Tito’s Vodka maker Fifth Generation, Inc. has struck an offer in compromise (OIC) with the Department of Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB) for $305,000, the federal agency announced Monday.
The fine comes amid increased TTB enforcement actions related to sponsorships.
Austin, Texas-based Fifth Generation “allegedly violated the Federal Alcohol Administration Act’s trade practice prohibitions by entering into sponsorship agreements with various sports and entertainment venues, through which the venues’ retail concessionaires were induced to purchase the proponent’s distilled spirits to the exclusion of its competitors’ products.”
The alleged infractions took place between 2016 and 2021, and the OIC was accepted on January 18. The TTB did not specify which partnerships ran afoul of the FAAA, and no other details were provided.
Tito’s is the country’s largest spirits brand by far. In 2021, Tito’s posted $1.075 billion in off-premise sales at retailers, including liquor and convenience stores, tracked by NielsenIQ, according to data provided by Bump Williams Consulting. Fireball, the next largest spirits brand at off-premise retailers, posted $613 million in sales in the same period.
Tito’s has penned several sponsorship agreements with both venues and sporting events in recent years, although it is unclear which deals led to the OIC.
In December, the Moody Center at the University of Texas announced a multi-year partnership with Tito’s that will entail “branded experiences at over 150 unique events each year and upwards of 15,000 fans each event.” The arena is scheduled to open in April 2022.
Tito’s became an official sponsor of Sonoma Raceway in 2015, according to AutoRacing1.com, and extended the partnership in 2017 to become the exclusive sponsor of an entertainment stage during the GoPro Grand Prix of Sonoma race weekend, according to Speedway Digest.
The brand is listed as a 2022 partner of the Talladega Speedway on the race track’s website, which specifies that “official partners receive exclusive promotional rights within a mutually defined product category with the right to use our marks for on-site and in-market promotions, themed advertising campaigns, point-of-sale materials, and product packaging.”
Earlier this month, the TTB accepted OICs from two wholesalers who struck sponsorship deals with venues that the federal agency alleged excluded competitors’ products. Those OICs included $225,000 from Des Moines, Iowa-based Doll Distributing LLC, which entered into a sponsorship agreement with Drake University’s Knapp Center that allegedly allowed the wholesaler to control “in part” the venue’s malt beverage distribution.
In the second OIC, the TTB agreed to accept $225,000 from Belleville, Illinois-based Robert “Chick” Fritz Inc., which allegedly entered into a sponsorship agreement with Alton, Illinois-based Liberty Bank Amphitheater that allowed the wholesaler to control the distribution of malt beverages at the venue.
Venue sponsorships drew criticism from Brewers Association (BA) president and CEO Bob Pease in his comments to Amy Greenberg, TTB regulations and rulings division director. Trade groups were invited to share comments with Greenberg following President Joe Biden’s executive order last summer to promote competition across several industries, including beer.
Pease included “so-called ‘sponsorship’ arrangements in which large suppliers and wholesalers pay substantial sums to venue operators, ostensibly to purchase advertising within such venues” in his list of “unlawful trade practices” that “disadvantage small brewers in the market.”
“In practice, these payments almost invariably secure exclusive or near-exclusive pouring rights at the venue,” he added.
In July 2020, Anheuser-Busch InBev agreed to pay a record $5 million OIC for alleged trade practice violations related to sports and entertainment sponsorships throughout the U.S. Additionally, A-B’s importer and wholesaler permits were suspended for four days in Denver and two days in Littleton, Colorado. Those alleged violations of the FAA Act occurred between July 1, 2016, and December 31, 2018.