Case Title: Craft Beer Guild, LLC v. Alcoholic Beverages Control Commission

Citation: 

Docket Number: SJC-12547, SJC-12595

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2019-02-28T00:00:00Z

Document:
NOTICE:  All slip opinions and orders are subject to formal 
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Decisions, Supreme Judicial Court, John Adams Courthouse, 1 
Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-
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SJC-12547 
SJC-12595 
 
CRAFT BEER GUILD, LLC1  vs.  ALCOHOLIC BEVERAGES CONTROL 
COMMISSION. 
 
REBEL RESTAURANTS, INC.2  vs.  ALCOHOLIC BEVERAGES CONTROL 
COMMISSION. 
 
 
 
Suffolk.     December 4, 2018. - February 28, 2019. 
 
Present:  Gants, C.J., Lenk, Gaziano, Lowy, Cypher, & Kafker, 
JJ. 
 
 
Alcoholic Liquors, Alcoholic Beverages Control Commission, 
Wholesaler, Price.  Bribery.  Evidence, Bribe.  Regulation.  
Administrative Law, Regulations. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
March 10, 2016. 
 
 
The case was heard by Douglas H. Wilkins, J., on motions 
for judgment on the pleadings. 
 
 
The Supreme Judicial Court granted an application for 
direct appellate review. 
 
 
Civil action commenced in the Superior Court Department on 
January 27, 2017. 
 
                                                          
 
 
1 Doing business as Craft Brewers Guild. 
 
 
2 Doing business as Jerry Remy's. 
2 
 
 
 
The case was heard by Michael D. Ricciuti, J., on motions 
for judgment on the pleadings. 
 
 
The Supreme Judicial Court granted an application for 
direct appellate review. 
 
 
 
J. Mark Dickison (Joshua M.D. Segal also present) for Craft 
Beer Guild, LLC. 
 
Thomas R. Kiley (Meredith Fierro also present) for Rebel 
Restaurants, Inc. 
 
Kirk G. Hanson, Assistant Attorney General, for Alcoholic 
Beverages Control Commission. 
 
Kevin M. Considine, for Beer Distributors of Massachusetts, 
Inc., amicus curiae, submitted a brief. 
 
 
 
GANTS, C.J.  In these cases, we review two decisions of the 
alcoholic beverages control commission (commission) that 
resulted in the issuance of penalties against Craft Beer Guild, 
LLC (Craft), a licensed wholesaler of craft beers doing business 
as Craft Brewers Guild, and Rebel Restaurants, Inc. (Rebel), a 
licensed retailer doing business as Jerry Remy's, which 
purchased kegs of craft beer from Craft for sale to its bar and 
restaurant customers.  After an investigation and evidentiary 
hearings, the commission determined that Craft had paid monetary 
rebates in differing amounts on craft beer purchases to certain 
licensed retailers in violation of G. L. c. 138, § 25A (a), 
which prohibits licensed wholesalers from discriminating, 
directly or indirectly, in price among retailers that purchase 
the same alcoholic beverage.  The commission also concluded that 
both Craft and Rebel violated a regulation prohibiting a 
3 
 
 
particular scheme of commercial bribery, 204 Code Mass. Regs. 
§ 2.08 (1993), which provides that "[n]o licensee shall give or 
permit to be given money or any other thing of substantial value 
in any effort to induce any person to persuade or influence any 
other person to purchase . . . any particular brand or kind of 
alcoholic beverages" -- the validity of which Craft and Rebel 
both challenge.  Craft and Rebel each sought judicial review of 
the commission's decisions; one Superior Court judge affirmed 
the commission's penalty against Craft, and another judge 
affirmed the penalty against Rebel. 
 
We affirm the judgment against Craft, concluding that the 
commission properly determined that Craft violated both the 
statute and the regulation, and that the regulation remains 
valid.  But because we conclude that the terms of the regulation 
do not apply to Rebel's conduct in accepting money derived from 
kickbacks paid by Craft, we reverse the judgment against Rebel.3 
 
Background.  Craft is a Massachusetts-based wholesaler and 
distributor of craft beer, licensed by the commission pursuant 
to G. L. c. 138, § 18.  Craft distributes approximately 200 
craft beer brands to its retail customers, which are restaurants 
and bars licensed under G. L. c. 138, § 12.  In October 2014, an 
owner of a Massachusetts-based beer supplier -- and one of the 
                                                          
 
 
3 We acknowledge the amicus brief submitted by Beer 
Distributors of Massachusetts, Inc. 
4 
 
 
products distributed by Craft -- posted comments to his Twitter 
social media webpage, alleging that competing suppliers were 
making unlawful payments to Massachusetts retailers in exchange 
for those retailers carrying their Craft-distributed brand.  As 
a result of those complaints, the commission initiated an 
investigation into Craft's practices in accordance with its 
mandate of "general supervision of the conduct of the business 
of . . . selling alcoholic beverages."  G. L. c. 10, § 71. 
 
In April 2015, the commission investigators released an 
eighteen-page violation report setting forth the results of the 
investigation.  After receipt of the report, the commission 
issued notices of hearing, alleging violations by Craft of the 
statute (G. L. c. 138, § 25A [a]) and the regulation (204 Code 
Mass. Regs. § 2.08).  The commission also issued notices of 
hearing to Rebel and other restaurant groups involved in the 
investigation of Craft, alleging violation of the regulation, 
but deferred hearing on these notices until it rendered its 
decision as to Craft.  After a hearing, where Craft stipulated 
to the facts in the violation report, the commission in February 
2016 issued a written decision finding Craft in violation of the 
statute and regulation as charged.  In June 2016, the commission 
conducted a hearing regarding the alleged violations by Rebel, 
and in December 2016, it issued a written decision finding Rebel 
in violation of the regulation. 
5 
 
 
 
We summarize the facts as found by the commission, which 
are largely not in dispute but, in any event, which we find to 
be supported by substantial evidence.  See G. L. c. 30A, 
§ 14 (7) (e) (court may set aside agency decision if 
"[u]nsupported by substantial evidence").  See also Vaspourakan, 
Ltd. v. Alcoholic Beverages Control Comm'n, 401 Mass. 347, 351 
(1987) ("we do not make a de novo determination of the facts or 
draw different inferences from the facts found by the agency"). 
 
Beginning in 2013, Craft "negotiated and implemented a 
series of kickback schemes" with various craft beer 
manufacturers and importers (suppliers), various bars and 
restaurants (retailers), and various management or marketing 
companies that "have the exact same or common group of corporate 
officers and beneficial interest holders as the [r]etailers," 
but do not themselves hold alcoholic beverages licenses (third 
parties).4  One of those retailers was Rebel, whose associated 
                                                          
 
 
4 The Liquor Control Act provides for a three-tiered legal 
framework in which "alcohol products sold . . . by manufacturers 
or suppliers be sold initially to licensed Massachusetts 
wholesalers . . . . [who] in turn sell to retailers."  Heublein, 
Inc. v. Capital Distrib. Co., 434 Mass. 698, 699 (2001). 
 
 
Under G. L. c. 138, § 19, the commission is authorized to 
issue licenses to manufacture alcoholic beverages.  Throughout 
this opinion, as a result of terminology employed by the 
commission and used throughout the legislative history of the 
statute, § 19 licensees are interchangeably referred to as 
"manufacturers," "suppliers," "breweries," and "brewers." 
 
6 
 
 
management or marketing company was Rebel Restaurant Group, Inc. 
(Rebel Marketing). 
 
Through this scheme, Craft negotiated payments to third 
parties -- unlicensed management or marketing companies -- in 
exchange for their associated § 12 retailers selling Craft 
products at their bars and restaurants.  Craft typically paid 
either $1,000 to $2,000 annually for each committed tap line 
serving a Craft brand, or fifteen to twenty dollars in "rebates" 
for each keg of beer sold.  As a way of disguising these 
payments, Craft never paid the licensed retailers directly.  
Instead, the third-party company -- rather than the licensed 
retailer -- invoiced Craft for services never actually 
performed, such as for "marketing support," "printing of menus," 
                                                          
 
 
Under G. L. c. 138, § 18, the commission is authorized to 
issue licenses to wholesalers and importers of alcoholic 
beverages, which we also refer to as "distributors" in this 
opinion.  Licensed wholesalers are permitted "to sell for resale 
to other licensees under this chapter alcoholic beverages 
manufactured by any manufacturer licensed under the provisions 
of [§ 19]."  G. L. c. 138, § 18. 
 
 
Under G. L. c. 138, § 12, the commission is authorized to 
issue licenses to bars, restaurants, hotels, and other venues 
where alcoholic beverages are sold and consumed on the premises, 
which we refer to as "retailers" or "§ 12 retailers" in this 
opinion. 
 
 
Under G. L. c. 138, § 15, the commission is authorized to 
issue licenses to liquor stores where alcoholic beverages are 
sold to be consumed off premises.  See Peoples Super Liquor 
Stores, Inc. v. Jenkins, 432 F. Supp. 2d 200, 204 (D. Mass. 
2006).  Our opinion today does not concern retailers licensed 
pursuant to § 15. 
7 
 
 
and "promotional services."  After paying the fee, Craft 
required the supplier of the beer brand to fully or partially 
reimburse Craft for the kickbacks paid to the third party.  
Craft did not publicly disclose that it was making these 
"rebate" payments, and it did not make them available to all 
licensed retailers. 
 
Craft paid Rebel Marketing a twenty dollar "rebate" per keg 
sold in exchange for carrying Craft brands, for a total of 
$8,420, which Rebel Marketing passed through to Rebel.  Although 
the commission extensively detailed Craft's dealings with other 
retailers and third-party management and marketing companies, 
only Rebel was charged with violating 204 Code Mass. Regs. 
§ 2.08, because the commission found no evidence that money paid 
from Craft to other third parties was actually received by any 
other retailers. 
 
The commission concluded that Craft committed price 
discrimination in violation of G. L. c. 138, § 25A (a), because 
it (1) did not offer rebates to all retailers and (2) did not 
offer the same rebate amounts to the retailers to which it paid 
rebates.  The commission also concluded that Craft violated 204 
Code Mass. Regs. § 2.08 because of its participation in a three-
person scheme wherein a licensee gave money to another person to 
induce a third person to purchase a particular brand of Craft-
8 
 
 
distributed beer.5  In so doing, the commission rejected Craft's 
arguments that § 2.08 had been impliedly repealed, was void for 
vagueness, or was being selectively enforced.  In accordance 
with its authority under G. L. c. 138, § 23, to revoke licenses 
"for any violation of this chapter or any regulation adopted by 
the commission," the commission suspended Craft's license for a 
period of fifteen months, with ninety days to be served and the 
remaining suspension to be held in abeyance for two years 
conditioned on no further violations of G. L. c. 138 or 
commission regulations.  After Craft submitted an offer of 
compromise and the commission accepted, Craft elected instead to 
pay a fine of $2,623,466.70 in lieu of the suspension, which 
amount was calculated under the formula set forth in G. L. 
c. 138, § 23. 
                                                          
 
 
5 The commission equivocated as to which particular parties 
were involved in this scheme for the purpose of determining 
whether Craft violated 204 Code Mass. Regs. § 2.08.  According 
to the commission, Craft can be held liable under the regulation 
on three separate grounds:  (1) because Craft gave money to its 
own employees to induce retailers to carry Craft brands; (2) 
because Craft gave money to the third-party management or 
marketing companies to induce their associated retailers to 
carry Craft brands; or (3) because beer suppliers gave money to 
Craft to induce the retailers to purchase Craft brands.  Because 
Craft does not now challenge the sufficiency of any of these 
alternative theories, we rest our affirmance only on the second 
theory and defer any assessment of the sufficiency of the other 
two theories to another day.  See First Nat'l Bank of Boston v. 
Haufler, 377 Mass. 209, 211 (1979) (declining to review issue 
"not briefed and argued before us"). 
9 
 
 
 
As to Rebel, the commission determined that Rebel was in 
violation of § 2.08 because Rebel "permitted Craft to give it 
[twenty dollars] per keg of Craft brands [that Rebel] sold on 
its licensed premises."  In so doing, the commission rejected 
the same arguments as to the validity of the regulation as it 
did against Craft, and additionally proclaimed that the 
regulation "applies to inducements received by retailers" 
(emphasis added).  The commission imposed a penalty of an 
eighteen-day suspension of Rebel's license, with three days to 
be served and the remaining balance to be held in abeyance for 
two years conditioned on no further violations of G. L. c. 138 
or commission regulations.6  
 
Craft and Rebel, in separate cases, sought judicial review 
in the Superior Court pursuant to G. L. c. 30A, § 14.  All 
parties filed motions for judgment on the pleadings, and the 
judges each granted the commission's motion to approve 
enforcement of its decisions.  Craft and Rebel timely appealed, 
and we granted their applications for direct appellate review. 
 
Discussion.  A final agency decision may be set aside or 
modified on judicial review under G. L. c. 30A, § 14, where, 
among other reasons, it is "[i]n violation of constitutional 
                                                          
 
 
6 With the assent of the commission, the Superior Court 
judge who heard Rebel's appeal stayed the suspension, and that 
stay remains in force pending our decision. 
10 
 
 
provisions," under § 14 (7) (a); is "[b]ased upon an error of 
law," under § 14 (7) (c); or is "arbitrary or capricious, an 
abuse of discretion, or otherwise not in accordance with law," 
under § 14 (7) (g).  See Police Dep't of Boston v. Kavaleski, 
463 Mass. 680, 689 (2012).  In reviewing an agency decision, we 
exercise de novo review on questions of law, giving "substantial 
deference to a reasonable interpretation of a statute by the 
administrative agency charged with its . . . enforcement."  
Commerce Ins. Co. v. Commissioner of Ins., 447 Mass. 478, 481 
(2006).  We also give "due weight to the commission's 
experience, technical competence and specialized knowledge, as 
well as to the discretionary authority conferred upon it."  Van 
Munching Co. v. Alcoholic Beverages Control Comm'n, 41 Mass. 
App. Ct. 308, 309-310 (1996).  But deference does not suggest 
abdication; "[a]n incorrect interpretation of a statute . . . is 
not entitled to deference."  Commerce Ins. Co., supra, quoting 
Kszepka's Case, 408 Mass. 843, 847 (1990). 
 
Before we address the specific challenges raised by Craft 
and Rebel to the agency decisions, we discuss the evolution of 
the statutory and regulatory framework governing the 
distribution and sale of alcoholic beverages in order to give 
historical context to the enactment and subsequent amendment of 
G. L. c. 138, § 25A (a), and to the promulgation of 204 Code 
Mass. Regs. § 2.08. 
11 
 
 
 
1.  Evolution of the statutory and regulatory framework 
governing the distribution and sale of alcoholic beverages.  The 
ratification of the Twenty-first Amendment to the United States 
Constitution on December 5, 1933, brought an end to the 
nationwide prohibition on the manufacture, sale, and 
transportation of intoxicating liquors.  See United States v. 
Chambers, 291 U.S. 217, 222 (1934).  The Amendment conferred 
upon the individual States "the broad powers . . . to regulate 
the sale of liquor."  Cabaret Enters., Inc. v. Alcoholic 
Beverages Control Comm'n, 393 Mass. 13, 16 (1984), citing New 
York State Liquor Auth. v. Bellanca, 452 U.S. 714, 717-718 
(1981). 
 
In anticipation of ratification, the Legislature in July 
1933 established a joint special recess committee (committee) to 
issue a report "determining upon appropriate means and methods 
of regulating and controlling the manufacture, transportation, 
importation, exportation and sale of intoxicating liquors."  
Report of the Special Committee on Liquor Legislation, 1933 
Senate Doc. No. 494, at 4 (Report of the Special Committee).  In 
the committee's report and recommendations to the Legislature, 
submitted in November 1933, it identified as its chief goals in 
developing new laws and regulations governing alcoholic 
beverages that "those conditions which lead to intemperance are 
properly regulated, the illicit traffic in liquor and allied 
12 
 
 
criminal activities made impossible of continuance, [and] the 
prompt return of a wholesome regard for law [is] assured."  Id. 
at 6.  In reaching its conclusions, the committee extensively 
studied the regulatory systems in place in foreign 
jurisdictions, as well as recommendations from a separate 
committee appointed by the Governor.  Id. at 6-7. 
 
The committee called for the creation of the commission and 
suggested that it have "absolute control . . . over conditions 
of sale," in order to "obviate the dangerous possibility of 
politics entering" the business of selling alcoholic beverages.  
Id. at 9.  To that end, the committee recommended that, in the 
forthcoming legislation that was to become the Liquor Control 
Act, the commission have "blanket authority to make rules and 
regulations not inconsistent with the provisions of the 
[legislation]."  Id. at 13.  The committee also sought to 
strictly limit the number of licenses issued by the commission -
- as to "all branches of the liquor traffic," including both 
retailers and wholesalers -- in order to ensure "closer and 
safer control" over the industry.  Id. at 9, 12, 15. 
 
Importantly, the committee warned against inviting the 
corruption that had been widespread in the alcoholic beverages 
industry before the Prohibition era, particularly "[t]he control 
of the retail liquor business by breweries or other 
manufacturers."  Id. at 16.  Fearing that the industry would be 
13 
 
 
subject to a takeover of control by manufacturers and suppliers, 
the committee recommended that beer manufacturers not be 
permitted to "lend money to any licensee[s]."  Id. 
 
In response to the committee's report, the Legislature took 
action consistent with the committee's recommendations.  See 
Connolly v. Alcoholic Beverages Control Comm'n, 334 Mass. 613, 
617 n.1 (1956) ("the report of the special recess committee 
. . . was the basis of most of . . . G. L. c. 138").  In a 
special legislative session that ended in December 1933, the 
Legislature enacted the legislation that created the commission, 
originally established by G. L. (Ter. Ed.) c. 6, § 43, inserted 
by St. 1933, c. 120, § 2, see Pettengell v. Alcoholic Beverages 
Control Comm'n, 295 Mass. 473, 474-475 (1936),7 and also enacted 
the Liquor Control Act, G. L. (Ter. Ed.) c. 138, as appearing in 
St. 1933, c. 376, § 2, see Pettengell, supra, which generally 
governs the distribution and sale of alcoholic beverages in the 
Commonwealth.  The commission is tasked with "general 
supervision of the conduct of the business of manufacturing, 
importing, exporting, storing, transporting and selling 
alcoholic beverages."  G. L. c. 10, § 71.  Among other things, 
the Liquor Control Act authorizes the commission to "make 
                                                          
 
 
7 The commission is now organized under G. L. c. 10, §§ 70-
72, which outlines its membership composition and statutory 
duties. 
14 
 
 
regulations not inconsistent with the provisions of this chapter 
for clarifying, carrying out, enforcing and preventing violation 
of . . . all and any of its provisions . . . for the proper and 
orderly conduct of the licensed business."  G. L. c. 138, § 24. 
 
Among the purposes of the Liquor Control Act was to 
"counteract the tendency toward" the evil of "tied houses," 
Seagram Distillers Co. v. Alcoholic Beverages Control Comm'n, 
401 Mass. 713, 716 (1988) -- that is, the "reciprocal 
relationship[s] between saloon owners and manufacturers of 
alcoholic beverages that existed before Prohibition."  Grubb, 
Exorcising the Ghosts of the Past:  An Exploration of Alcoholic 
Beverage Regulation in Oklahoma, 37 Okla. City U. L. Rev. 289, 
298 (2012).  "Tied house" practices "referred to large 
manufacturers and distillers able to control the entire 
distribution process from production down to the neighborhood 
bar."  Eng, Old Whine in a New Battle: Pragmatic Approaches to 
Balancing the Twenty-first Amendment, the Dormant Commerce 
Clause, and the Direct Shipping of Wine, 30 Fordham Urb. L.J. 
1849, 1863 (2003).  Typically, manufacturers of alcoholic 
beverages "provided incentives to saloon owners in exchange for 
payment or a pledge by the owner to sell the manufacturer's 
products," which transformed independent retailers into mere 
"'agents' of the liquor producers who supplied them."  Grubb, 
supra.  This exercise of the economic power of the supplier to 
15 
 
 
dominate the wholesale and retail tiers of the industry 
undermined both the independence of wholesalers and the 
protection of small retailers.  See Opinion of the Justices, 368 
Mass. 857, 862 (1975).  See also National Distrib. Co. v. United 
States Treasury Dep't, Bureau of Alcohol, Tobacco & Firearms, 
626 F.2d 997, 1008 (D.C. Cir. 1980) (practices which "tended to 
produce monopolistic control of retail outlets" included 
"arrangements for exclusive outlets, creation of tied houses, 
commercial bribery, and sales on consignment" [citation 
omitted]). 
 
The "tied house" was thought to lead to a variety of social 
ills.  In 1935, the chair of the newly created Federal Alcohol 
Administration opined that "[b]efore prohibition, a vast number 
of the retail outlets of the country where liquor was sold for 
consumption on the premises had fallen into the hands of the 
distillers and the brewers. . . .  That inevitably threw them 
into politics, inevitably led them to seek control of State and 
municipal legislation, and . . . was one of the first causes of 
prohibition" (citation omitted).  National Distrib. Co., 626 
F.2d at 1009.  Another common view was that the "tied house" led 
to the increased consumption of alcohol, because distillers and 
brewers frequently required retailers to sell a certain quota as 
a condition of carrying a particular brand.  See id.  See also 
Affiliated Distillers Brands Co. v. Sills, 56 N.J. 251, 258 
16 
 
 
(1970) ("tied-houses inevitably result in excessive sales 
stimulation at the retail level, creating a direct conflict with 
the promotion of temperance").  By enacting a legislative scheme 
that segregated the three tiers of licensees -- 
manufacturers/suppliers, wholesalers, and retailers -- and gave 
the commission strict regulatory oversight, the Legislature 
sought to encourage temperance and combat the risk that the 
multiple branches of liquor traffic would become muddled due to 
collusion and corruption.  See Opinion of the Justices, 368 
Mass. at 862.  See also de Ganahl, Trade Practice and Price 
Control in the Alcoholic Beverage Industry, 7 Law & Contemp. 
Probs. 665, 669 (1940) (noting that commission ordered ban on 
brewers "loaning signs to retail licensees" because "[o]ne of 
the basic principles underlying the provisions of the [L]iquor 
[C]ontrol [A]ct is that there shall be a complete disassociation 
between brewers and retail licensees"); Grubb, supra at 299 
("several states devised regulatory schemes aimed at preventing" 
tied houses and excessive consumption by prohibiting suppliers 
from "giv[ing] 'a thing of value' to a retailer" [citation 
omitted]). 
 
In 1935, in accordance with its legislative mandate, the 
commission promulgated a panoply of regulations governing the 
new business of manufacturing, distributing, and selling 
17 
 
 
alcoholic beverages in the Commonwealth.  Among those 
regulations was Regulation 47, which stated: 
"No licensee shall give or permit to be given money or any 
other thing of substantial value in any effort to induce 
any person to persuade or influence any other person to 
purchase, or contract for the purchase of any particular 
brand or kind of alcoholic beverages, or to persuade or 
influence any person to refrain from purchasing, or 
contracting for the purchase of any particular brand or 
kind of alcoholic beverages." 
 
 
In 1946, prompted by a petition from the Massachusetts 
Package Stores Association, the Legislature enacted G. L. 
c. 138, § 25A, inserted by St. 1946, c. 304, titled, "An Act 
prohibiting discrimination between licensees of alcoholic 
beverages by eliminating the practice of manufacturers and 
wholesalers in granting discounts, rebates, allowances, free 
goods and other inducements to favored licensees."  The statute 
as originally enacted stated in part as follows: 
"It shall be unlawful for any licensee authorized under 
this chapter to sell alcoholic beverages to wholesalers or 
retailers: 
 
"(a) To discriminate, directly or indirectly, in price, in 
discounts for time of payment or in discounts on quantity 
or merchandise sold, between one wholesaler and another 
wholesaler, or between one retailer and another retailer 
purchasing alcoholic beverages bearing the same brand or 
trade name and of like age and quality. 
 
"(b) To grant, directly or indirectly, any discount, 
rebate, free goods, allowance or other inducement, except a 
discount not in excess of two per centum for quantity of 
alcoholic beverages except wines, or a discount not in 
excess of five per centum for quantity of wines." 
 
18 
 
 
In the preamble to § 25A, the Legislature noted that the 
practice of manufacturers and wholesalers granting such 
discounts, rebates, and inducements "contributes to a disorderly 
distribution of alcoholic beverages."  See Miller Brewing Co. v. 
Alcoholic Beverages Control Comm'n, 56 Mass. App. Ct. 801, 807 
(2002) ("From its inception, . . . § 25A has been firmly 
tethered to the goal of protecting the public through the strict 
regulation of the distribution and sale of alcoholic 
beverages"). 
 
In 1970, the Legislature repealed the provision quoted 
above in G. L. c. 138, § 25A (b), repealed by St. 1970, c. 140, 
§ 1, which limited the size of discounts a wholesaler may offer 
to all retailers.8  No changes were made to § 25A (a), which 
                                                          
 
 
8 After subsection (b) was repealed, the Legislature enacted 
a new provision of G. L. c. 138, § 25A, inserted by St. 1971, 
c. 494, the so-called "post and hold" clause, which provided: 
 
"All price lists or price quotations made to a licensee by 
a wholesaler shall remain in effect for at least thirty 
days after the establishment of such price list or 
quotation.  Any sale by a wholesaler of any alcoholic 
beverages at prices lower than the price reflected in such 
price list or quotation within such thirty day period shall 
constitute price discrimination under this section."  
 
In 1998, a judge of the United States District Court for the 
District of Massachusetts invalidated the post and hold clause, 
concluding that it violated the Sherman Act, 15 U.S.C. § 1.  
Canterbury Liquors & Pantry v. Sullivan, 16 F. Supp. 2d 41, 51 
(D. Mass. 1998).  Accordingly, the only legally effective 
provision of § 25A as it stands today is subsection (a), the 
clause governing price discrimination. 
19 
 
 
prohibits a wholesaler from discriminating in price among 
different retailers.  The result of the repeal is that the 
statute, as it stands today, permits authorized licensees to 
grant discounts in alcoholic beverage sales, but only "block 
discounts" that apply evenly to all retailers. 
 
In 1978, the commission codified its administrative 
regulations in the Code of Massachusetts Regulations.  
Regulation 47, left unchanged, was promulgated as 204 Code Mass. 
Regs. § 2.08, and continues to prohibit inducements within the 
context of a three-person scheme. 
 
2.  Statutory violations as charged against Craft.  We 
begin our analysis by assessing the commission's decision 
against Craft with respect to the charged violation of G. L. 
c. 138, § 25A (a).  The commission found that Craft violated the 
statute in two separate ways.  First, Craft engaged in price 
discrimination by offering rebates to at least six distinct 
retail licensees or their affiliated third-party management or 
marketing companies, but not offering rebates to other retailers 
with which it did business.  Second, the rebates that Craft did 
offer varied significantly in price:  Rebel received twenty 
dollars per keg, while another restaurant group received fifteen 
dollars per keg; one group of licensees received $1,000 per 
dedicated tap line, another received $1,500, and yet another 
received $2,000.  Craft concedes that it engaged in this 
20 
 
 
conduct, but argues, for various reasons, that the commission 
failed to find sufficient facts that its conduct constituted a 
violation of § 25A (a).  We are not persuaded. 
 
Craft correctly posits that, in order to establish a prima 
facie violation of § 25A (a), the commission must establish that 
(1) a licensee (2) discriminated (directly or indirectly) (3) in 
price, in discounts of payment, or in discounts on quantity of 
merchandise sold (4) between one licensed retailer and another 
licensed retailer that were purchasing alcoholic beverages (5) 
that bore the same brand or trade name and (6) were of like age 
and quality.  But Craft suggests that the commission failed to 
find "simultaneous sales of the same products at different 
prices," reading another requirement into the statutory 
framework:  contemporaneousness.  We agree that, where price 
discrimination is alleged, the sales that demonstrate price 
discrimination should generally be contemporaneous "to eliminate 
the possibility that their differences are caused by market 
fluctuations ordinarily happening during an extended time 
interval between sales."  Rutledge v. Electric Hose & Rubber 
Co., 327 F. Supp. 1267, 1275 (C.D. Cal. 1971).  But in this 
case, substantial evidence supported the commission's 
conclusions that Craft did discriminate in price as to the same 
brands during the same time frame.  The commission's violation 
report -- the facts of which Craft stipulated to in writing -- 
21 
 
 
reveals that, for example, in invoices from July 2014, Craft 
granted rebates to numerous retailers for the same brands of 
beer at differing rates of fifteen and twenty dollars per keg.  
At least one of these invoices indicated a reporting period of 
January 1, 2014, through June 30, 2014, with consistently 
applied twenty dollar rebates throughout that period.  Further 
evidence shows that Craft was paying the same "tap line" rebates 
on an annual basis, year after year, effectively ruling out the 
possibility that the differing rebate rates found by the 
commission were the result of changed prices.  Because, "given 
the articulated purpose of eliminating differential treatment of 
'favored licensees,' § 25A can be construed as prohibiting even 
seemingly minor discrepancies in prices," Miller Brewing Co., 56 
Mass. App. Ct. at 807, we cannot say that the commission lacked 
sufficient facts to find Craft in violation of the statute. 
 
Craft also contends that, because the commission only found 
evidence that Craft paid the rebates to third-party marketing 
and management companies, not to the retailers themselves -- 
with the exception of Rebel, which was found to have accepted 
those rebates -- Craft contends that it did not unlawfully 
discriminate against "retail licensees."  In other words, 
because Craft was only found to have paid one § 12 retailer, 
discrimination "between one retailer and another retailer" was 
legally impossible.  The flaw in this argument is that the 
22 
 
 
unlicensed third parties had the exact same or a common group of 
corporate officers and beneficial interest holders as the 
licensed retailers.  If we were to adopt Craft's argument, a 
wholesaler could engage in price discrimination so long as it 
simply paid the rebates to a corporate parent or any affiliated 
entity of a licensed retailer.  But by expressly prohibiting 
"direct[] or indirect[]" price discrimination to particular 
favored licensees, the Legislature demonstrated its intent to 
forbid any attempt to execute this type of end run around the 
statute.  See Mullally v. Waste Mgt. of Mass., Inc., 452 Mass. 
526, 531 (2008) (statutory construction must not "frustrate the 
general beneficial purposes of the legislation" [citation 
omitted]).  Moreover, the record reflects that the third parties 
sought to conceal the true purpose of the rebates by invoicing 
Craft for false "services," such as "marketing support," and 
that those payments were sometimes made by Craft employees hand-
delivering checks to the retailers' premises.  This evidence 
more than adequately supports the commission's finding that 
Craft discriminated in price as to its actual licensed retail 
customers, even if it did not do so directly. 
 
Lastly, Craft asserts that it did not discriminate in price 
because it "is only accused of giving rebates and not of 
changing the front-line price paid by retailers."  Prices under 
the statute, however, are calculated after appropriate 
23 
 
 
reductions are made "to reflect all discounts, rebates, and 
other allowances given to the purchasers."  M. H. Gordon & Son, 
Inc. v. Alcoholic Beverages Control Comm'n, 371 Mass. 584, 591 
(1976).  See G. L. c. 138, § 25D (d) (describing how to 
calculate price of alcoholic beverages sold in other States).  
See also A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 
F.2d 1396, 1407 (7th Cir. 1989), cert. denied, 494 U.S. 1019 
(1990) ("Whether price discrimination has occurred depends . . . 
on the price after all discounts, specials, and so on" [emphasis 
in original]).  It is simply irrelevant that the retailers here 
paid the same price for the same goods before discounts or 
rebates, where the actual price after discounts or rebates 
differed. 
 
Because the commission's determination that Craft violated 
G. L. c. 138, § 25A (a), is supported by substantial evidence 
and is free from legal error, we decline to disturb that part of 
its decision. 
 
3.  Regulatory violations as charged against Craft and 
Rebel.  a.  Validity of the regulation.  As discussed above, 
both Craft and Rebel were found in violation of 204 Code Mass. 
Regs. § 2.08 -- and penalized accordingly -- for their 
participation in an inducement scheme among beer suppliers, 
Craft, Rebel Marketing, and Rebel.  Craft and Rebel both argue 
that § 2.08 is no longer valid following the repeal of G. L. 
24 
 
 
c. 138, § 25A (b) -- the Liquor Control Act's ban on the 
granting of discounts and inducements.  They contend that, 
without § 25A (b), the commission has no legislative authority 
to continue to enforce its regulation prohibiting a licensee 
from giving money to a person to induce that person to persuade 
another person to purchase a particular brand of alcoholic 
beverage.  In response, the commission argues that the repeal 
unambiguously means that it can no longer prohibit uniform 
discounts, but the repeal was not intended to "permit licensees 
to secretly pay bribes or kickbacks to bar managers or 
management companies in an effort to have those people influence 
§ 12 retailers to purchase particular kinds of alcohol."  We 
conclude that the commission has the better argument. 
 
"Duly promulgated regulations of an administrative agency 
are presumptively valid and 'must be accorded all the deference 
due to a statute.'"  Pepin v. Division of Fisheries & Wildlife, 
467 Mass. 210, 221 (2014), quoting Massachusetts Fed'n of 
Teachers, AFT, AFL-CIO v. Board of Educ., 436 Mass. 763, 771 
(2002).  The burden of demonstrating invalidity rests squarely 
on the party challenging the regulation.  Pepin, supra. 
 
In determining whether an administrative agency's 
regulation is valid, we apply a two-step test.  First, we 
determine whether the Legislature, through the enactment of a 
statute, "has spoken with certainty on the topic" in the 
25 
 
 
regulation.  Taylor v. Housing Appeals Comm., 451 Mass. 149, 
153-154 (2008), quoting Goldberg v. Board of Health of Granby, 
444 Mass. 627, 632-633 (2005).  If it has done so unambiguously, 
we "give effect to the Legislature's intent," Taylor, supra at 
154, quoting Goldberg, supra at 633, and need not reach the 
second step. 
 
If the statute relevant to the regulation is ambiguous or 
if there is a gap in the statutory guidance, we turn to the 
second step and "determine whether the agency's resolution of 
[the pertinent] issue may 'be reconciled with the governing 
legislation.'"  Taylor, supra, quoting Goldberg, supra at 633.  
In doing so, we accord "substantial deference" to the agency 
charged with interpreting and administering the statute in 
question, and do not invalidate regulations unless "their 
provisions cannot by any reasonable construction be interpreted 
in harmony with the legislative mandate."  Taylor, supra, 
quoting Goldberg, supra.  See Alliance to Protect Nantucket 
Sound, Inc. v. Energy Facilities Siting Bd., 457 Mass. 663, 681 
(2010) ("We accord substantial discretion to an agency to 
interpret the statute it is charged with enforcing, especially 
where . . . the Legislature has authorized the agency to 
promulgate regulations"). 
 
Applying that two-part test, we note that there is no 
statutory provision that unambiguously speaks to the prohibition 
26 
 
 
in 204 Code Mass. Regs. § 2.08, so we must move to the second 
step and determine whether the regulation may be reconciled with 
the governing legislation, the Liquor Control Act.  As earlier 
noted, the commission promulgated the regulation in 1935 as 
Regulation 47, well before the enactment of § 25A (b), pursuant 
to the commission's legislative mandate to "make regulations not 
inconsistent with the provisions of this chapter for clarifying, 
carrying out, enforcing and preventing violation of . . . all 
and any of its provisions . . . for the proper and orderly 
conduct of the licensed business."  G. L. c. 138, § 24.  The 
regulation's prohibition against commercial bribery -- the 
payment by a licensed beer manufacturer or wholesaler to a third 
person, perhaps a bartender or bar manager, to induce that 
person to persuade or influence the bar owner to purchase a 
particular brand of beer -- is well within the over-all 
legislative purpose of the Liquor Control Act to maintain fair 
competition in the industry.  The regulation addresses one 
scheme to create "tied houses" that would effectively block 
certain beer brands from being sold in bars and restaurants for 
reasons unrelated to their price or quality.  Indeed, the evil 
of commercial bribery strikes at the core of the Legislature's 
purpose in enacting the Liquor Control Act, because commission 
27 
 
 
oversight of the industry is made more difficult where business 
is conducted covertly and in secret.9 
 
In light of this history, we conclude that the repeal of 
§ 25A (b) renders § 2.08 no less consistent with the over-all 
legislative scheme of the Liquor Control Act.  The purpose of 
§ 25A, as titled, was to prohibit special treatment toward 
"favored licensees."  In repealing § 25A (b), the Legislature 
sought to allow volume discounts as applied to all retailers, 
but left intact the provision of the statute barring price 
discrimination as to different retailers.  By prohibiting 
clandestine payments to third persons to persuade retailers to 
carry favored brands of alcoholic beverages, the commission 
continued to safeguard against such discrimination by regulating 
bribery and "pay-to-play" schemes that benefited some to the 
detriment of others.  The commission's attempt to regulate such 
conduct through § 2.08 (the renamed Regulation 47) cannot be 
said to be inconsistent with that legislative scheme, either 
before or after the repeal of § 25A (b). 
 
We think it worth noting that the same year that Regulation 
47 was promulgated, Congress enacted the Federal Alcohol 
Administration Act, which contained a provision prohibiting 
                                                          
 
 
9 Perhaps the best evidence of this assertion is that the 
penalties imposed in these cases were the first penalties ever 
imposed by the commission for violations of 204 Code Mass. Regs. 
§ 2.08. 
28 
 
 
commercial bribery from sellers to retailers via employees or 
agents.  27 U.S.C. § 205(c).10  The Federal Trade Commission 
applied the statute "to the practice of sellers of secretly 
paying money or making gifts to employees or agents to induce 
them to promote purchases by their own employers from the 
sellers offering the secret inducements."  American Distilling 
Co. v. Wisconsin Liquor Co., 104 F.2d 582, 585 (7th Cir. 1939).  
As the United States Court of Appeals for the Seventh Circuit 
concluded, the principal "vice" of such conduct against which 
                                                          
 
 
10 Title 27 U.S.C. § 205(c) states in relevant part: 
 
"It shall be unlawful for any person engaged in business as 
a distiller, brewer, . . . or other producer, or as an 
importer or wholesaler, of distilled spirits, wine, or malt 
beverages, . . . directly or indirectly or through an 
affiliate: 
 
". . . 
 
"To induce through any of the following means, any trade 
buyer engaged in the sale of distilled spirits, wine, or 
malt beverages, to purchase any such products from such 
person to the exclusion in whole or in part of distilled 
spirits, wine, or malt beverages sold or offered for sale 
by other persons in interstate or foreign commerce, if such 
inducement is made in the course of interstate or foreign 
commerce, or if such person engages in the practice of 
using such means . . . to such an extent as substantially 
to restrain or prevent transactions in interstate or 
foreign commerce in any such products, or if the direct 
effect of such inducement is to prevent, deter, hinder, or 
restrict other persons from selling or offering for sale 
any such products to such trade buyer in interstate or 
foreign commerce:  (1) By commercial bribery; or (2) by 
offering or giving any bonus, premium, or compensation to 
any officer, or employee, or representative of the trade 
buyer . . . ." 
29 
 
 
Congress sought to guard related to unfair competition and trade 
practices.  Id.  This finding squarely comports with our own 
Legislature's concerns that the consumer not be injured by the 
"control of the retail liquor business by breweries or other 
manufacturers."  Report of the Special Committee, supra at 16.  
By promulgating § 2.08, the commission, not unlike Congress in 
enacting 27 U.S.C. § 205(c), sought to avoid "secret and corrupt 
dealing with employees or agents of prospective purchasers."  
American Distilling Co., supra. 
 
In sum, because 204 Code Mass. Regs. § 2.08 can be read 
harmoniously with the legislative mandate underlying G. L. 
c. 138, it remains valid despite the repeal of § 25A (b). 
 
b.  Regulatory violations -- Craft.  Apart from challenging 
the validity of the regulation, Craft challenges the 
commission's ruling on two other grounds:  first, that the 
decision "conflicted with subsequent holdings based on the same 
facts and was thus arbitrary and capricious"; and, second, that 
the commission violated Craft's due process rights by improperly 
relying on evidence from outside the hearing record.  We address 
these arguments in turn. 
 
As to the first argument, Craft claims that because it was 
found in violation of 204 Code Mass. Regs. § 2.08 as to a number 
of different retailers, but the commission found insufficient 
evidence that all of those retailers -- except for Rebel -- 
30 
 
 
violated § 2.08 under the same set of facts, the commission 
"contradict[ed] an earlier interim determination made on the 
same record."  Retirement Bd. of Somerville v. Contributory 
Retirement Appeal Bd., 38 Mass. App. Ct. 673, 677-678 (1995).  
Specifically, in a 2016 decision as to one § 12 retailer, the 
commission determined that its affiliated third-party management 
company received $20,000 from Craft in bribes for twenty 
dedicated tap lines at its restaurants, but there was no 
evidence that the particular § 12 retailer itself was 
"permit[ted] to be given" money in violation of § 2.08; the 
licensed retailer was therefore not found to have violated the 
regulation.  Indeed, Rebel was the only § 12 retailer in the 
entire "scheme" involving Craft to have been found in violation 
of the regulation, because it was the only licensed retailer 
shown to have been "given money."  Craft contends that it cannot 
be held responsible for the inducements targeted at the other 
retailers because "an essential element of § 2.08 is that a 
retail licensee permits to be given something of value" 
(quotation, citation, and alterations omitted), and every 
retailer but Rebel did not.11 
 
Craft's argument reflects a misreading of the plain terms 
of § 2.08.  The regulation prohibits a licensee from "giv[ing] 
                                                          
 
 
11 As discussed infra, we also conclude that Rebel did not 
violate 204 Code Mass. Regs. § 2.08. 
31 
 
 
or permit[ting] to be given money . . . to induce any person to 
persuade or any influence any other person to purchase . . . any 
particular brand or kind of alcoholic beverages."  In the case 
against Craft, Craft -- not a § 12 retailer -- is the licensee 
whose conduct was at issue; none of the other persons referenced 
in the regulation need be a licensee.  Specifically, the person 
given the money need not be a licensee for the licensee who is 
giving the money to be in violation of the regulation.  Where 
the commission determined that Craft gave money to induce third-
party management and marketing companies to persuade § 12 
retailers to purchase Craft brand beers, Craft was in violation 
of the regulation regardless of whether any of the money it paid 
was actually given to the § 12 retailers.  Because, as to the 
§ 2.08 charge against Craft, it is irrelevant whether the 
retailers that were the target of Craft's inducements ultimately 
received any money, the commission's decisions as to the other 
retailers involved in these cases are not inconsistent with the 
decision against Craft.  For that reason, we conclude that the 
commission's decision against Craft was not arbitrary or 
capricious. 
 
Craft's second argument rests on due process grounds.  
Craft contends that, because the commission took administrative 
notice of its own internal documents after the hearing to 
establish the common ownership of several retailers and their 
32 
 
 
third-party management or marketing companies, Craft was 
deprived of the opportunity to challenge this evidence.12  We 
agree with Craft that facts that an agency relies upon in 
reaching its decision must be established by the record, Arthurs 
v. Board of Registration in Med., 383 Mass. 299, 310 (1981), and 
that the parties should be afforded an opportunity to respond to 
administratively noticed material.  See Kavaleski, 463 Mass. at 
690.  But a party seeking to set aside an agency decision must 
also establish that it was "substantially prejudiced" by such an 
error, and Craft has not met that burden.  See G. L. c. 30A, 
§ 14 (7); Fitchburg Gas & Elec. Light Co. v. Department of 
Telecomm. & Energy, 440 Mass. 625, 641 (2004). 
 
As the commission points out, the violation report -- 
stipulated to by Craft -- establishes the common ownership 
between numerous third-party companies and their licensed § 12 
retailers.  For example, one management company lists a single 
individual as its president, treasurer, secretary, and director; 
this individual is also listed as the president of all four 
restaurant or bar retailers affiliated with that management 
                                                          
 
 
12 Craft's assertion that the commission used these 
administrative records to draw an inference that inducements 
were paid from management companies to retailers is of no moment 
here.  As discussed supra, it is Craft's conduct -- and its 
underlying motive in giving money to another person -- that is 
necessary to establish a violation of 204 Code Mass. Regs. 
§ 2.08.  Whether that money actually reached the retailers was 
unnecessary to the commission's decision as to Craft. 
33 
 
 
company.  Similar fact patterns are evident as to the other 
involved retailer groups and their associated third-party firms.  
To the extent that the commission erroneously relied on 
administrative documents to reach that same conclusion, Craft 
cannot show that its substantial rights were prejudiced.  
Accordingly, we discern no reason to set aside the commission's 
finding that Craft violated § 2.08 and the penalty imposed.13 
 
c.  Regulatory violations -- Rebel.  The commission 
concluded that 204 Code Mass. Regs. § 2.08 "applies to a retail 
licensee's receipt of an inducement (emphasis added)," and that 
Rebel therefore violated the regulation by accepting the money 
that Craft paid in order to induce Rebel's restaurants to carry 
Craft-distributed brands.  The commission relied on the language 
in the regulation providing that "[n]o licensee shall . . . 
permit to be given money," and declared that this language 
"prohibits [both] active solicitation of an inducement by a 
[retail] licensee . . . [and] passive acceptance of an 
inducement."  Rebel, however, contends that the regulation does 
not envision enforcement against the party receiving inducements 
-- only those giving them.  We conclude that the commission's 
                                                          
 
 
13 Craft asks that we consider reducing or otherwise 
revising the penalty imposed by the commission.  Aside from a 
cursory request in the concluding paragraph of its brief, Craft 
has not meaningfully presented this argument, and we thus 
consider it waived.  See Commonwealth v. Appleby, 389 Mass. 359, 
380, cert. denied, 464 U.S. 941 (1983). 
34 
 
 
interpretation of § 2.08 regarding a licensee's receipt of money 
is an error of law, and that § 2.08 cannot be enforced against 
Rebel solely because it received money as an inducement to 
purchase certain brands of alcoholic beverages sold by Craft. 
 
We are loath to accept an interpretation of an agency 
regulation that is bound to lead to "absurd consequences."  See 
Commonwealth v. Buccella, 434 Mass. 473, 482 (2001), cert. 
denied, 534 U.S. 1079 (2002).  That outcome is assured if we 
were to apply the regulation's plain language to retail 
licensees.  As the commission has applied the regulation to 
Rebel, it states:  "No licensee [Rebel] shall . . . permit to be 
given money . . . in any effort to induce any person [Rebel 
Marketing] to persuade or influence any other person [Rebel] to 
purchase . . . alcoholic beverages."  In other words, in order 
to apply § 2.08 to a retailer in receipt of inducement money, 
the commission must find that the retailer intended to persuade 
itself to purchase a brand of alcoholic beverages.  We need not 
-- and do not -- endorse this tortured reading of the 
regulation.  Cf. Green v. Board of Appeal of Norwood, 358 Mass. 
253, 258 (1970) (avoiding "absurd or unreasonable results" where 
statutory language "susceptible of a sensible meaning"). 
 
The most sensible reading of the "[n]o licensee shall give 
or permit to be given" phrase of § 2.08 is that it prohibits a 
licensee from itself giving money as an inducement or 
35 
 
 
authorizing or allowing an agent -- or a proverbial "bagman" -- 
to give money as an inducement, not that it prohibits a licensee 
from allowing itself to receive an inducement, as the commission 
urges.  In the 1935 set of regulations in which § 2.08 was 
originally promulgated (as Regulation 47), the word "permit" 
appears as a verb in at least five other regulations.  Those 
regulations state in relevant part as follows: 
"15.  No licensee shall use, or permit to be used, any 
advertising matter which is false or untrue . . . ." 
 
"16.  No licensee shall make or permit to be made by his 
agent or employee, any false or misleading statement 
concerning any other licensee, his products, or the conduct 
of his business." 
 
"21.  No licensee for the sale of alcoholic beverages shall 
permit any disorder, disturbance or illegality of any kind 
of take place in or on the licensed premises.  The licensee 
shall be responsible therefor, whether present or not." 
 
"24.  'Package Goods' Store licensees shall not permit any 
alcoholic beverages to be consumed on their licensed 
premises." 
 
"40.  No false, deceptive or misleading statement shall be 
made or used, or permitted to be made or used, by any 
licensee on any label on any keg, cask, barrel, bottle or 
other container of any alcoholic beverages." 
 
In each of these regulations, the word "permit" is used to 
prohibit a licensee from authorizing or allowing another person 
to engage in prohibited conduct.  There is no reason to believe 
that the commission intended a different meaning when it drafted 
Regulation 47's prohibition that "[n]o licensee shall give or 
permit to be given money."  See TBI, Inc. v. Board of Health of 
36 
 
 
N. Andover, 431 Mass. 9, 15 (2000) ("the provisions [of a 
regulation] should be interpreted in a way that is harmonious"). 
 
It is also noteworthy, where § 2.08 is essentially a 
prohibition of commercial bribery in the alcoholic beverage 
industry, that the State commercial bribery statute that was in 
effect in 1935 expressly distinguished between persons who 
"corruptly give[], offer[] or promise[] . . . any gift or 
gratuity whatever, with intent to influence" and persons who 
"corruptly request[] or accept[]" such things.  G. L. (Ter. Ed.) 
c. 271, § 39, as amended by St. 1912, c. 495.  Given this 
statutory background, the commission could have drafted 
Regulation 47 so that it also barred licensees from receiving 
inducements, but it did not do so. 
 
The commission's failure expressly to prohibit licensees 
from receiving inducements is consistent with the legislative 
purpose of the Liquor Control Act, which sought to protect 
against the undue influence of powerful manufacturers of 
alcoholic beverages, fearing that their influence would allow 
them to dominate the wholesale sector and eventually disrupt the 
business of small retailers.  See Report of the Special 
Committee, supra at 16; Seagram Distillers Co., 401 Mass. at 
716; de Ganahl, supra at 669.  There is much in the legislative 
history of the statute to indicate that the Legislature wanted 
the commission to exercise its authority to penalize 
37 
 
 
manufacturers or large wholesalers that were using commercial 
bribery to control the purchasing behavior of § 12 retailers -- 
that is, licensed bars and restaurants; there is nothing to 
indicate that the Legislature wanted the commission to penalize 
the § 12 retailers that were receiving these commercial bribes.  
See TBI, Inc., 431 Mass. at 15 (we construe regulations in 
manner "consistent with the legislative design"). 
 
Although we are generous in our deference to administrative 
agencies in their interpretation of their own regulations, see 
Commerce Ins. Co., 447 Mass. at 481, that deference is not 
unlimited.  Here, the commission's decision against Rebel was 
premised upon an error of law.  Because we conclude that § 2.08 
cannot be applied against licensees in receipt of inducements, 
the Superior Court judgment in favor of the commission must be 
reversed, and the matter remanded to the Superior Court for 
entry of judgment in favor of Rebel. 
 
Conclusion.  The order of the Superior Court granting the 
commission's cross motion for judgment on the pleadings with 
respect to Craft is affirmed.  The order of the Superior Court 
granting the commission's cross motion for judgment on the 
pleadings with respect to Rebel is reversed, and that case is 
remanded with instruction to enter judgment in favor of Rebel. 
 
 
 
 
 
 
 
So ordered.