Back in our March 2021 posting, we reviewed how an FDA compliance check works. Let’s take a look at some compliance numbers and how they relate to fines.
Digging through the FDA enforcement database of compliance checks, we identified retailers who have had frequent compliance visits checking to see if they illegally sold to minors. Among the 16 retail chains we examined, our calculation of average violation rates parallels that of the national rate – around 9% of the checks result in a violation, which means retailers pass these checks 91% of the time.
Retailers should note that FDA fines can add up quickly.
The FDA Fines & Penalties chart illustrates how quickly fines can accumulate. Taking a closer look at Federal Fiscal Year 2020 (October 2019 – September 2020), we see that a retailer with multiple stores had 2,798 FDA compliance checks which resulted in 161 FDA Warning Letters and 53 FDA Civil Money Penalties. These fines amount to a range of between $15,000 and $30,000. (We provide a range because the final negotiated amount is not made public.)
After the first failed inspection, FDA issues a Warning Letter and begins to issue fines for any subsequent compliance check failures.
It’s important to note that a single compliance inspection results in TWO VIOLATIONS when a tobacco or vapor product sale is made to an underage customer. Typically, those violations are:
1) Employee did not ask for ID
2) An Age Restricted Product Sale Was Made
FDA has stated that if it finds a retailer in violation, it will return for additional inspections.
If another underage sale is made, a retailer now has FOUR violations. A third compliance check failure can result in violations 5 and 6 and a possible NO TOBACCO SALE ORDER (NTSO).
The “no tobacco sale order” requires that a retailer stop selling tobacco and vapor products for a specified period of time (see chart for time period). The first no tobacco sale order can be for 30 days while the 3rd one can be permanent. In our analysis of 16 chains, we found that 9 stores were issued “no tobacco sale orders” mandating that they stop selling tobacco and vapor products for a period of time. And of course, no sales at all has its own measurable cost with in-store tobacco and vapor products amounting to an estimated 20 – 30% of store revenues.
In looking at 16 major retailers that had over 13,000 FDA inspections with 361 Civil Money Penalties, we can estimate total fines to be in a range from $100,000 to $220,000. While we can see what the total fines might be, there is also the internal retailer costs of legal fees and staff time to manage the process as it works its way through the FDA administrative system.
It’s clear that the fine and penalty structure makes a strong case that employees be well trained and stores correctly equipped to prevent underage sales of age restricted products. And what Ben Franklin said back in 1736 seems to apply here, “An ounce of prevention is worth a pound of cure.”
As always, We Card is here to help with a host of resources from training to materials. A good place to start is to take our Best Practices Survey to see how your store measures up. And check out We Card’s training, or learn more about The We Card Program.
