In the Doghouse

Heineken Receives Small Punishment for Big Violation

A broken Heineken bottleLast week, Heineken was forced to pay the piper in a blatant violation of the three-tier system that governs California alcohol sales. Lucky for them, the piper didn’t ask for much.

According to California Alcohol Beverage Control (ABC), the brewer was running a Facebook- and Twitter-based marketing scheme wherein consumers registering with Heineken were given coupons redeemable for a free beer at specific establishments. The problems were many and evident. Facebook and other social media outlets are extremely popular with younger users. Despite the potential to draw an underage audience, “age gates” (e.g. prompts to enter a date of birth) are difficult to implement on social media sites, and even if a clickthrough to the company website were required, they are comically easy to circumvent. Although the retailers were obligated to verify age when redeeming the coupons, that put them in the unenviable position of trying to take away the free beers Heineken already handed out.

As opportunistic and harmful as this sort of unfettered access to the youth market seems, ABC’s concerns were more fundamental. By running the promotion alongside specific, named retailers, Heineken violated the three-tier system which maintains that distributors serve as the gateway between brewers and retail outlets. This system prevents manipulation of markets, protecting consumers and promoting competition. Protecting its integrity is essential to regulatory organizations, and ABC acted decisively on its principles.

Of course, the decisive act amounted to a $30,000 fine. Since A-B InBev and SABMiller merged this summer, Heineken has become the second largest brewer in the world. They spent well over $150 million in marketing last year, with at least 25% of that being dedicated to digital campaigns. Proportionally, if they had spent $20 on their marketing, they would’ve been fined a about a cent and a half. (By comparison, Greece recently fined Athenian Brewery—Heineken’s subsidiary in that country—the equivalent of $33 million for unfair business practices.)

The three-tier system has been around since the repeal of Prohibition, so Heineken must have known they were stepping out of line. Fortunately, ABC was there to throw the book at them. Too bad they were only allowed to toss a paperback.