ALCOHOL LAW ADVISOR
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
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Regulation of Social Media by TTB

by and | Jun 18, 2014 | ,

Facebook and similar types of social media have become increasingly popular as a promotional tool for craft brewers.  Ease of setup, simplified maintenance, the lure of almost immediate ex­posure to the general public and the ability to reach targeted audiences all make social media extremely attractive. Craft brewers use social media to introduce new products, generate interest or attendance at an event or solicit feedback on proposed new beers, among many other uses.  Brewers should bear in mind, however, that social media is not without regulation.

This article was originally published in the January/February 2014 issue of The New Brewer.



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The Legal Aspects of Barrel Aging Distilled Spirits

by | May 28, 2014 | ,

Distillers have used barrels to age whiskies, brandies and other distilled spirits for centuries.  Today, American craft distillers increasingly seek to innovate and extend their product offerings by barrel aging spirits, both traditional (e.g., whiskies) and non-traditional (e.g., barrel-rested cocktails).  Not surprisingly, the thicket of alcohol beverage laws and regulations impose certain requirements and place certain limits on the use of barrels.

This article, originally published in the Fall 2013 issue of Artisan Spirit, briefly outlines some of the most important considerations.



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Supreme Court Will Rule on Whether Agency-Approved Beverage Label Can Be Challenged as ‘False Advertising’ in Federal Court

by | Jan 15, 2014 | , ,

On January 10, 2014, the U.S. Supreme Court agreed to hear an appeal by Pom Wonderful LLC against The Coca-Cola Company.  The Court will examine whether Pom can bring a federal Lanham Act false advertising claim against a Minute Maid juice product label that had been approved by the U.S. Food and Drug Administration (FDA).  (Pom Wonderful LLC v. The Coca-Cola Co., U.S. Supreme Court case no. 12-761).

At issue in the lawsuit is a Minute Maid label for “Pomegranate Blueberry Flavored Blend of 5 Juices.”  The label presents the words “Pomegranate Blueberry” in larger type than the remainder of the phrase.  Pom claimed that the label was misleading because the product contains 0.3 percent pomegranate juice and 0.2 percent blueberry juice.

A California federal trial court and the 9th Circuit federal appeals court in California both ruled that Pom could not bring a Lanham Act false advertising claim against the label, since it had been specifically examined and approved by the FDA.  Pom has argued that the decisions were contrary to established law in other U.S. courts, and that federal regulations establish a floor –but not a ceiling — on what an advertiser is required to do to avoid a claim that the advertising is false and misleading.  Coca-Cola has argued that product labeling that is specifically authorized by the Food, Drug and Cosmetic Act (FDCA) and approved by the FDA cannot be charged as false or misleading under another federal statute such as the Lanham Act.

Although the question before the Supreme Court is whether a private party can bring a Lanham Act claim challenging a product label regulated under the FDCA, the Supreme Court’s decision could potentially have significant implications for the alcohol beverage industry.  For example:

  • If the Supreme Court rules that a competitor cannot bring a Lanham Act claim against a label that has been approved by the FDA, a natural question is whether the same rule will apply with regard to alcohol beverage labels that have been reviewed and approved by the Alcohol and Tobacco Tax and Trade Bureau (TTB) (by its terms, the Federal Alcohol Administration Act does not preempt the Lanham Act); and
  • If a Lanham Act claim would be barred against labels approved by TTB, a question may arise about whether a Lanham Act claim would be barred on elements of the label that TTB does not specifically review as a matter of policy – such as contrast, size and placement of label elements.

The Supreme Court is expected to hear argument this spring and decide the case by June 2014.  Depending on the decision, alcohol beverage industry members could find they have additional insulation against a federal false advertising claim, but they may likewise be limited in bringing a federal false advertising lawsuit against a competitor’s label that has been approved by TTB.



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Towards Liquor Control: A Critical Analysis

by | Oct 7, 2013 | , , ,

First published in 1933, shortly before passage of the 21st Amendment repealing Prohibition, Raymond Fosdick and Albert Scott’s Toward Liquor Control is still used by many in the industry to support various positions of current alcohol policy.  In his September 19 presentation for CLE International’s Wine, Beer & Spirits Law Conference,  Marc Sorini provides an overview and critical analysis of the impact of this work on alcohol law and regulatory policy, licensing, distribution, taxation, advertising and education.

To view the presentation, click here.



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Fourth Circuit Holds that ABC Regulation Cannot Prohibit Advertising in All College Newspapers

by | Oct 4, 2013 |

Last week the United States Court of Appeals for the Fourth Circuit (based in Richmond, VA) handed down the attached decision in Educational Media v. Insley, No. 12-2183 (Sept. 25, 2013).   The case underlines the trend to provide commercial speech, even speech about heavily-regulated products like alcohol beverages, with strong protection under the Constitution’s First Amendment.

Educational Media arose when two college student newspapers affiliated with Virginia Tech and the University of Virginia challenged a Virginia Alcoholic Beverage Control Board (ABC) regulation prohibiting the publication of alcohol advertisements in college newspapers.  In 2010, the Fourth Circuit ruled that the Virginia ABC regulations were not unconstitutional on their face.  After a remand to the District Court, which upheld the regulation, the Fourth Circuit’s recent decision struck down the regulation as applied to the newspapers in question.

The Fourth Circuit applied the well-established four-part test for commercial speech first articulated in Central Hudson v. Public Service Commission of New York (Supr. Ct. 1980).  The parties conceded that the speech (the advertisements) at issue was truthful and not misleading, and that Virginia had a substantial state interest in combatting underage and abusive drinking – satisfying the first and second prongs of the Central Hudson analysis.

The Court next examined whether the college newspaper advertising ban directly advanced the state’s interest.  Relying on their earlier (2010) decision examining the ABC regulation on its face, the Fourth Circuit concluded that the advertising ban directly and materially advanced the state’s interest in combatting underage and abusive drinking.

The challenged regulation, however, fell to Central Hudson’s fourth prong – whether or not the regulation was more extensive than necessary (i.e., overbroad).  Rejecting the ABC’s argument that its regulation was reasonably tailored, the Court concluded that the ban was overbroad because it prevented many adults of legal drinking age from receiving truthful information about a product they could legally consume.  Critical to this conclusion was evidence that the majority of both college newspapers’ readership were 21 years of age or older.  Significantly, the court emphatically rejected the state’s fallback argument that the regulations also helped prevent abuse drinking by persons of legal drinking age.  Quoting Supreme Court precedent, the Fourth Circuit explained, “’the First Amendment directs us to be especially skeptical of regulations that seek to keep people in the dark for what the government perceives to be their own good.’”

Based on the Central Hudson analysis, the Court held that the Virginia ABC regulation was overbroad as applied to the Virginia Tech and University of Virginia student newspapers.  In doing so, the Fourth Circuit aligned itself with the Third Circuit, which decided a very similar case in 2004.



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Alcohol Advertising in Digital Media, Part 4: Industry Self-Regulation

by | Sep 12, 2013 | , ,

Alcohol beverage suppliers were among the first U.S. business sectors to embrace self-regulation of advertising and marketing in the 1930s and 1940s.  Voluntary codes have evolved from simple commitments to truthful advertising to comprehensive guidance documents containing mechanisms for independent review of consumer complaints.

Compliance with voluntary industry codes does not absolve an advertiser from compliance with laws and regulations covered in Part 2 and Part 3 of this series.  The codes cover areas that would be difficult for government to regulate such as non-misleading advertising content, which enjoys significant First Amendment protection.  The codes also provide best practices in minimizing exposure of persons under the legal drinking age to alcohol advertising.

As indicated in Part 1 of this series, the Federal Trade Commission (FTC) views compliance with voluntary codes as an essential part of an alcohol beverage advertising and marketing function.  A detailed FTC review of advertising practices initiated in 2012 will likely result in a report to Congress by the end of 2013.  That report will include a detailed analysis of digital advertising activities and expenditures along with recommendations for future code enhancements.

The codes subject the digital marketing space to the same list of traditional “dos and don’ts” in advertising content that apply to all other media.  Beyond those fundamentals, digital advertising is subject to unique placement and audience measurement requirements that require communication with host networks and/or advance research on the audience demographics of traditional web sites or networks.

Voluntary industry codes are developed and disseminated by trade associations for distillers, vintners, and brewers.  Similar guidelines exist across all codes for advertising content.  Audience demographic standards are included in the codes of the Distilled Spirits Council of the United States, Beer Institute and Wine Institute.  Those standards are the same as they are based on U.S. Census data.  Links to major industry codes and examples of media policies follow:

Beer Institute Advertising and Marketing Code and Buying Guidelines

Brewers Association Advertising Code

Distilled Spirits Council of the United States Code of Responsible Practices and Note on Responsible Digital Marketing Communications

Facebook Alcohol Advertising Policy

Google Alcohol Advertising Policy

Wine Institute Code of Advertising Standards



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Alcohol Advertising in Digital Media, Part 3: State Regulation

by | Aug 28, 2013 | , ,

In Part 2 of this series, we highlighted recent developments in federal regulation and oversight of alcohol beverage advertising with implications for digital media.  State alcohol and consumer protection laws also apply and can make regional or national ad campaigns challenging.

An overarching concern to state officials is the potential appeal of alcohol beverage advertising to persons below the legal drinking age.  In the digital space state attorneys general and regulators quickly responded to the advent of social media and asserted authority to prevent dissemination of inappropriate advertising content to children.  Attorneys general signed consent agreements on alcohol and tobacco advertising with Facebook, MySpace and several other social networks in 2008.  As a result, the networks developed technology to limit access to alcohol advertising content to registered users over the age of 21.  Advertisers must ensure that they set up their social network pages properly so that the technology limiting access to alcohol ads is functioning.

The 21st Amendment to the U.S. Constitution grants states a degree of unique authority over alcohol beverages that does not apply to most other consumer products.  In advertising, that authority has been somewhat eroded by the First Amendment’s commercial speech doctrine and other case law, but most states continue to actively regulate the source of funds used to pay for advertising based on older legal concepts designed to protect the independence of retailers from domination by manufacturers.  In the post-Prohibition period, officials feared that large brewers and distillers would dominate local grocery stores, bars and other retailers, most of which were then “mom and pop” operations.

While the retail sector has changed dramatically, many state laws still contain restrictions on advertising or promotional activities by manufacturers that benefit specific retailers.  Recent examples of these trends are found in changes in Texas law effective September 1, 2013 that have significant implications for regional and local advertising via digital media in a large and diverse state.

In response to a 2011 court decision (Authentic Beverages Company, Inc. v. Texas Alcoholic Beverage Commission), the Texas Legislature repealed longstanding advertising restrictions and authorized prearrangement and preannouncement of promotional activities to be held on a retailer’s premises.  Texas law now permits manufacturers and wholesalers to utilize digital media to inform consumers of the identity and location of retailers where their products are available.  Restrictions apply to payments or reimbursements to retailers for the cost of an alcohol beverage ad.  Finally the Texas Legislature repealed a prohibition on advertisements that refer to the alcohol content of beer as well as a requirement to label malt beverages as “beer” or “ale” based on the alcohol content even where that designation (from an industry understanding) was inaccurate.  Those types of archaic restrictions made it difficult to run national or regional digital advertising campaigns without technical violations of Texas law.

While you can now use factual statements about product availability and attributes in digital and other media in Texas, many analogous state restrictions remain on the books.



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TTB Reiterates Position on Gluten-Free Claims

by | Aug 26, 2013 | ,

On August 22, 2013, Alcohol and Tobacco Tax and Trade Bureau (TTB) announced that, pending further study, it intends to adhere to the restrictive policy towards gluten-free labeling and advertising statements that it first announced in May 2012.  Thus, although the Food & Drug Administration has finalized gluten-free regulations applicable to most foods on August 5, as of today TTB’s gluten-free position is outlined in its “interim policy” announced in TTB Ruling 2012-2 (May 24, 2012).  That policy applies to all alcohol beverages regulated under the Federal Alcohol Administration Act – i.e., all distilled spirits, all wine containing 7 percent alc./vol. or more, and all beers made with malted barley and hops.

Current TTB policy permits a gluten-free labeling claim only on products made from gluten-free materials.  Thus, for example, TTB will permit a vodka distilled completely from potatoes to make a gluten-free claim.  See id. at 4.  But where a product is made with “any amount of wheat, barley, rye or a crossbred hybrid of these grains, or any ingredient derived from these grains,” TTB considers a gluten-free claim misleading and will not approve labels making such claims.  Id. at 5.  TTB based this conclusion on FDA’s public expression of doubt that existing methods to test for glutens are effective when applied to fermented and hydrolyzed foods.  See 76 Fed. Reg. 46,671 at 46,673 (Aug. 3, 2011).  That conclusion was reinforced in FDA’s final gluten-free rule published earlier this month.

Thus, as of today TTB policy will not approve gluten-free claims on products made with a gluten-related ingredient.  Where a TTB-regulated product is made with a gluten-related ingredient but meets FDA’s 20 ppm threshold, TTB’s interim policy permits:

truthful and accurate statements that a product was “[Processed or Treated or Crafted] to remove gluten” for products that were produced from wheat, barley, rye, or a crossbred hybrid of these grains, or any ingredient derived from these grains, and then processed or treated or crafted to remove some or all of the gluten under the following conditions:

(1) One of the following qualifying statements must also appear legibly and conspicuously on the label or in the advertisement as part of the above statement:

“Product fermented from grains containing gluten and [processed or treated or crafted] to remove gluten. The gluten content of this product cannot be verified, and this product may contain gluten.”

OR,

“This product was distilled from grains containing gluten, which removed some or all of the gluten. The gluten content of this product cannot be verified, and this product may contain gluten.”

TTB Ruling 2012-2 at 5-6.  TTB also requires any COLA application for a label making such claims to contain a detailed description of the method used to remove gluten from the product and Competitive R5 ELISA test results showing less than 20 ppm gluten.  Id.

The labeling of gluten-free foods remains a fast moving area.  Stay tuned here for further developments.



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Alcohol Advertising in Digital Media, Part 2: Federal Regulation

by | Aug 22, 2013 | , , ,

This past year brought examples of federal regulation and oversight of social media.  Both illustrate the general policy concerns of federal agencies that regulate alcohol beverage advertising.

TTB Industry Circular 2013-1, reviews the application of TTB regulations to beer, wine and spirits advertising in social media and other forms of digital advertising.  TTB’s primary concerns are the clear disclosure of the company responsible for an advertisement and prohibiting communication of false and misleading information.   The circular makes clear that TTB’s advertising regulations apply to digital advertising, including user-generated content.  Helpful references are provided to key sections of TTB advertising regulations for beer, wine and spirits.

FTC 2012 Special Order (FTC Matter No. P104518) requested a broad range of information on advertising expenditures and practices from companies in the alcohol beverage industry to make sure that they comply with the Federal Trade Commission Act and voluntary industry advertising codes.  The FTC has broad authority to prohibit and take enforcement action against advertising that is deceptive or unfair.  FTC officials have long maintained that this authority empowers the agency to limit exposure of persons under the legal drinking age to alcohol beverage advertising content in all media.  The Special Order requested information about online and social media activity at pages 4-6 and 9-10, and companies should recognize that advertising content, planning documents and placement information may be requested in similar special orders in the future.



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TTB Modifies Mandatory Information for Wine Labels

by | Aug 16, 2013 | ,

The Alcohol and Tobacco Tax and Trade Bureau (TTB) recently amended its regulations regarding the mandatory labeling requirements for wine.  Effective August 9, 2013, TTB regulations (27 C.F.R. § 4.32) no longer require that the alcohol content appear on the brand (front) label.  The alcohol content may now appear on other labels for wine products.  Of course, those other labels must be affixed to the container as required by 27 C.F.R. § 4.38.



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