Pay to Play in the wine industry — not breaking news!

Everybody seems to “know” what Pay to Play means; unfortunately, not everyone agrees on its potential pros and cons. Therefore, governments have created legal definitions, and courts of law have had to interpret those laws in practice. For the rest of us, it seems to be trial-and-error, finding out what we can get away with and what we cannot. Let's have a look at this topic, as regards wine.

After all, this applies to the wine industry just as much as anywhere else. For example, producers, wholesalers and retailers can all get into trouble, when they try something on, and it then turns out that the customer does not agree on its acceptability. Let's start with the sellers.

The most common violations, by sellers in practice, seem to be ones that compromise the retailer’s independence. Such behavior might involve payment to an operator to increase sales of specific products, or to obtain preferential shelf or promotional space within a store (which might lead to greater sales). This also includes inducing a retailer to purchase certain products to the exclusion (in whole or in part) of other brands’ products; or requiring a retailer to buy a product that it doesn’t want in order to receive a particular product that it does want (politely referred to as a “tie in” sale).

This issue can involve individuals, companies, and even whole countries. The Australian wine industry, for example, has been dealing for some time with a Chinese accusation against them of Pay to Play (“if you want this wine then you must also buy that wine”), which resulted in punitive import tariffs being imposed nearly two years ago. This is a serious problem, because China was Australia’s largest wine market at the time (How Australian wine lost its major export market in less than 12 months), and Australia was one of China’s largest suppliers (Australian wine in China: Impact of China’s anti-dumping duties). The ice is only now just beginning to thaw, apparently (Inside Labor’s plan to rebuild Australia’s relationship with China).

At what might be the other extreme, there is the matter of payment associated with wine reviews, which I have looked at before (We all know that there is Pay-for-Play in wine reviews). * There have sometimes been suggestions that wine magazines can arrange things in the manner described in these examples (Wine media is broken: A case study):

• a PR firm alleged that one of their clients —a popular Italian region— was told by a wine magazine that its wines would not be reviewed unless they made advertising buys.
• a firm pays “about $25,000 a year” to a certain influential wine publication. This was not for advertising purposes ... instead, this fee was “to ensure that our clients’ wines are reviewed” and to make sure “poorly reviewed wines aren’t listed” in critics’ tasting reports.

Similarly, there are often suggestions about individual commentators (Is “pay to play” wrecking wine criticism?), who might use:

“pay to play journalism”, where wine, beer, and spirits writers take samples, free trips, free meals, and who knows what else — and then write exactly what will make the producer happy. Because they want to keep getting the free samples, free trips, free meals, and who knows what else.

Even subscription–based wine reviewing has long been a contentious issue in this regard (The war over wine); and social media is apparently another culprit (Buying influence in the wine world).

One response to this situation has been for independent critics to charge an explicit up–front fee for reviewing any given wine, notably in New Zealand (Update — winemaker criticises paid wine reviews). This has generated negative press from some wine–makers (Mahana Estates winemaker Michael Glover rejects ‘paid for’ reviews), although the media themselves seem to recognize the need to get paid a salary for their work (Winemaker criticises paid wine reviews ; Glover takes his gloves off). This issue has been discussed for at least a decade (Pay To Play wine reviews ... It’s all good).

Returning to suppliers and retailers, where I started this post, this seems to be where some of the biggest action occurs (Pay-to-Play scandal exposed): “We know shady dealings are going on in the wine and spirits distribution business. The question is, how widespread are they?” The discussion, in this particular example, involved Southern Glazer’s Wine & Spirits, the largest alcohol distributor in the United States, and the Pennsylvania Liquor Control Board, which has an alcohol retail monopoly in the sixth most populous U.S. state. The list of reported SG gifts to the PLCB is quite long (see also: Digging deeper in Pay-for-Play scandal).

This sort of thing is not limited to shops, of course. Restaurants also sell wine, and so gifts can change hands there, as well. A recently cited discussion is from South Africa (The great South African pay-for-play wine list rip-off):

A listing fee is an amount of money the restaurant deems fit to charge a winery for the winery’s privilege of seeing one or more of its offerings appearing on that specific restaurant’s wine list ... The occurrence of listing fees is growing in abundance as this becomes assumed standard practice among many trading as restaurants in the hospitality industry.

There is also an older cited example from the USA (Bribes, backdoor deals, and pay to play: How bad rosé took over).

I noted in a recent post (If you are American, then the TTB might be after you) that in the USA it is the Alcohol and Tobacco Tax and Trade Bureau (TTB) whose Trade Practice Program is responsible for addressing these issues. Apparently, the list of illegal financial offenses that have been committed by alcohol suppliers and wholesalers is a long one. Some advice has been offered as to what suppliers can do to rectify this (How to avoid pay-to-play violations).

Of course, not everything is illegal in the world of providing things to U.S. retailers:

There are some exceptions. These permit a brand to offer point-of-sale advertising material; consumer and retailer advertising specials; product displays; combination packages; consumer tastings and samplings; coupons and sweepstakes or contests; educational seminars; and stocking, rotation, and pricing of the brand’s own products. Brands that operate legally will work within these exceptions.

Sticking to the rules is presumably the best way to move forward, commercially. However, stepping your way carefully through the financial–incentive minefield is also required. In the commercial world, the buck is the primary goal, but you need to take your eyes off it occasionally (When just focusing on the money works — and when it doesn’t).

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* This particular sub-topic has recently been extensively covered in: Buying influence in the wine world. There is also extensive coverage in: Why no fame for the wines of Spain?