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Top 10 spirits industry fines

From multi-million-dollar bribes to illegal ‘pay-to-play’ schemes, the spirits sector has been handed some hefty penalties in recent years. We look back at some of the industry’s biggest fines.

Here’s some of the biggest spirits industry fines from the last 10 years

The spirits sector has been hit with some major charges in the past decade, including fines for oil leaks, distillery fires and trademark violations.

Some of the biggest fines have happened in the US, where companies have been ordered to pay out for moves such as violating liquor control board rules and presenting ‘misleading’ sales.

From Diageo’s £33 million (US$46m) fine for ‘anti-competitive practices in the raki market’ to Southern Glazer’s illicit ‘pay-to-play’ schemes, we present 10 industry fines that made the headlines in the past decade.

Click through the following pages to discover our pick of the top 10 biggest spirits industry fines.

Whyte & Mackay fined over oil leak

 

Dalmore owner Whyte & Mackay was fined £9,000 (US$12,500) for leaking 20,000 litres of oil from its Invergordon plant into a nearby nature habitat in 2012.

The oil was spilled into the Cromarty Firth, an environmentally protected area to support the breeding of birds such as osprey.

Whyte & Mackay pleaded guilty to the offence under the Water Environment Regulations at Tain Sheriff Court.

A spokesperson for Whyte & Mackay said at the time: “Thankfully there was no environmental damage. We accept full responsibility and apologise profusely for the incident.”

Diageo fined £18k over distillery falls

Diageo was given an £18,000 (US$25,000) penalty after two employees were hurt at its sites in Scotland. The workers had experienced falls at two different Moray facilities – Glenlossie Dark Grains Plant in Thornshill, Elgin, and Burghead Maltings in King Street, Burghead. Both workers were admitted to hospital.

Diageo pleaded guilty before Elgin Sheriff Court after the Health and Safety Executive (HSE) showed the company had “failed to take sufficient” steps to prevent ladders being used in unsafe circumstances when clearing blockages at Burghead Maltings.

HSE principal inspector Niall Miller said: “In both cases Diageo had provided work at height training, which included risk assessment training, and believed their employees should be competent to plan and carry out work at height.

“However, it is not sufficient for health and safety instructions merely to be given to workers; employers must also ensure those instructions are carried out.”

Diageo said it had implemented “extensive measures” since the incidents took place.

Ukrainian distillery fined over imitating Johnnie Walker

A distillery in central Ukraine was fined over a number of breaches relating to Diageo’s Johnnie Walker Scotch brand in May 2017.

The Anti-Monopoly Committee of Ukraine fined The Simferopol Wine and Cognac Factory in Dnipro £20,000 (US$27,800) – following a £400,000 (US$556,800) fine for a similar violation in 2015. The penalty was over the producer’s Jack Talker Red Level ‘whiskye’.

The distillery also makes a product called Black Jack, said to imitate the US whiskey Jack Daniel’s, and in 2016 it registered another trademark, ‘White Hopes’, to compete with Diageo’s White Horse blended whisky.

At the time, a Diageo spokesperson said: “Everywhere we operate we are committed to a long-term, strategic view of consistent and forceful action against all lookalike or counterfeited products that violate our intellectual property rights.”

Edrington fined £40,000 after warehouse fire

Macallan Double Cask whiskies

The Macallan owner Edrington was charged £40,000 (US$55,700) for safety failures that led to a serious fire at its Glasgow warehouse in 2013.

The blaze in June 2011 happened when unaged whisky splashed onto a light fitting as casks were being filled, forcing two distillery workers to run for their lives. More than 17,500 litres of whisky were lost during the incident.

Following an investigation, the Health and Safety Executive (HSE) found that the light fittings should not have been used in a flammable area.

According to the HSE, the workers were filling casks using flexible hoses when a jet of alcohol shot out and splashed onto a light fitting above a forklift truck. The truck immediately caught fire as both men ran from the warehouse.

HSE inspectors said the workmen were “extremely lucky” to have survived the incident.

Alcohols Limited fined £270,000 after distillery fire

spirits bottles

In August 2016, chemical distribution firm Alcohols Limited was charged £270,000 (US$376,000) after a blaze at its distillery in 2012 hospitalised a member of staff.

The fire, which occurred at the company’s site in Langley Green, Birmingham, caused nearby lamp-posts to melt and required more than 100 firefighters to extinguish.

The court heard that one employee sustained 20% burns to his hands, head and neck in the incident. The fire also caused around 200 local residents to flee their homes.

RNDC fined $3m over supply shortages in Michigan

US distributor Republic National Distributing Company (RNDC) was ordered to pay a US$3 million fine after the company violated the liquor control code.

Michigan’s attorney general, Dana Nessel, and Michigan Liquor Control Commission (MLCC) chair, Pat Gagliardi, issued the “unprecedented” fine after RNDC was found to have violated the liquor control code 88 times.

The violations by RNDC contributed to supply shortages of spirits throughout the state in 2019. Stock shortages hit Michigan following RNDC’s move to a new facility, which the firm said “turned out to be like building a new plane while flying it”.

At the time, MLCC said it had received complaints from retailers regarding “delivery issues, stock shortages, and lack of customer service that are negatively impacting their businesses”.

Diageo’s £33m Turkish fine

In August 2017, Diageo’s full-year financial results revealed that the Johnnie Walker owner had set aside £33m (US$46m) to cover a fine issued by Turkish authorities for ‘anti-competitive practices in the raki market’.

In 2015, the Turkish Competition Authority, otherwise known as Rekabet, launched an investigation into Diageo’s Turkish subsidiary, Mey Içki, which produces the Yeni Raki brand.

According to Diageo’s financial results, the fine was for exceptional items “in respect of a Turkish Competition Authority investigation into certain [parts] of Mey Içki’s trading practices in Turkey”.

Diageo acquired Mey Içki for £1.3bn in 2011 in order to increase its presence in Turkey, which was described as an “attractive emerging market” at the time.

Southern Glazer’s $3.5m for illegal ‘pay-to-play’ schemes

The largest wine and spirits distributor in the US, Southern Glazer’s Wine and Spirits (SGWS), was charged US$3.5m for partaking in illicit ‘pay-to-play’ schemes in December 2017.

At the time, the penalty was the largest issued by the New York State Liquor Authority since it was formed, and one of the biggest civil penalties of any state liquor administrative agency against a wholesaler.

The State Liquor Authority accepted the conditional no contest offer from SGWS to settle charges of providing illegal gifts and services to business to “influence their purchasing decisions”, for allowing incomplete, inaccurate and inadequate record-keeping practices, and for engaging in discriminatory sales, violating the 2006 Wholesale Consent Order and Decree.

SGWS’ Albany district manager confessed to making “several illegal transactions” between 1 January and 30 June 2017, ranging from US$50 to US$1,000 in credit card swipes.

Diageo’s $5m fine over ‘misleading’ sales

Smirnoff vodka

Smirnoff owner Diageo once again hit the headlines in February 2020 after the Securities and Exchange Commission (SEC) fined the firm US$5 million for creating a “misleading picture” of its financial results for North America.

According to the US securities regulator’s charges, in its 2014 and 2015 fiscal years, Diageo North America “pressured” distributors to buy excess inventory in order to meet internal sales targets in the face of declining market conditions.

However, Diageo failed to disclose the excess stocks to investors, creating a “misleading impression” that Diageo and Diageo North America were able to achieve their sales targets through normal customer demand, according to the SEC.

Without admitting or denying the SEC’s findings, Diageo agreed to pay a US$5m penalty, and agreed to cease and desist from any further violations.

Beam Suntory’s US$19.6m fine in bribery case

Beam Suntory range

The biggest fine on our list came last year when Jim Beam owner Beam Suntory was given a US$19.6 million penalty in October over a bribery investigation into its Indian subsidiary.

Beam Suntory entered into an agreement with the US Department of Justice to conclude the government’s inquiry into conduct by the US drinks group and its Indian business, which was disclosed in 2012. From 2006 until the end of Q3 in 2012, Beam’s Indian arm paid bribes to various Indian government executives, including corrupt payments to gain or retain business in India.

During the period, a bribe of one million Indian rupees (around US$18,000 at the time) was paid to a senior Indian government official in exchange for a licence to bottle ready‐to‐drink products.

Beam Suntory said it had dismissed workers who violated the firm’s code of ethics, and stopped all commercial activity in India until it was satisfied the business was compliant.

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