage over another competitor by reason of a ``secret and corrupt 
dealing with employees or agents of prospective purchasers.'' See, 
American Distilling Co. v Wisconsin Liquor Co., 104 F.2d 582 (7th Cir. 
1939). Even where such practices exist, ATF would still be required to 
demonstrate that they affect the trade buyer's purchases in order to 
establish exclusion. With respect to those practices not mentioned 
herein, ATF would be required to demonstrate the existence of both of 
the elements of exclusion set forth above.

Criteria for Determining Retailer Independence

    ATF is proposing criteria by which to evaluate whether or not a 
particular practice places retailer independence at risk. Elements 
which have repeatedly been mentioned in court cases are degree of 
control exercised over trade buyers' purchasing decisions, duration of 
the practice, indiscriminateness, contractual or other enforceable 
requirements. The goal of regulating trade practices in the alcoholic 
beverage industry has been identified as healthy competition in order 
to insure the best possible price, quality and selection for the 
consumer and to prevent formation of a corrupt black market.
    The proposed criteria are indications that a particular practice, 
other than those in Secs. 6.152, 8.52, and 10.52, places retailer 
independence at risk. A practice need not meet all of the criteria 
specified in order to place retailer independence at risk.
    (a) The practice restricts or hampers the free economic choice of a 
retailer to decide which products to purchase and the quantity in which 
to purchase them for sale to consumers.
    (b) The industry member obligates the retailer to participate in 
the promotion to obtain the industry member's product.
    (c) The retailer has a continuing obligation to purchase or 
otherwise promote the industry member's product.
    (d) The retailer has a commitment not to terminate its relationship 
with the industry member with respect to purchase of the industry 
member's products.
    (e) The practice involves the industry member in the day-to-day 
operations of the retailer. For example, the industry member controls 
the retailer's decisions on which brand of products to purchase, the 
pricing of products, or the manner in which the products will be 
displayed on the retailer's premises.
    (f) The practice is discriminatory in that it is not offered to all 
retailers in the local market on the same terms without business 
reasons present to justify the difference in treatment.

Other Proposed Changes

    In 1988, ATF designated an agency task force to review the trade 
practice regulations and ATF's enforcement experience, since 1980, and 
determine whether revisions were needed. ATF determined that certain 
regulations may need to be modified or clarified to provide guidance to 
the industry on ATF's interpretations of the trade practice statute. 
Such guidance has been provided by rulings and industry circulars. This 
notice proposes incorporating these rulings and industry circulars into 
the regulations.
    In addition to changes identified in the Bureau's own review, this 
notice responds to changes suggested in a February, 1992, petition 
filed by representatives of the Distilled Spirits Council of the United 
States, Inc. (DISCUS), the National Association of Beverage Importers, 
Inc. (NABI), Wine and Spirits Wholesalers of America, Inc. (WSWA), the 
National Licensed Beverage Association (NLBA), and the National Liquor 
Stores Association, Inc. (NLSA). This petition superseded an earlier 
petition filed by DISCUS and NABI with ATF. ATF requested that DISCUS 
and NABI work with all segments of the alcohol beverage industry to 
reach a consensus concerning the various proposals to revise the trade 
practice regulations. The 1992 petition reflects a culmination of that 
effort by the supplier, wholesaler, and retailer organizations noted 
above.
    ATF is proposing to revise or add regulations in 27 CFR Parts 6, 8, 
10, and 11, in areas suggested by the industry petition and in trade 
practice areas identified by ATF as appropriate for rulemaking. The 
proposed revisions and additions are discussed below.

Scope of Parts 6, 8, 10 and 11

    ATF is proposing to revise Secs. 6.1, 8.1, 10.1 and 11.1 to reflect 
the recodification of the Federal Administration Act which included 
renumbering the trade practice section from section 5 to section 105 
and to better reflect the function of the proposed regulations.

Administrative Provisions in Parts 6, 8, 10 and 11

    ATF proposes adding new regulations stating that ATF officers are 
authorized to examine relevant records of an industry member and to 
subpoena relevant records from any person. These new regulations would 
be codified as Secs. 6.5, 8.5, 10.5 and 11.5. Current regulations do 
not contain any reference to ATF's statutory authority to examine and 
subpoena records and to require reports from industry members.
    Section 102(c) of the FAA Act (27 U.S.C. 202(c)) incorporates by 
reference the provisions of sections 49 and 50 of title 15, U.S.C. of 
the Federal Trade Commission Act which vests in ATF investigative 
subpoena authority and the right to examine and copy relevant data 
subject to an FAA Act investigation. In addition, section 102(d) 
provides authority to require such reports as are necessary to 
effectuate the purposes of the statute.
    Pursuant to 15 U.S.C. 49 and 50 as made applicable by section 
102(c), ATF may examine, at all reasonable times, any documentary 
evidence which is necessary to determine whether the person, 
partnership, or corporation being investigated or proceeded against 
violated the FAA Act. The right to examine includes the right to copy 
any such documentary evidence. In addition, section 49 authorizes the 
issuance of a subpoena for any person, partnership, or corporation to 
produce records or give testimony relevant to an investigation of a 
violation of the FAA Act.
    In addition, pursuant to section 102(d) of the FAA Act, new 
regulations are proposed for parts 6, 8, and 10, authorizing the 
regional director (compliance) to require a letter report from industry 
members regarding information on sponsorships, advertisements, 
promotions, and other activities conducted by, or on behalf of, or 
benefiting the industry member. The reporting requirement will be used 
on a case-by-case basis, rather than as a recurrent and periodic 
reporting requirement such as a monthly report of activities applying 
to all industry members. ATF does not feel that a reporting requirement 
is needed for part 11, Consignment Sales.

Meaning of Terms Revisions in Parts 6, 8, 10 and 11

    ATF is proposing to add the terms ``ATF officer'' and ``Director'' 
to the definitions in 27 CFR 6.11, 8.11, 10.11, and 11.11 to correspond 
to the terms in the proposed administrative provisions in Secs. 6.5, 
8.5, 10.5, and 11.5, discussed above.
    ATF is proposing to define the term ``brand'' in 27 CFR 6.11, since 
a number of dollar limitations on things of value which may lawfully be 
given to retailers is on a ``per brand'' basis. The definition proposed 
is drawn from ATF Ruling 81-1, Q.B. 1981-2, page 27, but ATF has 
narrowed the proposed definition to exclude changes in the color or 
design of the label.
    ATF is proposing adding the term ``Regional director (compliance)'' 
to the definitions in 27 CFR 6.11, 8.11 and 10.11 to correspond to the 
term in the proposed administrative provisions.
    The petitioners believe that the definition of ``retailer'' should 
be revised in 27 CFR parts 6 and 8. The current provision excludes 
wholesalers who make incidental retail sales representing less than 5 
percent of their sales during the preceding two months. The petitioners 
state that a supplier cannot know whether the wholesaler's retail sales 
are within the 5 percent limitation and suggest eliminating that 
standard. The petitioners also believe that the definition of 
``retailer'' should be clarified in order to ensure that this 
definition is consistent with Sec. 6.2 which defines the territorial 
extent of part 6 of the regulations.
    ATF believes that removal of the 5 percent limitation would make 
the definition too broad. For example, without the percent limitations, 
a wholesaler who makes a single sale to a consumer is deemed to be a 
retailer. Also, the petitioners' proposed definition would exclude, as 
a retailer, someone within the United States who makes sales for 
consumption outside of the United States; i.e., a duty free shop. The 
FAA Act itself does not allow this type of exception to the territorial 
coverage of the law. Therefore, ATF does not agree with this proposal. 
For the same reasons, ATF does not agree with the proposed amendment to 
the definition of ``retailer establishment.''
    ATF is proposing to change the term ``retailer establishment'' in 
27 CFR 6.11 to ``retail establishment'', since that is the term used in 
27 CFR part 6 regulations. The term ``retail establishment'' in 27 CFR 
8.11 will be removed because the term is not used in 27 CFR part 8 
regulations.

Part 6--``Tied-House''

Sections 6.25 Through 6.33, Interest in Retail Licensee

    The petitioners state that these sections of the regulations 
provide identical treatment concerning an interest of an industry 
member in a license with respect to a retailer's premises (Secs. 6.25-
6.27) and in real or personal property owned, occupied, or used by the 
retailer in the conduct of the business (Secs. 6.31-6.33). The 
petitioners feel that combining the provisions, which they believe 
parallel each other (Secs. 6.25 and 6.31; 6.26 and 6.32; and 6.27 and 
6.33), will enhance the simplicity and clarity of the rules.
    Further, the petitioners recommend clarifying changes to existing 
regulations to ensure that there is no misunderstanding that a 
violation of the FAA Act does not occur merely upon a finding of the 
existence of the means to induce. The petitioners believe that the 
wording of several existing regulations describing various means to 
induce results in industry confusion since such sections are written in 
terms describing ``prohibited means to induce.''
    The petitioners believe that the term ``prohibited'' should be 
deleted from such sections in order to avoid any contention or 
confusion that this provision, read separately from Sec. 6.21, allows 
for finding a violation of the FAA Act without also establishing that 
the means to induce results in exclusion. While the petitioners 
recognize that these sections are subject to the general application 
provisions of Sec. 6.21, which states that these means to induce are 
unlawful only if they result in exclusion, they believe such a change 
will help reduce the possibility of industry confusion on this issue. 
The same request was made concerning Secs. 6.31, 6.41, 6.51, 6.61, 6.65 
and 6.71, which all contain similar language.
    ATF does not object to revising the language in Secs. 6.25, 6.31, 
6.41, 6.51, 6.61, 6.65 and 6.71. ATF proposes to adopt this suggestion 
but would replace the word ``inducement,'' with ``means to induce,'' in 
order to correspond with the wording of the FAA Act. Conforming changes 
were also made to the language in Secs. 6.27 and 6.33.
    ATF does not believe that the provisions of Secs. 6.25 through 6.33 
should be combined in the various ways proposed by the petitioners. 
From a structural point of view, merging Secs. 6.25 through 6.33 
fundamentally alters the organization of subpart C of part 6. Subpart C 
is divided into topics (with titles) which parallel sections 105(b)(1) 
through (7) of the FAA Act. The proposed merger of the corresponding 
sections will mean that the regulations applicable to an interest in 
retail property under section 105(b)(2) will be contained in a group of 
the regulations categorized under an interest in a retail license under 
section 105(b)(1). ATF believes that it may be confusing for a person 
or industry representative relying on the part 6 regulations to look 
under the regulations on a retail license for a regulation relating to 
an interest in retail property.

Section 6.42, Third Party Arrangements

    ATF's review of its regulations disclosed that some confusion 
exists over the breadth of the proscription on indirect means to 
induce. Some industry members incorrectly view the two examples in 
Sec. 6.42 as exclusive of the situations covered by the regulation. 
Additionally, ATF believes some industry members interpret the examples 
as meaning the third party receiving the means to induce must be an 
agent of an individual retailer.
    By enacting the phrase ``directly or indirectly or through an 
affiliate,'' Congress intended the broadest possible application of the 
proscriptions of the FAA Act. The term ``indirectly'' encompasses more 
than simply trade practice activities with agents of retailers. It 
covers such activities with any representative of a retailer or 
industry member, whether or not such representative is technically an 
agent of the retailer or industry member. Thus, an industry member 
providing the means to induce to any third party who will pass the 
means on to the retailer, or use them in a manner to benefit the 
retailer, is indirectly providing the means to induce to the retailer.
    Accordingly, ATF proposes revising Sec. 6.42 to clarify that the 
examples are simply illustrative and not exclusive of the situations 
resulting in indirect inducements. A revision to the final sentence is 
proposed for clarity.

Section 6.43, Sale of Equipment

    The petitioners recommend deleting the last sentence of Sec. 6.43. 
The petitioners believe that negotiation by an industry member with an 
equipment company for a special price for a retailer for equipment 
should not be a means to induce unless the industry member subsidizes 
the special price.
    ATF does not agree. The means to induce is not the special price, 
but the service provided by the industry member in negotiating with the 
equipment company, or using its influence on behalf of the retailer. In 
the past, ATF has experienced cases in which a retailer, believing that 
it received special price consideration, altered its buying patterns 
resulting in exclusion of a competitor's products. Also, a conforming 
change to the cross-reference is proposed.

Section 6.46, Outside Signs

    ATF proposes to make outside signs an exception in subpart D. See 
the discussion under proposed Sec. 6.102.

Section 6.47, Items Intended for Consumers

    The petitioners recommend deleting this section because they 
believe that it is redundant and unnecessary in light of Sec. 6.93 and 
their proposed revisions to Sec. 6.87.
    ATF proposes to remove this section since the general prohibition 
in Sec. 6.41 covers things of value not specifically excepted in 
subpart D. Those of the examples listed in Sec. 6.47 which ATF proposes 
to allow will be listed in the proposed revision of Sec. 6.84, Point of 
sale advertising and consumer advertising specialties.

Section 6.52, Cooperative Advertising

    ATF proposes that the phrase ``placed by the retailer'' be deleted 
from this section and that language be added to emphasize that it does 
not matter whether the retailer or the industry member places the 
advertisement. The means to induce to be addressed here is the 
cooperative nature of the transaction and the benefit received by the 
retailer.
    For clarity, ATF proposes cross-referencing Sec. 6.52 to Sec. 6.98, 
Advertising Service.

Section 6.67, Sales to a Retailer Whose Account is in Arrears

    ATF's current position is contained in Revenue Ruling 54-162, 1954-
1 C.B. 340. On August 1, 1979, ATF proposed a regulation (Notice No. 
327, 44 FR 45298) on credit arrears which would have provided that a 
supplier could continue to sell to a retailer, with unpaid purchases 
existing in excess of 30 days, without violating the extension of 
credit provision if the retailer either made payments in accordance 
with Revenue Ruling 54-162 or the amount of arrears did not exceed an 
average purchase by the retailer from the supplier over the preceding 4 
month period.
    Commenters on the proposal objected to the proposal stating that it 
would require extensive bookkeeping checks or it might force repayment 
of large outstanding debts in order to keep dealing with a wholesaler. 
Several commenters recommended that ATF simply adhere to the credit 
requirements imposed by State law. ATF withdrew the proposal (T.D. ATF-
74, 45 FR 63242, September 23, 1980) from further consideration. ATF is 
again raising the issue and proposing to adopt in the regulations the 
position stated in Revenue Ruling 54-162. However, comments on other 
possible approaches will be considered.

Section 6.71, Quota Sales and Section 6.72, Tie-in Sales

    In addition to the language change to Sec. 6.71 discussed under 
Sec. 6.41, the petitioners propose to eliminate the tie-in prohibition 
in Sec. 6.72 and consolidate the remaining provisions into Sec. 6.71. 
The petitioners recommend deleting the first two sentences of Sec. 6.72 
because they believe that there is no statutory basis for this 
regulation under the FAA Act. The petitioners state that the classic 
``tying relationship'' prohibited by the antitrust laws is not 
addressed by section 105 of the FAA Act notwithstanding that subsection 
105(b) of the FAA Act bears the heading ``Tied-House.'' The petitioners 
further state that prohibitions against tie-in agreements are covered 
adequately by the Federal antitrust laws.
    The tie-in sale described in the regulations is a form of quota 
sale covered by the Act. Moreover, ATF feels that Sec. 6.71 and 
Sec. 6.72 are distinct from one another and should be kept separate to 
insure clarity and foster understanding of the regulations. The fact 
that another Federal law may apply to such a practice is not relevant 
to whether such a practice is covered by the FAA Act. Additionally, ATF 
proposes revising Sec. 6.72 to cover expressly a particular type of 
transaction as a tie-in sale.

Subpart D--Exceptions

    Many changes discussed in the first section of the Supplementary 
Information on Exclusion affect this subpart. The discussion which 
follows is limited to specific requests by the industry or findings of 
ATF's own internal review which were not discussed in that earlier 
section.

Section 6.81, General

    The petitioners propose amending Sec. 6.81(a) by deleting the 
second sentence which prohibits an industry member from conditioning 
the providing of items or services allowed under subpart D on the 
purchase of distilled spirits, wine, or malt beverages. ATF agrees this 
prohibition is not necessary for most items, and will remove the 
prohibition from the general section and place it in the specific 
sections where such conditioning has been a concern, for instance, 
Sec. 6.83 on product displays.
    Section 6.81(b), Recordkeeping requirements, requires industry 
members to maintain certain records which can be used to substantiate 
claims that items provided to retailers are within the subpart D 
exceptions to the tied-house prohibitions. The petitioners propose 
deleting Sec. 6.81(b) in its entirety, thereby eliminating all 
recordkeeping requirements. The petitioners state that ``(t)his change 
should be adopted because the FAA Act neither provides nor suggests 
that any such requirements can be imposed.''
    The petitioners further state that if it is decided not to delete 
Sec. 6.81(b) in its entirety, they recommend the addition of language 
to this paragraph to make it clear that no separate violation of the 
FAA Act shall arise from the failure of an industry member to maintain 
records in accordance with the requirements of Sec. 6.81(b). The 
petitioners believe that the FAA Act neither creates nor supports the 
existence of any such violation of the FAA Act.
    The proposal to eliminate the requirement to keep records which 
substantiate industry members' claims that items provided retailers are 
within the exceptions would negate ATF's capability to verify 
compliance with the dollar limitations and any other requirements of 
subpart D. The limitations in each exception section of the regulations 
would be unenforceable if ATF had no way to verify compliance with the 
requirements of such exceptions. Where the industry member fails to 
keep the required records, the industry member is not eligible for the 
regulatory exception in that particular transaction. No separate 
recordkeeping violation would be charged.

Section 6.82, Cost Adjustment Factor

    While the petitioners do not request a specific change to this 
section, they request that ATF explore alternate methods which would be 
cost effective for ATF to convey this information in a manner that 
continues to ensure that all permittees are apprised of the annual 
dollar adjustments. Instead, ATF proposes to delete this section and 
periodically review the amounts if necessary.

Section 6.83, Product Displays

    The petitioners recommended amending the definition of product 
display to substitute ``* * * and similar items the primary function of 
which is to hold, display or shelve consumer products.'' for ``* * * 
and the like,'' which appears in the current regulation. ATF is 
incorporating this change in its proposed revision, but proposes the 
phrase ``hold and display'' for clarity.
    The petitioners also requested that ATF amend the dollar limitation 
in the regulation to reflect the current adjusted rate. Instead, ATF 
proposes a $500 per brand at any one time per retail establishment 
limitation for the current limitation of $100 (as adjusted) per year 
per brand per retail establishment. As noted earlier, ATF proposes 
narrowing the definition of the term ``brand'' and requests comments on 
the definition.
    Although the general prohibition against an industry member 
imposing conditions on receipt of items allowed in subpart D has been 
removed from Sec. 6.81, the proposed Sec. 6.83 states that giving or 
selling product displays may be conditioned upon the purchase of the 
distilled spirits, wine or malt beverage product advertised thereon in 
a quantity only necessary for the initial completion or use of the 
product display. The loan or rental of product displays would not be 
within the exception. Such a continuing tie would not be consistent 
with the intent of the Act. Industry members have long argued that they 
should be allowed to condition receipt of product displays on the 
purchase of a limited quantity of the product advertised. The dollar 
limit of $500 per brand, coupled with the requirements for permanently 
inscribed advertising and transfer of ownership of product displays to 
the retailer minimizes the inducement value to the retailer. The 
combination of these factors allows product displays to be excepted 
from the regulations of Part 6, and would be the basis for allowing the 
industry member to condition receipt of such materials as described 
above.

Section 6.84, Point of Sale Advertising and Consumer Advertising 
Specialties

    Promotions and practices currently allowed under the regulatory 
exceptions to the tied-house provisions are safe harbors. This notice 
proposes a revision to those exceptions which would combine several of 
the current exceptions into one general regulatory section. The 
approach of having a single general section addressing all of the 
similar activities gives greater flexibility to the industry.
    The proposed regulations combine the exceptions listed in 
Secs. 6.84, 6.85, 6.86 and 6.87, (inside signs, retailer advertising 
specialties, wine lists and consumer advertising specialties) into a 
revised Sec. 6.84, Point of sale advertising and consumer advertising 
specialties. Items intended for consumers currently identified in 
Sec. 6.47 are also included in the proposed listing of exceptions. The 
petitioners requested that ATF amend the dollar limitation to reflect 
the adjusted rates, but instead, under ATF's proposed revision there 
will be no limit to the specified point of sale (POS) materials 
furnished by an industry member to a retail establishment.
    The petitioners also requested that the term ``wine lists'' be 
expanded to include all alcoholic beverages. Instead, the proposed 
Sec. 6.84 permits all lists or menus, subject to the conditions in 
paragraph (c) of the section.

Section 6.86, Temporary Retailers

    ATF proposes adding a new section which will allow furnishing 
things of value to a temporary retailer.

Section 6.88, Glassware--Section 6.89, Tapping Accessories--Section 
6.90, Supplies--Section 6.97, Coil Cleaning Service

    The petitioners recommend that these four sections be combined in a 
new section 6.88, under the title ``Equipment and supplies,'' because 
they deal with similar types of merchandise and impose similar 
conditions. As with other subpart D exceptions which combine similar 
types of merchandise, (viz., Secs. 6.83, 6.87 and 6.89), the 
petitioners feel that combining these items in one section will enhance 
the simplicity and clarity of the rules.
    The petitioners also recommend several other revisions to this 
consolidated section. They believe that the coverage of the coil 
cleaning service should be extended from ``a retailer of wine or malt 
beverages'' to ``a retailer.'' This amendment would provide equal 
treatment for wine, malt beverages and distilled spirits.
    The petitioners also recommend substituting the term ``dispensing 
accessories'' in section 6.88 for ``tapping accessories'' because the 
former term more accurately describes the modern type of accessories 
falling within this category and reflects present marketplace practices 
where, for example, wine also is served by dispensing equipment.
    The petitioners also feel that cold plates should be added to the 
list of examples of ``dispensing accessories'' and, as with the present 
requirements for glassware and tapping accessories, carbon dioxide gas 
or ice may be sold at a price not less than the cost to the industry 
member who initially purchased it.
    The petitioners' proposed Sec. 6.88 would read as follows: 
``Sec. 6.88 Equipment and supplies. (a) Definition. Equipment and 
supplies means glassware, dispensing accessories, carbon dioxide gas or 
ice. Dispensing accessories include items such as standards, faucets, 
cold plates, rods, vents, taps, tap standards, hoses, washers, 
couplings, gas gauges, vent tongues, shanks and check valves. (b) 
Application. (1) An industry member may sell equipment or supplies to a 
retailer if the equipment or supplies are sold at a price not less than 
the cost to the industry member who initially purchased it, and if the 
price is collected within 30 days of the date of the sale. (2) If 
dispensing accessories are sold pursuant to (1), the industry member 
also may install them at the retailer's establishment. (c) Coil 
cleaning service may be furnished, given or sold to a retailer.''
    While the petitioners' proposal to combine various sections into 
one all inclusive section covering equipment and supplies is 
structurally logical and the terminology change from tapping equipment 
to dispensing equipment has merit, some of the items listed in the 
proposed section have not in the past been recognized as exceptions by 
ATF.
    ATF is consolidating these sections with the following additional 
changes. ATF proposes to revise the definition of glassware to include 
similar containers made of materials other than glass. Currently, 
Sec. 6.89 enumerates the type of tapping accessories which can be sold, 
at cost, to a retailer. As proposed, the regulation also specifies that 
the industry member must pass on the cost of initial installation to 
the retailer.
    The proposed regulation would expand the original coil cleaning 
service exception currently in Sec. 6.97 to cover distilled spirits, as 
well as wine and malt beverages. Keeping the coils clean and free of 
contamination is clearly in the interest of public health. Therefore, 
it is in the public interest to allow such services without a dollar 
limit.
    The current regulation allows industry members to sell carbon 
dioxide gas to retailers. The regulation does not provide for the sale 
of other gases, such as nitrogen, which are used in various existing 
alcoholic beverage dispensing systems. ATF proposes modifying this 
regulatory section to allow industry members to sell any gas to a 
retailer provided it is used in a beverage dispensing system. This 
proposal should not be viewed as sanctioning treatment which would 
change still wine to sparkling wine.

Section 6.91, Samples

    The current section allows an industry member to furnish or give 
samples of distilled spirits, wine or malt beverages to a retailer. The 
petitioners recommend amending this section to provide that industry 
members may furnish a maximum of 750 milliliters (mls.) of distilled 
spirits samples to qualifying retailers. The 500 milliliter (ml.) 
container is no longer an authorized size for distilled spirits. 
Accordingly, the petitioners suggest that ``750 ml.'' should be 
substituted for ``500 milliliters'' in the second sentence of this 
section and the third sentence of this section should be eliminated in 
its entirety.
    ATF agrees with the petitioners that the reference to the obsolete 
500 ml size be replaced, but proposes a maximum of 3 liters for either 
distilled spirits or wine.
    ATF also proposes amending the current regulation by limiting the 
number of commonly owned retail establishments (not to exceed four per 
retailer) which can be given samples. This amendment would allow for a 
control State or chain retailer to receive sufficient samples to 
determine whether to purchase a product.

Section 6.93, Combination Packages

    In general, Sec. 6.93 addresses combination packages where an 
industry member packages a non-alcoholic item with distilled spirits, 
wine, or malt beverages and, in particular, paragraph (c) requires that 
the cost of the combination package be passed on to the retailer. The 
petitioners recommend deleting paragraph (c) of Sec. 6.93 because they 
feel the condition imposed by the paragraph is really a pricing 
decision outside of ATF's regulation under the FAA Act. ATF proposes 
removing all the conditions currently imposed on combination packages.

Section 6.94, Educational Seminars

    ATF proposes to clarify the final sentence, ``This does not 
authorize an industry member to pay a retailer's expenses in 
conjunction with an educational seminar.'' by adding the explanatory 
phrase ``(such as travel, lodging, and meals).''

Section 6.98, Advertising Service

    The petitioners recommend adding the clause ``except where the 
exclusive retailer in the state is a state agency'' to paragraph (a) to 
read as follows: ``Sec. 6.98 Advertising service (a) The advertisement 
does not also contain the retail price of the product, except where the 
exclusive retailer in the state is a state agency, and * * *''
    The petitioners do not believe that the objectives of section 
105(b) of the FAA Act are served by prohibiting industry members from 
advertising control States' prices. The petitioners' proposed revision 
would permit an industry member to advertise a control State's state-
wide retail prices as determined by that State for product sold within 
the State. The petitioners feel that in such circumstances, there is no 
possibility of any ``inducement'' or ``exclusion'' that would 
contravene the intent or purpose of the FAA Act.
    ATF proposes amending the current regulation in accordance with the 
industry request, modified to reflect situations in which the sole 
retailer in a jurisdiction is a State or local agency. ATF also 
proposes to delete the condition that an advertisement placed by an 
industry member may not mention events or promotions at a retail 
establishment.

Section 6.99, Stocking, Rotation, and Pricing Service

    The petitioners recommend revising this section to allow industry 
members to also ``recommend shelf plans.'' The petitioners feel that 
this revision would permit an industry member to provide services to a 
retailer consistent with present day marketplace realities. ATF 
proposes to amend this section in line with the petitioners' proposal.

Section 6.100, Participation in Retailer Association Activities

    Section 6.100 permits industry members to participate in retailer 
association activities under certain circumstances. Paragraphs (b) and 
(d) permit rental of display booth space and purchase of tickets or 
payment of registration fees, respectively. Each of these paragraphs 
contains the phrase ``if * * * not excessive and * * * the same as paid 
by all exhibitors.'' ATF proposes amending the section to delete ``not 
excessive'' and specifying the fees must be the same as the fees paid 
by all exhibitors ``at that event.'' ATF also proposes raising the 
limitation for payments for advertisements in programs or brochures 
authorized by paragraph (e) from $100 to $500.

Section 6.101, Merchandise

    Paragraph (a) currently provides that an industry member who also 
is engaged in business as a bona fide vendor of other merchandise may 
sell such merchandise to a retailer if three conditions are met, the 
first of which is that merchandise is ``sold at its fair market 
value.'' The petitioners believe, however, that ATF has no authority to 
regulate or condition legitimate marketing practices pertaining to bona 
fide sales of non-alcoholic beverage products. Accordingly, the 
petitioners recommend changing this condition to state that the 
merchandise is ``furnished, distributed, or sold according to the 
custom and practice of that business.''
    The petitioners also recommend eliminating paragraph (b) regarding 
things of value covered in other sections of part 6 since they believe 
it is redundant and unnecessary in light of other sections of subpart 
D.
    ATF believes that the elimination of the phrase, ``* * * fair 
market value,'' from paragraph (a), as proposed by the petitioners, 
would result in an ambiguous regulation. The phrase is used in other 
parts of the regulations. The adoption of the phrase ``* * * custom and 
practice of that business,'' would be inconsistent and potentially 
confusing. Additionally, ATF believes that the elimination of paragraph 
(b) of this regulation would be a mistake. Paragraph (b) is a necessary 
clarifying paragraph for the section.
    As discussed above, Sec. 6.101 excepts from the prohibitions of 
section 105(b)(3) of the FAA Act sales transactions by industry members 
who are engaged in the business as bona fide vendors of other 
merchandise in addition to alcoholic beverages. This section sanctions 
sales of other merchandise to retailers in addition to alcoholic 
beverages if the merchandise is sold at its fair market value, not in 
combination with distilled spirits, wines, or malt beverages, and the 
merchandise is itemized separately on the industry member's invoices 
and other records. The records are necessary so that ATF can determine 
the real cost of the merchandise to the industry member and whether the 
industry member is reselling the merchandise to retailers at its fair 
market value. Likewise, ATF needs these records to determine whether 
the industry member is a bona fide vendor of the merchandise or whether 
it is using the merchandise as a means to induce.
    Accordingly, ATF is proposing to revise the records requirement of 
the regulation to state that, first, acquisition costs must appear on 
the industry member's purchase invoices (available upon request to ATF) 
and, second, the merchandise and the distilled spirits, wines, or malt 
beverages sold to the retailer in a single sales transaction must be 
itemized separately on the same invoice.

Section 6.102, Outside Signs

    ATF is proposing a new section allowing outside signs in certain 
circumstances and with a $500 limit.

27 CFR Part 8, Exclusive Outlet

    New administrative provisions and definition changes were discussed 
previously.

Section 8.23, Third Party Arrangements

    The current regulation can be interpreted to mean that a violation 
of the section could occur if a third party requires the retailer to 
use an industry member's product without the knowledge of the industry 
member. ATF proposes clarifying that the industry member's requirement, 
by agreement or otherwise, with a third party is necessary to violate 
this section. However, the requirement need not originate with the 
industry member. If the industry member knows or is aware that the 
third party controlling the retailer extends such a requirement with 
respect to the products of the industry member making payments under 
the arrangement, and the industry member avails itself of such 
requirement, then the requirement within the proscription of the FAA 
Act is present.

27 CFR Part 10, Commercial Bribery

    New administrative provisions and definition changes were discussed 
previously.

Section 10.4, Jurisdictional Limits

    ATF proposes amending this section to correct the wording of 
paragraph (a)(1), which appeared in error in ATF TD-74 on September 3, 
1980 (45 FR 63242).
    The proposed section would read as follows: ``Sec. 10.4 
Jurisdictional limits. (a) General. The regulations in this part apply 
where: (1) The industry member induces a trade buyer to purchase 
distilled spirits, wine, or malt beverages from such industry member to 
the exclusion, in whole or in part, of products sold or offered for 
sale by other persons in interstate or foreign commerce; and * * *''

Section 10.23, Gifts or Payments to Wholesalers

    This section is considered for revision because ATF feels that its 
purpose should be clarified. The following example of a sales 
representative incentive program is viewed as being within the 
commercial bribery provision: An industry member and a trade buyer meet 
to discuss, among other things, upcoming programs to promote a 
particular product or products. They agree that certain promotions will 
be run over a period of time. Some of these promotions include sales 
incentive programs in which sales representatives can win money and/or 
prizes. At the conclusion of the meeting, the parties agree or 
understand, or it is implied, that all or part of the funding for these 
sales representative incentive programs will come from monies that have 
been or will be provided by the industry member, usually under the 
guise of unrestricted funds.
    ATF's position is that the above example is an instance of 
commercial bribery since it involves the furnishing of a premium or 
bonus to an employee of a trade buyer. While no change to the language 
of the section is proposed at this time, ATF solicits comments on 
whether the section is unclear or ambiguous.

27 CFR Part 11, Consignment Sales

    New administrative provisions and definition changes were discussed 
previously.

Section 11.24, Other Than Bona Fide Sale

    Section 105(d) of the Act addresses ``consignment sales.'' Section 
105(d) describes consignment sales to include conditional sales (i.e., 
where an industry member is not paid for products until they are sold 
by a trade buyer); sales with a privilege of return (i.e., where an 
industry member agrees to repurchase products that remain unsold by the 
trade buyer at the end of a specified period of time); and other sales 
on any basis otherwise than a bona fide sale.
    Consignment sales are essentially arrangements pursuant to which 
the risk, or cost, of non-sale of a product is retained by an industry 
member, or transferred from a trade buyer back to an industry member at 
the expiration of a specified time period. ATF is proposing to add a 
new Sec. 11.24 to its regulations to specify certain other 
arrangements, in addition to conditional sales and sales with a 
privilege of return, in which the risk of non-sale is transferred from 
the trade buyer back to the industry member and which therefore do not 
constitute bona fide sales.
    In particular, the proposed rule specifies that so-called 
``slotting allowances,'' arrangements pursuant to which an industry 
member makes payments to a trade buyer, ostensibly for shelf space, are 
a form of consignment sale. The practical effect of ``slotting 
allowances'' is to refund, in whole or in part, the purchase price of a 
product that has not been sold, in proportion to the period of time 
that it remains unsold.
    At a minimum, payment of ``slotting allowances'' may reimburse the 
trade buyer for the cost of shelf space occupied by the industry 
member's products. In addition, it may also compensate the trade buyer 
for the lost opportunity cost of having capital tied up in inventory 
acquired from the industry member. Ultimately, the amount refunded by 
this mechanism can, over any specified period of time, be the economic 
equivalent of simply buying back a product at the end of that period of 
time.
    ATF believes that its regulations should address all arrangements 
that clearly embody the substance of the ``consignment sale'' practice 
proscribed by Congress, and not merely particular forms of that 
practice. Therefore, ATF proposes to amend its regulations to specify 
payment of ``slotting allowances'' from an industry member to a trade 
buyer as a form of consignment sale.

Section 11.32, Defective Products

    The current regulation specifically allows products which are 
unmarketable for certain reasons to be exchanged, under certain 
conditions, for an equal quantity of identical products, but is silent 
as to whether such products may be returned for cash or credit. 
Industry Circular 81-11 states that a return of such products for cash 
or credit is not precluded by section 11.32. ATF proposes changing this 
regulation to incorporate the provisions of Industry Circular 81-11 
into the section. The revised section would also delete references to 
mutilated and missing strip stamps since they are no longer a 
requirement.

Section 11.34, Products Which May No Longer Be Lawfully Sold

    ATF proposes revising the current regulation to allow the return of 
a product if, due to a change in law or regulation over which the trade 
buyer has no control, a particular size or brand is no longer permitted 
to be sold. The addition of the phrase ``over which the trade buyer has 
no control'' is intended to address situations in which the trade buyer 
is a State agency with the authority to delist a particular product.

Section 11.35, Termination of Business

    ATF proposes revising this section to cite Sec. 11.39 instead of 
the incorrect Sec. 11.40 citation.

Executive Order 12866

     It has been determined that this proposed rule is not a 
significant regulatory action as defined by Executive Order 12866. 
Therefore, a Regulatory Assessment is not required.

Regulatory Flexibility Act

     Based on information currently available, it is hereby certified 
under the provisions of section 3 of the Regulatory Flexibility Act (5 
U.S.C. 605(b)) that this proposed regulation, if adopted, will not have 
a significant economic impact on a substantial number of small 
entities. Accordingly, a regulatory flexibility analysis is not 
required. It has been suggested, however, that implementing the 
proposed interpretation of exclusion may have the effect of 
``freezing'' industry member standings where they are. For instance, a 
large wholesaler might be in a better position to offer 
indiscriminately premiums for volume purchases, and retain a 
competitive advantage over a small wholesaler who could not afford to 
offer a similar inducement to all customers. On the trade buyer side, a 
small retailer might be more likely to lose its freedom in purchasing 
decisions because of a relatively minor service or piece of equipment 
it receives from a particular supplier. Although ATF believes that the 
proposed regulations are required to bring ATF's policy into 
conformance with Federal court decisions on the FAA Act, ATF requests 
the comments of small businesses and their representatives on this 
subject. We will review this certification in light of any pertinent 
comments we may receive.

Paperwork Reduction Act

     The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1980 (44 
U.S.C. 3504(h)). Comments on the collection of information should be 
directed to the Office of Management and Budget, Attention: Desk 
Officer for the Department of the Treasury, Bureau of Alcohol, Tobacco 
and Firearms, Office of Information and Regulatory Affairs, Washington, 
DC 20503, with copies to: Reports Management Officer, Information 
Programs Branch, Room 3450, Bureau of Alcohol, Tobacco and Firearms, 
650 Massachusetts Avenue, NW., Washington, DC 20226.
    The collection of information in this regulation is in 27 CFR parts 
6, 8, and 10. This information is required by ATF to protect the public 
interest and ensure fair trade competition in the alcoholic beverage 
industry. The information will be used to analyze promotional 
activities as part of an investigation. The likely respondents are 
industry members.
    The authority to require reports which is stated in this notice of 
proposed rulemaking is to be used on a case-by-case basis only, and 
does not apply to industry members in general. The estimated number of 
respondents in any given year is 20, with one report being required 
from each respondent. The estimated average annual burden associated 
with this collection of information is 1 hour per respondent.

Public Participation

    ATF requests comments from all interested persons. Comments 
received no later than the closing date of the comment period will be 
carefully considered. Comments received after the closing date and too 
late for consideration will be treated as possible suggestions for 
future ATF action. ATF will not recognize any comment as confidential. 
Comments may be disclosed to the public. Any material which the 
respondent considers to be confidential or inappropriate for disclosure 
should not be included in the comment. The name of the person 
submitting the comment is public information.

Public Hearings

    It is anticipated that two public hearings will be held following 
the close of the written comment period. One hearing will be in 
Washington, D.C. and one in San Francisco, California. A separate 
notice announcing the times and places of the hearings will be 
published in a future Federal Register.

Drafting Information

    The principal author of this document is Marjorie Ruhf, Wine and 
Beer Branch, Bureau of Alcohol, Tobacco and Firearms.

Treatment of Rulings and Circulars

    The following revenue ruling, ATF ruling and industry circulars 
will be incorporated into the proposed regulations, or their provisions 
will become obsolete at the time these proposed regulations become 
effective: Revenue Ruling 54-162, 1954-1 C.B. 340; ATF Ruling 81-1, 
1981-2 ATF Q.B. 27 and ATF Ruling 81-6, 1981-4 ATF Q.B. 23; Industry 
Circulars 81-11 and 81-16.

List of Subjects

27 CFR Part 6

    Advertising, alcohol and alcoholic beverages, antitrust, credit and 
trade practices.

27 CFR Part 8

    Alcohol and alcoholic beverages, antitrust, and trade practices.

27 CFR Part 10

    Alcohol and alcoholic beverages, antitrust, and trade practices.

27 CFR Part 11

    Alcohol and alcoholic beverages, antitrust, and trade practices.

Issuance

    Title 27, Chapter I, is proposed to be amended as follows:

PART 6--``TIED-HOUSE''

    Paragraphs 1-2. The authority citation for Part 6 is revised to 
read as follows:


    Authority: 15 U.S.C. 49-50; 27 U.S.C. 202 and 205; 44 U.S.C. 
3504(h).


    Par. 3. Section 6.1 is revised to read as follows:


Sec. 6.1  General.

    The regulations in this part, issued pursuant to section 105 of the 
Federal Alcohol Administration Act (27 U.S.C. 205), specify practices 
that are means to induce under 105(b), criteria for determining whether 
a practice is a violation of 105(b), and exceptions to 105(b). This 
part does not attempt to enumerate all of the practices that may be a 
violation of section 105(b) of the Act. Nothing in this part shall 
operate to exempt any person from the requirements of any State law or 
regulation.


Sec. 6.4  [Amended]

    Par. 4. Section 6.4 is amended by removing the reference to 
``section 5(b) of the Federal Alcohol Administration Act'' where it 
appears in paragraph (b) and replacing it with a reference to ``section 
105(b) of the Federal Alcohol Administration Act''.
    Par. 5. Section 6.5 is added to subpart A to read as follows:


Sec. 6.5  Administrative provisions.

    (a) General. The Act makes applicable the provisions including 
penalties of sections 49 and 50 of title 15, United States Code, to the 
jurisdiction, powers and duties of the Director under this Act, and to 
any person (whether or not a corporation) subject to the provisions of 
law administered by the Director under this Act.
    (b) Examination and subpoena. The Director or any authorized ATF 
officers shall at all reasonable times have access to, for the purpose 
of examination, and the right to copy any documentary evidence of any 
person, partnership, or corporation being investigated or proceeded 
against; and the Director shall have the power to require by subpoena 
the attendance and testimony of witnesses and the production of all 
such documentary evidence relating to any matter under investigation.
    (c) Reports required by the regional director (compliance).--(l) 
General. When required in writing by the regional director 
(compliance), an industry member shall submit a written report 
containing information on sponsorships, advertisements, promotions, and 
other activities pertaining to its business subject to the Act 
conducted by, or on behalf of, or benefiting the industry member.
    (2) Preparation. The report will be prepared by the industry member 
in letter form, executed under the penalties of perjury, and will 
contain the information specified by the regional director 
(compliance).
    (3) Filing. The report will be filed in accordance with the 
instructions of the regional director (compliance). (27 U.S.C. 202(c) 
and (d)).
    Par. 6. Section 6.11 is amended by adding the definitions for ``ATF 
officer,'' ``Director,'' ``brand'' and ``regional director 
(compliance),'' and by revising the term ``retailer establishment'' to 
read ``retail establishment''. as follows:


Sec. 6.11  Meaning of terms.

* * * * *
    ATF officer. An officer or employee of the Bureau of Alcohol, 
Tobacco and Firearms (ATF) authorized to perform any function relating 
to the administration or enforcement of this part.
    Brand. The term ``brand'' refers to differences in the brand name 
of a product or in the nature of a product. Examples of different 
brands are products having a different brand name; class, type, or kind 
designation; appellation of origin (wine); vintage date (wine); age 
(distilled spirits); or percentage of alcohol. Differences in packaging 
such as difference in label design or color, or a different style, type 
or size of container are not considered different brands.
    Director. The Director, Bureau of Alcohol, Tobacco and Firearms, 
the Department of the Treasury, Washington, DC.
* * * * *
    Regional director (compliance). The principal ATF regional official 
responsible for administering regulations in this part.
* * * * *
    Retail establishment. * * *
    Par. 7. Section 6.25 is revised to read as follows:


Sec. 6.25  General.

    The act by an industry member of acquiring or holding any interest 
in any license (State, county or municipal) with respect to the 
premises of a retailer constitutes a means to induce within the meaning 
of the Act.
    Par. 8. Section 6.27 is amended by revising paragraph (a) to read 
as follows:


Sec. 6.27  Proprietary interest.

    (a) Complete ownership. Outright ownership of a retail business by 
an industry member is not an interest which may result in a violation 
of section 105(b)(1) of the Act.
* * * * *
    Par. 9. Section 6.31 is revised to read as follows:


Sec. 6.31  General.

    The act by an industry member of acquiring an interest in real or 
personal property owned, occupied, or used by the retailer in the 
conduct of business constitutes a means to induce within the meaning of 
the Act.
    Par. 10. Section 6.33 is amended by revising paragraph (a) to read 
as follows:


Sec. 6.33  Proprietary interest.

    (a) Complete ownership. Outright ownership of a retail business by 
an industry member is not an interest that may result in a violation of 
section 105(b)(2) of the Act.
* * * * *
    Par. 11. Section 6.41 is revised to read as follows:


Sec. 6.41  General.

    Subject to the exceptions listed in Subpart D, the act by an 
industry member of furnishing, giving, renting, lending, or selling any 
equipment, fixtures, signs, supplies, money, services, or other things 
of value to a retailer constitutes a means to induce within the meaning 
of the Act.
    Par. 12. Section 6.42 is revised to read as follows:


Sec. 6.42  Indirect inducement through third party arrangements.

    The furnishing, giving, renting, lending, or selling of equipment, 
fixtures, signs, supplies, money, services, or other thing of value by 
an industry member to a third party, where the benefits resulting from 
such things of value flow to individual retailers, is the indirect 
furnishing of a thing of value within the meaning of the Act. Indirect 
furnishing of a thing of value includes, but is not limited to, making 
payments for advertising to a retailer association or a display company 
where the resulting benefits flow to individual retailers. Things which 
may lawfully be furnished, given, rented, lent, or sold by industry 
members to retailers under subpart D or E may also be furnished 
directly by a third party to a retailer.
    Par. 13. Section 6.43 is amended by removing the reference 
``Secs. 6.88 and 6.89,'' where it appears in the first sentence and 
replacing it with ``Sec. 6.88,''.
    Par. 14. Sections 6.46 and 6.47 are removed and reserved.
    Par. 15. Section 6.51 is revised to read as follows:


Sec. 6.51  General.

    The act by an industry member of paying or crediting a retailer for 
any advertising, display, or distribution service constitutes a means 
to induce within the meaning of the Act, whether or not the 
advertising, display, or distribution service received may be 
commensurate with the cost paid or incurred by, or on behalf of, the 
retailer.
    Par. 16. Section 6.52 is revised to read as follows:


Sec. 6.52  Cooperative advertising.

    An arrangement in which an industry member participates with a 
retailer in paying for an advertisement constitutes paying the retailer 
for advertising within the meaning of the Act unless excepted under 
Sec. 6.98.
    Par. 17. Section 6.61 is revised to read as follows:


Sec. 6.61  Guaranteeing loans.

    The act by an industry member of guaranteeing any loan or the 
repayment of any financial obligation by a retailer constitutes a means 
to induce within the meaning of the Act.
    Par. 18. Section 6.65 is revised to read as follows:


Sec. 6.65  General.

    Extension of credit by an industry member to a retailer for a 
period of time in excess of 30 days from the date of delivery 
constitutes a means to induce within the meaning of the Act.
    Par. 19. The text of Sec. 6.67 is added to read as follows:


Sec. 6.67  Sales to retailer whose account is in arrears.

    An extension of credit by an industry member to a retailer does not 
constitute a means to induce within the meaning of the Act so long as a 
current order from a retailer whose account is in arrears is 
accompanied with a payment equal to or greater than the value of such 
current order, regardless of the manner in which the industry member 
applies the payment in its records.
    Par. 20. Section 6.71 is revised to read as follows:


Sec. 6.71  Quota sales.

    The act by an industry member of requiring a retailer to take and 
dispose of any quota of distilled spirits, wine, or malt beverages 
constitutes a means to induce within the meaning of the Act.
    Par. 21. Section 6.72 is revised to read as follows:


Sec. 6.72  ``Tie-in'' sales.

    The act by an industry member of requiring that a retailer purchase 
one product in order to obtain another constitutes a means to induce 
within the meaning of the Act. This includes the requirement to take a 
minimum quantity of a product in standard packaging in order to obtain 
the same product in some type of premium package, i.e., a distinctive 
decanter, or wooden or tin box. This also includes combination sales if 
one or more products may be purchased only in combination with other 
products and not individually. However, an industry member is not 
precluded from selling two or more kinds or brands of products to a 
retailer at a special combination price, provided (a) the retailer has 
the option of purchasing either product at the usual price, and (b) the 
retailer is not required to purchase any product it does not want.
    Par. 22. Section 6.81 is amended by revising paragraph (a), by 
removing the references to Secs. 6.85, 6.89, 6.90 in the first sentence 
of paragraph (b), and by adding concluding text to the end of paragraph 
(b), to read as follows:


Sec. 6.81  General.

    (a) Application. Section 105(b)(3) of the Act enumerates means to 
induce that may be unlawful under the subsection, subject to such 
exceptions as are prescribed in regulations, having due regard for 
public health, the quantity and value of articles involved, established 
trade customs not contrary to the public interest, and the purposes of 
that section. This subpart implements section 105(b)(3) and identifies 
the practices that are exceptions to section 105(b)(3). An industry 
member may furnish a retailer equipment, inside signs, supplies, 
services, or other things of value, under the conditions and within the 
limitations prescribed in this subpart.
    (b) * * *

Failure to keep such records may result in loss of the exception 
claimed. No separate recordkeeping violation is present.
* * * * *


Sec. 6.82  [Removed]

    Par. 23. Section 6.82 is removed and reserved.
    Par. 24. Section 6.83 is revised to read as follows:


Sec. 6.83  Product displays.

    (a) General. The act by an industry member of giving or selling 
product displays to a retailer does not constitute a means to induce 
within the meaning of section 105(b)(3) of the Act provided that the 
conditions prescribed in paragraph (c) of this section are met.
    (b) Definition. ``Product display'' means any wine racks, bins, 
barrels, casks, shelving, and similar items the primary function of 
which is to hold and display consumer products.
    (c) Conditions and limitations. (1) The total value of all product 
displays furnished by an industry member under paragraph (a) of this 
section may not exceed $500 per brand at any one time in any one retail 
establishment. Industry members may not pool or combine dollar 
limitations in order to provide a retailer a product display valued in 
excess of $500 per brand. The value of a product display is the actual 
cost to the industry member who initially purchased it. Transportation 
and installation costs are excluded.
    (2) All product displays must bear conspicuous and substantial 
advertising matter on the product or the industry member which is 
permanently inscribed or permanently affixed. The name and address of 
the retailer may appear on the product displays.
    (3) The giving or selling of such product displays may be 
conditioned upon the purchase of the distilled spirits, wine, or malt 
beverage product advertised on those displays in a quantity necessary 
for the completion of such display or the use of such materials. No 
other condition can be imposed by the industry member on the retailer 
in order for the retailer to receive or obtain the product display.
    Par. 25. Section 6.84 is revised to read as follows:


Sec. 6.84  Point of sale advertising and consumer advertising 
specialties.

    (a) General. The act by an industry member of giving or selling 
point of sale advertising materials and consumer advertising 
specialties to a retailer does not constitute a means to induce within 
the meaning of section 105(b)(3) of the Act provided that the 
conditions prescribed in paragraph (c) of this section are met.
    (b) Definitions--(1) Point of sale advertising materials are items 
designed to be used within a retail establishment to attract consumer 
attention to the products of the industry member. Such materials 
include, but are not limited to:
    (i) Inside signs, such as posters, placards, designs, and window 
decorations;
    (ii) Retailer advertising specialties, such as trays, coasters, 
mats, menu cards, meal checks, paper napkins, foam scrapers, back bar 
mats, thermometers, clocks, and calendars; and
    (iii) Lists or menus.
    (2) Consumer advertising specialties are items that are designed to 
be carried away by the consumer, such as trading stamps, nonalcoholic 
mixers, pouring racks, ash trays, bottle or can openers, cork screws, 
shopping bags, matches, printed recipes, pamphlets, cards, leaflets, 
blotters, post cards, pencils, shirts, caps, and visors.
    (c) Conditions and limitations. (1) All point of sale advertising 
materials and consumer advertising specialties must bear conspicuous 
and substantial advertising matter about the product or the industry 
member which is permanently inscribed or permanently affixed. The name 
and address of the retailer may appear on the point of sale advertising 
materials.
    (2) With respect to retailer and consumer advertising specialties, 
the industry member may not directly or indirectly pay or credit the 
retailer for using or distributing the advertising materials or for any 
expense incidental to their use.
    Par. 26. Section 6.85 is revised to read as follows:


Sec. 6.85  Temporary retailers.

    (a) General. The furnishing of things of value to a temporary 
retailer does not constitute a means to induce within the meaning of 
section 105(b)(3) of the Act.
    (b) Definition. A temporary retailer is a dealer who is not engaged 
in business as a retailer for more than four consecutive days per 
event, and for not more than five events in a calendar year.
    Par. 27. Sections 6.86 and 6.87 are removed and reserved.
    Par. 28. Section 6.88 is revised to read as follows:


Sec. 6.88  Equipment and supplies.

    (a) General. The act by an industry member of selling equipment or 
supplies to a retailer does not constitute a means to induce within the 
meaning of section 105(b)(3) of the Act if the equipment or supplies 
are sold at a price not less than the cost to the industry member who 
initially purchased them, and if the price is collected within 30 days 
of the date of the sale. The act by an industry member of installing 
dispensing accessories at the retailer's establishment does not 
constitute a means to induce within the meaning of the Act as long as 
the retailer bears the cost of initial installation. The act by an 
industry member of furnishing, giving, or selling coil cleaning service 
to a retailer of distilled spirits, wine, or malt beverages does not 
constitute a means to induce within the meaning of section 105(b)(3) of 
the Act.
    (b) Definition. Equipment and supplies means glassware (or similar 
containers made of other material), dispensing accessories, carbon 
dioxide (and other gasses used in dispensing equipment) or ice. 
Dispensing accessories include items such as standards, faucets, cold 
plates, rods, vents, taps, tap standards, hoses, washers, couplings, 
gas gauges, vent tongues, shanks, and check valves.
    Par. 29. Sections 6.89 and 6.90 are removed and reserved.
    Par. 30. Section 6.91 is revised to read as follows:


Sec. 6.91  Samples.

    The act by an industry member of furnishing or giving a sample of 
distilled spirits, wine, or malt beverages to a retailer who has not 
previously purchased the brand from that industry member does not 
constitute a means to induce within the meaning of section 105(b)(3) of 
the Act. For each retail establishment the industry member may give not 
more than 3 gallons of any brand of malt beverage, and not more than 3 
liters of any brand of wine or distilled spirits. Where a retailer owns 
multiple retail establishments and purchasing decisions are made at a 
central location, no more than four retail establishments owned by that 
retailer may receive samples. If a particular product is not available 
in a size within the quantity limitations of this section, an industry 
member may furnish to a retailer the next larger size.
    Par. 31. Section 6.92 is amended by removing the word ``loaned'' 
where it appears and replacing it with the word ``lent.''
    Par. 32. Section 6.93 is revised to read as follows:


Sec. 6.93  Combination packaging.

    The act by an industry member of packaging and distributing 
distilled spirits, wine, or malt beverages in combination with other 
(non-alcoholic) items does not constitute a means to induce within the 
meaning of section 105(b)(3) of the Act.
    Par. 33. Section 6.94 is amended by adding the phrase ``(such as 
travel, lodging, and meals)'' before the period in the final sentence 
of the section.
    Par. 34. Section 6.96 is amended by revising paragraph (a) to read 
as follows:


Sec. 6.96  Consumer promotions.

    (a) Coupons. The act by an industry member of furnishing to 
consumers coupons which are redeemable at a retail establishment does 
not constitute a means to induce within the meaning of section 
105(b)(3) of the Act, provided the following conditions are met: (1) 
Redemption of such coupons may not be limited to a particular retailer 
or group of retailers; and
    (2) An industry member may not reimburse a retailer for more than 
the face value of all coupons redeemed, plus a usual and customary 
handling fee for the redemption of coupons.
* * * * *
    Par. 35. Section 6.97 is removed and reserved.
    Par. 36. Section 6.98 is revised to read as follows:


Sec. 6.98  Advertising service.

    The listing of the names and addresses of two or more retailers 
selling the products of an industry member in an advertisement of that 
industry member does not constitute a means to induce within the 
meaning of section 105(b)(3) of the Act, provided:
    (a) The advertisement does not also contain the retail price of the 
product (except where the exclusive retailer in the jurisdiction is a 
State or local agency), and
    (b) The listing is the only reference to the retailers in the 
advertisement and is relatively inconspicuous in relation to the 
advertisement as a whole, and
    (c) The advertisement does not refer only to one retailer or only 
to retail establishments controlled directly or indirectly by the same 
retailer, except where the retailer is an agency of a State or a 
political subdivision of a State.
    Par 37. Section 6.99 is revised to read as follows:


Sec. 6.99  Stocking, rotation, and pricing service.

    (a) General. Industry members may, at a retail establishment, 
stock, rotate and affix the price to distilled spirits, wine, or malt 
beverages which they sell, provided products of other industry members 
are not altered or disturbed. The rearranging or resetting of all or 
part of a store or liquor department is not hereby authorized.
    (b) Shelf plan and shelf schematics. The act by an industry member 
of providing a recommended shelf plan or shelf schematic for distilled 
spirits, wine, or malt beverages does not constitute a means to induce 
within the meaning of section 105(b)(3) of the Act.
    Par 38. Section 6.100 is revised to read as follows:


Sec. 6.100  Participation in retailer association activities.

    The following acts by an industry member participating in retailer 
association activities do not constitute a means to induce within the 
meaning of section 105(b)(3) of the Act:
    (a) Displaying its products at a convention or trade show,
    (b) Renting display booth space if the rental fee is the same as 
paid by all exhibitors at the event,
    (c) Providing its own hospitality which is independent from 
association sponsored activities,
    (d) Purchasing tickets to functions and paying registration fees if 
the payments or fees are the same as paid by all exhibitors at the 
event, and
    (e) Making payments for advertisements in programs or brochures 
issued by retailer associations at a convention or trade show if the 
total payments made by an industry member for all such advertisements 
do not exceed $500 per year for any retailer association.
    Par. 39. Section 6.101 is revised to read as follows:


Sec. 6.101  Merchandise.

    (a) General. The act by an industry member, who is also in business 
as a bona fide vendor of other merchandise (for example, groceries or 
pharmaceuticals), of selling that merchandise to a retailer does not 
constitute a means to induce within the meaning of section 105(b)(3) of 
the Act, provided:
    (1) The merchandise is sold at its fair market value, and
    (2) The merchandise is not sold in combination with distilled 
spirits, wines, or malt beverages, and
    (3) The industry member's acquisition costs of the merchandise 
appears on the industry member's purchase invoices or other records, 
and
    (4) Merchandise and distilled spirits, wines, or malt beverages 
sold in a single transaction are itemized separately on the same 
invoice covering the sales transaction.
    (b) Things of value covered in other sections of this part. The act 
by an industry member of providing equipment, fixtures, signs, 
glassware, supplies, services, and advertising specialties to retailers 
does not constitute a means to induce within the meaning of section 
105(b)(3) of the Act only as provided in other sections within this 
part.
    Par. 40. A new Sec. 6.102 is added to subpart D to read as follows:


Sec. 6.102  Outside signs.

    (a) The act by an industry member of furnishing outside signs to a 
retailer does not constitute a means to induce within the meaning of 
section 105(b)(3) of the Act provided that:
    (1) The retailer is not compensated, directly or indirectly such as 
through a sign company, for displaying the signs, and
    (2) The cost of the signs may not exceed $500.
    Par. 41. Part 6 is amended by adding a new subpart E to read as 
follows:

Subpart E--Exclusion

6.151  Exclusion, in general.
6.152  Practices which put retailer independence at risk.
6.153  Criteria for determining retailer independence.

Subpart E--Exclusion


Sec. 6.151   Exclusion, in general.

    (a) Exclusion, in whole or in part occurs:
    (1) When a practice by an industry member, whether direct, 
indirect, or through an affiliate, places retailer independence at risk 
by means of a tie or link between the industry member and retailer or 
by any other means of industry member control over the retailer, and
    (2) Such practice results in the retailer purchasing less than it 
would have of a competitor's product.
    (b) Section 6.152 lists practices that create a tie or link that 
places retailer independence at risk. Section 6.153 lists the criteria 
used for determining whether other practices can put retailer 
independence at risk.


Sec. 6.152   Practices which put retailer independence at risk.

    The practices specified in this section put retailer independence 
at risk. The practices specified here are examples and do not 
constitute a complete list of those practices that put retailer 
independence at risk.
    (a) The act by an industry member of resetting stock on a 
retailer's premises (other than stock offered for sale by the industry 
member).
    (b) The act by an industry member of purchasing or renting specific 
shelf space (e.g., slotting allowance) where such purchase reduces the 
availability on other shelf space of the distilled spirits, wine or 
malt beverages of another industry member.
    (c) Ownership by an industry member of less than a 100 percent 
interest in a retailer.
    (d) The act by an industry member of requiring a retailer to 
purchase one alcoholic beverage product in order to be allowed to 
purchase another alcoholic beverage product at the same time.


Sec. 6.153   Criteria for determining retailer independence.

    The criteria specified in this section are indications that a 
particular practice, other than those in Sec. 6.152, places retailer 
independence at risk. A practice need not meet all of the criteria 
specified in this section in order to place retailer independence at 
risk.
    (a) The practice restricts or hampers the free economic choice of a 
retailer to decide which products to purchase and the quantity in which 
to purchase them for sale to consumers.
    (b) The industry member obligates the retailer to participate in 
the promotion to obtain the industry member's product.
    (c) The retailer has a continuing obligation to purchase or 
otherwise promote the industry member's product.
    (d) The retailer has a commitment not to terminate its relationship 
with the industry member with respect to purchase of the industry 
member's products.
    (e) The practice involves the industry member in the day-to-day 
operations of the retailer. For example, the industry member controls 
the retailer's decisions on which brand of products to purchase, the 
pricing of products, or the manner in which the products will be 
displayed on the retailer's premises.
    (f) The practice is discriminatory in that it is not offered to all 
retailers in the local market on the same terms without business 
reasons present to justify the difference in treatment.

PART 8--EXCLUSIVE OUTLETS

    Par. 42-43. The authority citation for part 8 is revised to read as 
follows:

    Authority: 15 U.S.C. 49-50; 27 U.S.C. 202 and 205; 44 U.S.C. 
3504(h).

    Par. 44. Section 8.1 is revised to read as follows:


Sec. 8.1   General.

    The regulations in this part, issued pursuant to section 105 of the 
Federal Alcohol Administration Act (27 U.S.C. 205), specify 
arrangements which are exclusive outlets under section 105(a) and 
criteria for determining whether a practice is a violation of section 
105(a). This part does not attempt to enumerate all of the practices 
prohibited by section 105(a) of the Act. Nothing in this part shall 
operate to exempt any person from the requirements of any State law or 
regulation.
    Par. 45. Section 8.5 is added to subpart A to read as follows:


Sec. 8.5   Administrative provisions.

    (a) General. The Act makes applicable the provisions including 
penalties of sections 49 and 50 of Title 15, United States Code, to the 
jurisdiction, powers and duties of the Director under this Act, and to 
any person (whether or not a corporation) subject to the provisions of 
law administered by the Director under this Act.
    (b) Examination and subpoena. The Director or any authorized ATF 
officers shall at all reasonable times have access to, for the purpose 
of examination, and the right to copy any documentary evidence of any 
person, partnership, or corporation being investigated or proceeded 
against; and the Director shall have the power to require by subpoena 
the attendance and testimony of witnesses and the production of all 
such documentary evidence relating to any matter under investigation.
    (c) Reports requested by the regional director (compliance)--(1) 
General. When required in writing by the regional director 
(compliance), an industry member shall submit a written report 
containing information on sponsorships, advertisements, promotions, and 
other activities pertaining to its business subject to the Act 
conducted by, or on behalf of, or benefiting the industry member.
    (2) Preparation. The report will be prepared by the industry member 
in letter form, executed under the penalties of perjury, and will 
contain the information specified by the regional director 
(compliance).
    (3) Filing. The report will be filed in accordance with the 
instructions of the regional director (compliance). (27 U.S.C. 202(c) 
and (d))
    Par. 46. Section 8.11 is amended by removing the definition for the 
term ``retail establishment'' and by adding definitions for ``ATF 
officer,'' ``Director'' and ``regional director (compliance)'' as 
follows:


Sec. 8.11   Meaning of terms.

* * * * *
    ATF officer. An officer or employee of the Bureau of Alcohol, 
Tobacco and Firearms (ATF) authorized to perform any function relating 
to the administration or enforcement of this part.
    Director. The Director, Bureau of Alcohol, Tobacco and Firearms, 
the Department of the Treasury, Washington, DC.
* * * * *
    Regional director (compliance). The principal ATF regional official 
responsible for administering regulations in this part.
* * * * *
    Par. 47. Section 8.23 is revised to read as follows:


Sec. 8.23   Third party arrangements.

    Industry member requirements, by agreement or otherwise, with non-
retailers that result in a retailer being required to purchase the 
industry member's products are within the exclusive outlet provisions. 
These industry member requirements are covered whether the agreement or 
other arrangement originates with the industry member or the third 
party. For example, a supplier enters into a contractual agreement or 
other arrangement with a third party. This agreement or arrangement 
contains an industry member requirement as described above. The third 
party, a ballclub, or municipal or private corporation, not acting as a 
retailer, leases the concession rights and is able to control the 
purchasing decisions of the retailer. The third party, as a result of 
the requirement, by agreement or otherwise, with the industry member, 
requires the retailer to purchase the industry member's products to the 
exclusion, in whole or in part, of products sold or offered for sale by 
other persons in interstate or foreign commerce. The business 
arrangements entered into by the industry member and the third party 
may consist of such things as sponsoring radio or television 
broadcasting, paying for advertising, or providing other services or 
things of value.
    Par. 48. Part 8 is amended by adding a new Subpart D to read as 
follows:

Subpart D--Exclusion

8.51  Exclusion, in general.
8.52  Practices which result in exclusion.
8.53  Practices not resulting in exclusion.
8.54  Criteria for determining retailer independence.

Subpart D--Exclusion


Sec. 8.51   Exclusion, in general.

    (a) Exclusion, in whole or in part occurs:
    (1) When a practice by an industry member, whether direct, 
indirect, or through an affiliate, places retailer independence at risk 
by means of a tie or link between the industry member and retailer or 
by any other means of industry member control over the retailer, and
    (2) Such practice results in the retailer purchasing less than it 
would have of a competitor's product.
    (b) Section 8.52 lists practices that result in exclusion. Section 
8.53 lists practices not resulting in exclusion. Section 8.54 lists the 
criteria used for determining whether other practices can put retailer 
independence at risk.


Sec. 8.52   Practices which result in exclusion.

    The practices specified in this section result in exclusion under 
section 105(a) of the Act. The practices specified here are examples 
and do not constitute a complete list of such practices:
    (a) Purchases of distilled spirits, wine or malt beverages by a 
retailer as a result, directly or indirectly, of a threat or act of 
physical or economic harm by the selling industry member.
    (b) Contracts between an industry member and a retailer which 
require the retailer to purchase distilled spirits, wine, or malt 
beverages from that industry member and expressly restrict the retailer 
from purchasing, in whole or in part, such products from another 
industry member.


Sec. 8.53   Practices not resulting in exclusion.

    The practices specified in this section are deemed not to result in 
exclusion under section 105(a) of the Act:
    (a) A supply contract for one year or less between the industry 
member and retailer under which the industry member agrees to sell 
distilled spirits, wine, or malt beverages to the retailer on an ``as 
needed'' basis provided that the retailer is not required to purchase 
any minimum quantity of such product.
    (b) [Reserved]


Sec. 8.54   Criteria for determining retailer independence.

    The criteria specified in this section are indications that a 
particular practice, other than those in Sec. 8.52 and 8.53, places 
retailer independence at risk. A practice need not meet all of the 
criteria specified in this section in order to place retailer 
independence at risk.
    (a) The practice restricts or hampers the free economic choice of a 
retailer to decide which products to purchase and the quantity in which 
to purchase them for sale to consumers.
    (b) The industry member obligates the retailer to participate in 
the promotion to obtain the industry member's product.
    (c) The retailer has a continuing obligation to purchase or 
otherwise promote the industry member's product.
    (d) The retailer has a commitment not to terminate its relationship 
with the industry member with respect to purchase of the industry 
member's products.
    (e) The practice involves the industry member in the day-to-day 
operations of the retailer. For example, the industry member controls 
the retailer's decisions on which brand of products to purchase, the 
pricing of products, or the manner in which the products will be 
displayed on the retailer's premises.
    (f) The practice is discriminatory in that it is not offered to all 
retailers in the local market on the same terms without business 
reasons present to justify the difference in treatment.

PART 10--COMMERCIAL BRIBERY

    Par. 49. The authority citation for part 10 is revised to read as 
follows:

    Authority: 15 U.S.C. 49-50; 27 U.S.C. 202 and 205; 44 U.S.C. 
3504(h).

    Par. 51. Section 10.1 is revised to read as follows:


Sec. 10.1  General.

    The regulations in this part, issued pursuant to section 105 of the 
Federal Alcohol Administration Act (27 U.S.C. 205), specify practices 
which may result in violations of section 105(c) and criteria for 
determining whether a practice is a violation of section 105(c). This 
part does not attempt to enumerate all of the practices prohibited by 
section 105(c) of the Act. Nothing in this part shall operate to exempt 
any person from the requirements of any State law or regulation.
    Par. 52. Section 10.4 is amended by revising paragraph (a)(1) of 
the section to read as follows:


Sec. 10.4  Jurisdictional limits.

    (a) General. * * *
    (1) The industry member induces a trade buyer to purchase distilled 
spirits, wine, or malt beverages from such industry member to the 
exclusion, in whole or in part, of products sold or offered for sale by 
other persons in interstate or foreign commerce; and
    Par. 53. Section 10.5 is added to subpart 4 to read as follows:


Sec. 10.5  Administrative provisions.

    (a) General. The Act makes applicable the provisions including 
penalties of sections 49 and 50 of Title 15, United States Code, to the 
jurisdiction, powers and duties of the Director under this Act, and to 
any person (whether or not a corporation) subject to the provisions of 
law administered by the Director under this Act.
    (b) Examination and Subpoena. The Director or any authorized ATF 
officers shall at all reasonable times have access to, for the purpose 
of examination, and the right to copy any documentary evidence of any 
person, partnership, or corporation being investigated or proceeded 
against; and the Director shall have the power to require by subpoena 
the attendance and testimony of witnesses and the production of all 
such documentary evidence relating to any matter under investigation.
    (c) Reports requested by the regional director (compliance)--(1) 
General. When required in writing by the regional director 
(compliance), an industry member shall submit a written report 
containing information on sponsorships, advertisements, promotions, and 
other activities pertaining to its business subject to the Act 
conducted by, or on behalf of, or benefiting the industry member.
    (2) Preparation. The report will be prepared by the industry member 
in letter form, executed under the penalties of perjury, and will 
contain the information specified by the regional director 
(compliance).
    (3) Filing. The report will be filed in accordance with the 
instructions of the regional director (compliance). (27 U.S.C. 202 (c) 
and (d))
    Par. 54. Section 10.11 is amended by adding definitions for ``ATF 
officer,'' ``Director,'' and ``regional director (compliance)'' as 
follows:


Sec. 10.11  Meaning of terms.

* * * * *
    ATF officer. An officer or employee of the Bureau of Alcohol, 
Tobacco and Firearms (ATF) authorized to perform any function relating 
to the administration or enforcement of this part.
    Director. The Director, Bureau of Alcohol, Tobacco and Firearms, 
the Department of the Treasury, Washington, DC.
* * * * *
    Regional director (compliance). The principal ATF regional official 
responsible for administering regulations in this part.
* * * * *
    Par. 55. Part 10 is amended by adding a new Subpart D to read as 
follows:

Subpart D--Exclusion

10.51  Exclusion, in general.
10.52  Practices which put trade buyer independence at risk.
10.53  Practices not resulting in exclusion. [Reserved]
10.54  Criteria for determining retailer independence.

Subpart D--Exclusion


Sec. 10.51  Exclusion, in general.

    (a) Exclusion, in whole or in part occurs:
    (1) When a practice by an industry member, whether direct, 
indirect, or through an affiliate, places trade buyer independence at 
risk by means of a tie or link between the industry member and trade 
buyer or by any other means of industry member control over the trade 
buyer, and
    (2) Such practice results in the trade buyer purchasing less than 
it would have of a competitor's product. Section 10.52 lists practices 
that create a tie or link that places trade buyer independence at risk.
    (b) Section 10.53 is reserved and will list practices not resulting 
in exclusion. Section 10.54 lists the criteria used for determining 
whether other practices can put trade buyer independence at risk.


Sec. 10.52  Practices which put trade buyer independence at risk.

    The practice specified in this section is deemed to place trade 
buyer independence at risk within the description of exclusion in 
Sec. 10.51 of the regulations. The practice enumerated here is an 
example and does not constitute a complete list of those situations 
which result in such control.
    (a) Industry member payments of money to the employee(s) of a trade 
buyer without the knowledge or consent of the trade buyer-employer in 
return for the employee agreeing to order distilled spirits, wine, or 
malt beverages from the industry member.
    (b) [Reserved]


Sec. 10.53  Practices not resulting in exclusion. [Reserved]


Sec. 10.54  Criteria for determining trade buyer independence.

    The criteria specified in this section are indications that a 
particular practice, other than those in section 10.52, places trade 
buyer independence at risk. A practice need not meet all of the 
criteria specified in this section in order to place trade buyer 
independence at risk.
    (a) The practice restricts or hampers the free economic choice of a 
trade buyer to decide which products to purchase and the quantity in 
which to purchase them for sale to retailers and consumers.
    (b) The industry member obligates the trade buyer to participate in 
the promotion to obtain the industry member's product.
    (c) The trade buyer has a continuing obligation to purchase or 
otherwise promote the industry member's product.
    (d) The trade buyer has a commitment not to terminate its 
relationship with the industry member with respect to purchase of the 
industry member's products.
    (e) The practice involves the industry member in the day-to-day 
operations of the trade buyer. For example, the industry member 
controls the trade buyer's decisions on which brand of products to 
purchase, the pricing of products, or the manner in which the products 
will be displayed on the trade buyer's premises.
    (f) The practice is discriminatory in that it is not offered to all 
trade buyers in the local market on the same terms without business 
reasons present to justify the difference in treatment.

PART 11--CONSIGNMENT SALES

    Par. 56-57. The authority citation for 27 CFR part 11 is revised to 
read as follows:


    Authority: 15 U.S.C. 49-50; 27 U.S.C. 202 and 205.

    Par. 58. Section 11.1 is revised to read as follows:


Sec. 11.1  General.

    The regulations in this part, issued pursuant to section 105 of the 
Federal Alcohol Administration Act (27 U.S.C. 205), specify 
arrangements which are consignment sales under section 105(d) of the 
Act and contain guidelines concerning return of distilled spirits, wine 
and malt beverages from a trade buyer. This part does not attempt to 
enumerate all of the practices prohibited by section 105(d) of the Act. 
Nothing in this part shall operate to exempt any person from the 
requirements of any State law or regulation.
    Par. 59. Section 11.5 is added to subpart A to read as follows:


Sec. 11.5  Administrative provisions.

    (a) General. The Act makes applicable the provisions including 
penalties of sections 49 and 50 of Title 15, United States Code, to the 
jurisdiction, powers and duties of the Director under this Act, and to 
any person (whether or not a corporation) subject to the provisions of 
law administered by the Director under this Act.
    (b) Examination and subpoena. The Director or any authorized ATF 
officers shall at all reasonable times have access to, for the purpose 
of examination, and the right to copy any documentary evidence of any 
person, partnership, or corporation being investigated or proceeded 
against; and the Director shall have the power to require by subpoena 
the attendance and testimony of witnesses and the production of all 
such documentary evidence relating to any matter under investigation. 
(27 U.S.C. 202 (c))
    Par. 60. Section 11.11 is amended by adding definitions for ``ATF 
officer'' and ``Director'' as follows:


Sec. 11.11  Meaning of terms.

* * * * *
    ATF officer. An officer or employee of the Bureau of Alcohol, 
Tobacco and Firearms (ATF) authorized to perform any function relating 
to the administration or enforcement of this part.
    Director. The Director, Bureau of Alcohol, Tobacco and Firearms, 
the Department of the Treasury, Washington, DC.
* * * * *
    Par. 61. A new Sec. 11.24 is added to subpart C to read as follows:


Sec. 11.24  Other than a bona fide sale.

    ``Other than a bona fide sale'' includes, but is not limited to, 
sales in connection with which the industry member purchases or rents 
the trade buyer's shelf space to be occupied by such products.
    Par. 62. Section 11.32 is revised to read as follows:


Sec. 11.32  Defective products.

    Products which are unmarketable because of product deterioration, 
leaking containers, or damaged labels may be exchanged for an equal 
quantity of identical products or may be returned for cash or credit 
against outstanding indebtedness.
    Par. 63. Section 11.34 is revised to read as follows:


Sec. 11.34  Products which may no longer be lawfully sold.

    Products which may no longer be lawfully sold may be returned for 
cash or credit against outstanding indebtedness. This would include 
situations where, due to a change in law or regulation over which the 
trade buyer or an affiliate of the trade buyer has no control, a 
particular size or brand is no longer permitted to be sold.
    Par. 64. Section 11.35 is revised to read as follows:


Sec. 11.35  Termination of business.

    Products on hand at the time a trade buyer terminates operations 
may be returned for cash or credit against outstanding indebtedness. 
This does not include a temporary seasonal shutdown (see Sec. 11.39).


    Signed: April 15, 1994.
Daniel R. Black,
Acting Director.
    Approved: April 18, 1994.
John P. Simpson,
Deputy Assistant Secretary (Tariff and Trade Enforcement).
[FR Doc. 94-10041 Filed 4-22-94; 8:49 am]
BILLING CODE 4810-31-U