- 3 -
consumers. A buy-down is a discount given to a retailer for each
carton of cigarettes sold during a given promotional period.
Cigarette manufacturers expected the retailers to pass along
the buy-down discounts to the customers. The manufacturers used
different approaches to verify this expectation. Some of the
manufacturers’ sales representatives, during periodic sales
calls, confirmed that retailers complied. Other cigarette
manufacturers required the retailers to take inventories to
reconcile with the amount of buy-down payments. In such cases,
the buy-down amounts were computed by taking the change in
inventory for a given buy-down period and adding the total
cigarette purchases during the same period. When required,
Nick’s Liquors performed this accounting and furnished it to
cigarette manufacturers before they paid the buy-downs. Such
accountings were not audited or verified by the cigarette
manufacturers. Lastly, a number of cigarette manufacturers paid
buy-down discounts to retailers based on the number of cartons
purchased during a given buy-down period.
Because of delays in processing the buy-down information,
Nick’s Liquors received buy-down payments weeks or months after
the transactions with the ultimate consumer. Thus, some buy-down
checks received by Nick’s Liquors in 1997 contained payments with
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011