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I have done businss with (and for) wholesalers in DC for 10 years, so I know what the "list" is.

Essentially, if you have credit with a DC wholesaler, you must pay your bills for the preceding month by the 15th of the following month, or you will be placed on COD status. Not by the aggrieved party, but by virtually every distributor in DC.

When I say virtually every distributor, I mean just that. Not ALL of them participate in this program.

I bring this up because my company was placed on COD yesterday for a missed invoice of $230 that was received on April 27th. It has never happened to me before, so it got me thinking:

1) Every distributor licensed to do business in DC does not participate in the "list"- so it can't be the law, right?

2) Distributors are not required by DC ABRA to extend credit, and each application for credit is seperately filed and approved/denied by the individual wholesalers.

I cannot really see how competitive businesses (and there are few industries as cutthroat as the alcoholic beverage industry) can act in concert around a single issue.

If I was three weeks late in paying a plumber, and every plumber in DC suspended my already approved credit line, wouldn't this be collusion and a violation of anti-trust laws?

How can this be legal?

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If you do not pay your credit card debts on time it gets reported in your credit history and you will have difficulty obtaining credit with all future merchants, not just alcohol wholesalers.

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If you do not pay your credit card debts on time it gets reported in your credit history and you will have difficulty obtaining credit with all future merchants, not just alcohol wholesalers.

This is different. This is not overall poor credit effecting credit worthiness. My company's credit is pristine. This is about one industry where the few with the greatest market share work in concert with one another to immediately terminate pre-approved credit in an incredibly short timeframe.

Keeping things restaurant specific: I could be 60-90 days with Keany produce, stop paying, then go 60-90 days with Coastal Sunbelt, stop paying, then maybe do business with Karam Produce etc, etc, and never be without product. Eventually my credit rating would be decimated, and my ability to procure future credit from a meat vendor, or seafood vendor may be compromised. I'd likely be sued.

But yesterday we were denied credit by a vendor with whom we have never had an issue with in 10+ years because we were a whopping 22 4 (since the bill was due on the 5/15, but delivered on 4/27) days late on paying a bill of $230.00 to a completely different company.

I am not at all surprised that this happened. I know the rules, I have put people ON credit hold in the same system. But for the first time (since it happened to me), I thought "How can this be legal?"

Edited by B.A.R.
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This is different. This is not overall poor credit effecting credit worthiness. My company's credit is pristine. This is about one industry where the few with the greatest market share work in concert with one another to immediately terminate pre-approved credit in an incredibly short timeframe.

Keeping things restaurant specific: I could be 60-90 days with Keany produce, stop paying, then go 60-90 days with Coastal Sunbelt, stop paying, then maybe do business with Karam Produce etc, etc, and never be without product. Eventually my credit rating would be decimated, and my ability to procure future credit from a meat vendor, or seafood vendor may be compromised. I'd likely be sued.

But yesterday we were denied credit by a vendor with whom we have never had an issue with in 10+ years because we were a whopping 22 days late on paying a bill of $230.00 to a completely different company.

I am not at all surprised that this happened. I know the rules, I have put people ON credit hold in the same system. But for the first time (since it happened to me), I thought "How can this be legal?"

There is nothing I can think of in anti-trust law that would prohibit this. They aren't doing anything anti-competitive like making you pay a higher price or use a certain distributor - they are just protecting themselves from getting burned on collecting payment. You can still buy from all of them - you just have to pay on delivery right? Or just use one of the few distributors willing to operate outside of the list at a higher risk of being stiffed. No law I can think of requires companies to extend you credit, they just do that to woo you as a customer for convenience.

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There is nothing I can think of in anti-trust law that would prohibit this. They aren't doing anything anti-competitive like making you pay a higher price or use a certain distributor - they are just protecting themselves from getting burned on collecting payment. You can still buy from all of them - you just have to pay on delivery right? Or just use one of the few distributors willing to operate outside of the list at a higher risk of being stiffed. No law I can think of requires companies to extend you credit, they just do that to woo you as a customer for convenience.

Thanks. I checked and there is no DC ABRA law that mandates this (or prohibits this). Rather, it seems it is just an agreement among private companies. This is what I thought, and it just didn't feel right.

Frankly, if it is not illegal, and with the poor cash flow of many restaurants and other businesses, I am surprised that the produce companies, the seafood companies, etc. don't all do the same thing.

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If there's no law (Marshall?), this could be a situation of "collusion from afar" such as airline baggage fees or ATM fees which everyone seems to do in concert.

Hence, the Association of Independent Restaurants, coming to a city near you. B)

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Hence, the Association of Independent Restaurants, coming to a city near you.

Actually, the way B.A.R. described it, the group sounds like a unionized cadre, which is similar to what you propose, right? There is no law that prohibits this, although, if you were a consumer, I tend to think it may violate Fair Credit Collection practices.

Is there any way to get back on the good list? There should be a method.

Other industries probably do it in small pockets. This sounds like an organized consortium, which means that those who participate must agree to all the terms. That kind of agreement cannot/might not happen in all industries--people tend to be a dog eat dog world kind of mentality.

My two cents.

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Actually, the way B.A.R. described it, the group sounds like a unionized cadre, which is similar to what you propose, right? There is no law that prohibits this, although, if you were a consumer, I tend to think it may violate Fair Credit Collection practices.

Is there any way to get back on the good list? There should be a method.

Other industries probably do it in small pockets. This sounds like an organized consortium, which means that those who participate must agree to all the terms. That kind of agreement cannot/might not happen in all industries--people tend to be a dog eat dog world kind of mentality.

My two cents.

This law was enacted at the insistence of the large liquor/wine/beer wholesalers in DC several years ago. The law is in place to protect wholesalers from getting ripped off by large outstanding bills. Paying the late invoice removes the business from the list IN THEORY, but the reality is that it can take a few hours or a few days. I worked at a restaurant once that was listed over the "late" payment for a single case of Budweiser ($18); the check was on the wholesale accountants desk and had been overlooked, COD first, ask questions later. One of the largest liquor wholesalers in DC is notorious for its OOPS listings- simple accounting mistakes, which, when questioned, are answered by an Oops, Sorry. The greater problem that this poses for the restaurant community is that the "word" gets out very quickly who is on the COD list starting unfounded rumors about businesses being in trouble or closing soon.

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This law was enacted at the insistence of the large liquor/wine/beer wholesalers in DC several years ago. The law is in place to protect wholesalers from getting ripped off by large outstanding bills. Paying the late invoice removes the business from the list IN THEORY, but the reality is that it can take a few hours or a few days. I worked at a restaurant once that was listed over the "late" payment for a single case of Budweiser ($18); the check was on the wholesale accountants desk and had been overlooked, COD first, ask questions later. One of the largest liquor wholesalers in DC is notorious for its OOPS listings- simple accounting mistakes, which, when questioned, are answered by an Oops, Sorry. The greater problem that this poses for the restaurant community is that the "word" gets out very quickly who is on the COD list starting unfounded rumors about businesses being in trouble or closing soon.

This is what bothered me, because I KNOW there are smaller distributors who do not participate. If they don't participate, then it cannot be law.

So I called DC ABRA and spoke to their legal department. According to them, there is no such law. It is merely an agreement amongst private businesses and they have nothing to do with it. Couldn't even lodge a complaint. That's why I was curious as to the legality. These are private, unrelated institutions sharing financial information about their customers in real time in order to protect their mutual business interests.

By the way. The bill was paid. They were slow in removing us from the list. I had provided proof of payment to the company prior to being listed.

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This appears to be the relevant DC Code section:

Subchapter IV. Sale on Credit, Gifts, and Loans.

§ 25-731. Credit and delinquency.

(a) For the purposes of this section, the term "payment" means the delivery to the

manufacturer or wholesaler of cash or a check, draft, or other order for payment; provided, that

the check, draft, or other order of payment is drawn only on the bank account of the retailer.

(b ) No alcoholic beverage shall be sold by a manufacturer or wholesaler to a retailer, or

purchased by a retailer, except on the following terms: (1) full payment in cash on delivery, or

(2) full payment in cash before the 16th day of the month following the month of purchase or

delivery.

(c ) A retailer who fails to make payment in full in accordance with the terms of purchase

shall not, during the period of delinquency, make any further purchases except for cash on

delivery, and, during the period of delinquency, a manufacturer or wholesaler who has

knowledge of such delinquency shall not sell any alcoholic beverages to the retailer except for

cash on delivery.

(d) Subsections (b ) and (c ) of this section shall constitute a reasonable extension of credit

and no enlargement or extension of such terms, whether cash or credit, shall be granted by the

manufacturer or wholesaler or accepted by the retailer.

(e) The failure of a retailer who contracts to purchase an alcoholic beverage for full

payment in cash on delivery to make full payment upon delivery shall constitute a violation of

this chapter.

(f) A retailer shall not satisfy the obligation to pay for an alcoholic beverage unless the

payment is dated on or before the date payment is due and is, upon presentation, promptly

honored by the bank on which it is drawn.

(g) The failure of a manufacturer or wholesaler to deposit the payment in the

manufacturer’s or wholesaler’s bank for credit or collection, or present the payment to the bank

on which it is drawn, within 5 days from the receipt of a payment shall constitute a violation of

this chapter. Each day that the failure continues shall constitute a separate violation.

Thus, it seems that those wholesalers who do not subscribe to the list risk violation of this code provision. There is no requirement for the list, but there is a requirement not to extend credit to a retailer who does not pay before the 16th. I suppose those who do not subscribe to the list have plausible deniability of any knowledge of delinquencies.

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This appears to be the relevant DC Code section:

Thus, it seems that those wholesalers who do not subscribe to the list risk violation of this code provision. There is no requirement for the list, but there is a requirement not to extend credit to a retailer who does not pay before the 16th. I suppose those who do not subscribe to the list have plausible deniability of any knowledge of delinquencies.

Drinks for dcs!

The legal department at DC ABRA was unaware of this. B)

So yes, distributors violate this law all of the time. No one cares that they do, because the law, as Mark stated, was written to protect the cash flow of those with the largest market share. So it appears to be legal, but it doesn't make it right, IMHO.

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Thus, it seems that those wholesalers who do not subscribe to the list risk violation of this code provision. There is no requirement for the list, but there is a requirement not to extend credit to a retailer who does not pay before the 16th. I suppose those who do not subscribe to the list have plausible deniability of any knowledge of delinquencies.

It says they can't extend credit if they have knowledge of the violation. I don't think there'd be any constructive knowledge requirement, so I think this would require actual knowledge. The list is a way for distributors to share actual knowledge of violations with each other. I think it would be voluntary.

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It says they can't extend credit if they have knowledge of the violation. I don't think there'd be any constructive knowledge requirement, so I think this would require actual knowledge. The list is a way for distributors to share actual knowledge of violations with each other. I think it would be voluntary.

When I was on the distributor side, we knew which competitiors did not participate. It was common knowledge. As a licensee, distributors who do not participate will sometimes tell you of their non-participation as part of the sales pitch.

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Frankly, if it is not illegal, and with the poor cash flow of many restaurants and other businesses, I am surprised that the produce companies, the seafood companies, etc. don't all do the same thing.

The thing to remember is that the 21st Amendment gives states (and I guess DC) broad powers to regulate alcohol. So there is no slippery slope necessarily for the other items you mention.

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The thing to remember is that the 21st Amendment gives states (and I guess DC) broad powers to regulate alcohol. So there is no slippery slope necessarily for the other items you mention.

Food purveyors can demand cash or suspend deliveries due to non-payment at will.

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Food purveyors can demand cash or suspend deliveries due to non-payment at will.

I understood B.A.R. to be talking about a collective freeze-out by produce and seafood vendors. I think the 21st A allows states to come up with pretty much any alcohol regulatory system, including allowing a collective freeze-out by alcohol wholesalers. I meant to say there isn't necessarily a slippery slope for a collective freeze out for those items he mentioned.

Are you talking about individual food purveyors? B.A.R. was talking about how he can go from vendor to vendor to vendor, all with past due accounts, so I understood him to mean that there is no collective freeze-out agreements for seafood and produce currently.

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I cannot really see how competitive businesses (and there are few industries as cutthroat as the alcoholic beverage industry) can act in concert around a single issue.

I'm guessing the problem is with how much of a "competitive business" the messed up three-tier alcohol distribution system actually is. I'm not up on the laws and the way things work (I'd be interested in hearing more from someone more knowledgeable), but know that wholesalers do quite a bit of lobbying to keep the current status quo in place (and thus other forms of competition out).

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