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FDA to Issue Revised Guidance on Nutrition and Supplement Facts and Serving Size Regulations

This Friday, May 27, 2016, the US Food and Drug Administration (FDA) will publish its revised Nutrition and Supplement Facts and Serving Size regulations. The Serving Size regulation in public inspection view is close to 180 pages and the Nutrition Facts regulation is close to 1,000 pages.

Significantly, for beverages:

  • Serving size will be 12 ounces.
  • The new rules require dual column labeling if the container weighs at least 200 percent (e., 24 ounces) and up to and including 300 percent (i.e., 36 ounces) of the applicable referenced amount commonly consumed (here, 12 ounces).
  • Where dual column labeling is required, the label must show nutrition information listed (a) per serving and (b) per unit.

In addition, the new rules include “added sugar” labeling requirements that will likely prove quite controversial.

Assuming no congressional intervention or court challenges delay implementation (and the requirements for declaring “added sugar” may result in some), the compliance dates for the new rules are:

  • July 26, 2018 for manufacturers with $10 million or more in annual food sales; and
  • July 26, 2019, for manufacturers with less than $10 million in annual food sales.



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FDA Announces Availability of Final Guidance on Menu Labeling

On May 5, 2016, the US Food and Drug Administration (FDA) announced the availability of its final menu labeling guidance, “A Labeling Guide for Restaurants and Retail Establishments Selling Away-From-Home Foods – Part II (Menu Labeling Requirements in Accordance with 21 CFR 101.11).” The guidance is designed to help businesses comply with the menu labeling final rule.

Under a law signed late last year, FDA’s enforcement of its menu labeling final rule cannot begin until one year after FDA published this notice of availability. As a result, enforcement of the final Menu Labeling regulations will start on May 5, 2017.

FDA’s guidance responds to many frequently asked questions that it has received. It differs from the draft guidance by providing additional examples and new or revised questions and answers on topics such as covered establishments (pages 6, 12–17), alcohol beverages (pages 50–55), catered events (page 14), mobile vendors (page 16), grab-and-go items (pages 40–41) and record keeping requirements (pages 42–47). (more…)




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Join McDermott Partner Marc Sorini at the Annual Craft Brewers’ Conference

The annual Craft Brewers’ Conference will be held on May 3-6, 2016 in Philadelphia, PA. McDermott partner, Marc Sorini will give two presentations:

  • Wednesday, May 4, 1:20-2:20 pm: Marc will kick off his annual government affairs presentation by summarizing the results of recent research to be published in The New Brewer proving that no legally-mandated three-tier system existed immediately following the repeal of Prohibition. He then will provide an update on the biggest legal issues facing the industry during the past year, including recent tied-house/trade practice activities, the false advertising class actions and a distribution update.
  • Friday, May 6, 1:55-2:55 pm: Marc will join two other lawyers and moderator Bill Covaleski of Victory Brewing to explore the issue of beer “franchise law” reform.

For more information or to register, please visit https://www.craftbrewersconference.com/.




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Trademark Tips for Small Distillers

What’s in a name? (Or a slogan, logo, symbol or other source-identifying device?) Well, turns out a lot. While the craft spirits industry is a tight knit and collegial community, businesses must strive to create a unique and distinctive place in the market that makes their products stand out from the rest. For small distillers, who may have leaner advertising budgets than the spirits giants, one effective way to plant your flat in the ground and say “This is who we are, come and join us!” is through trademarks.

A trademark is any word, name, symbol, logo and/or device the identifies the goods and services of one party, and distinguishes such offerings from those of others.

Below we provide some tips and recommendations for small distillers to consider when selecting and protecting trademarks.

Read the full article (originally published in the Spring 2016 issue of Artisan Spirit).




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Red Stripe Prevails in Alcohol Beverage Labeling Class Action

The latest merits decision in the ongoing false advertising/labeling class actions appears here.  This case involves allegations that the labeling and marketing of Red Stripe Beer misleads consumers into thinking they are purchasing beer made in Jamaica from Jamaican ingredients.  In fact, production of Red Stripe for the US market moved to the US in 2012.  The Southern District of California’s Dumas v. Diageo PLC decision to dismiss the plaintiffs’ case gives hope that companies with alcohol beverage brands originating overseas can produce those brands in the US without facing significant litigation risk.

The plaintiffs brought their case under several California statues and also alleged negligent and intentional misrepresentation.  Central to the plaintiffs’ allegations were statements on Red Stripe’s secondary packaging and labeling that the beer was a “Jamaican Style Lager” and contained “The Taste of Jamaica.”  The plaintiffs also pointed to the labeling and packaging’s continued display of the original Jamaican brewer’s logo as evidence of deception.  Finally, the plaintiffs pointed to the label’s statement that the beer “embodied the spirit, rhythm and pulse of Jamaica and its people.”  Of course, the labels and secondary packaging did disclose that the US market beer was brewed and bottled in Latrobe, Pennsylvania.

Looking only at the complaint and before any discovery, the court dismissed the case, concluding that “no reasonable consumer would be misled into thinking that Red Stripe is made in Jamaica with Jamaican ingredients based on the wording of the packaging and labeling.”  More specifically:

  • The mere fact that the words “Jamaica” and Jamaican” appear on the packaging does not support a conclusion that consumers would be confused about the origin and ingredients of the beer.
  • The statements on Red Stripe were similar to those made with respect to a “Swiss Army knife” – just as “Swiss” modified “Army,” in this case “Jamaican” modifies “Style” and does not connote the actual place of production.
  • Red Stripe’s display of “Jamaican Style” and similar claims are similar to Blue Moon making a “Belgian-Style Wheat Ale” and Harpoon making a “Belgian Style Pale Ale.”
  • “Taste of Jamaica” is too vague and meaningless to form the basis of a false advertising claim.
  • Red Stripe presents different facts from the facts that give rise to the false advertising case involving Beck’s Beer, where the labeling and packaging stated “Originating in Germany,” “brewed under the German Purity Law of 1516,” and “German quality.”
  • Even though consumers may have already held an expectation that Red Stripe is brewed in Jamaica based on past production on the island, no legal authority places a duty on marketers to counter such pre-conceived notions.

On the basis of this reasoning, the court dismissed the plaintiffs’ complaint as a matter of law.  It did, however, dismiss the case “without prejudice,” which will give the plaintiffs 15 days (until April 21, 2016) to assert new claims that might survive dismissal.

The Dumas opinion represents merely one battle won (at least temporarily) in what will no doubt [...]

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Ruling Could Put Deceptive Labeling Cases on Hold

The U.S. Court of Appeals for the Ninth Circuit today placed on hold a consumer class action involving yogurt labels until the FDA issues final guidance on use of the terms at issue in the dispute—a decision that could ripple outward to the many other food and beverage cases alleging deceptive labeling.

The plaintiffs in Kane v. Chobani, LLC, No. 14-15670, alleged that Chobani deceptively labeled its yogurt as “natural” in violation of FDA regulations, and improperly used the term “evaporated cane juice” to describe the yogurt’s added sugar ingredient. But because the FDA is currently considering the scope and permissible usage of both terms, the court ordered a stay “until such time as the [FDA] completes its proceedings regarding the use of the terms . . . in food labeling.” The use of both terms “implicates technical and policy question that should be addressed in the first instance by the agency with regulatory authority over the relevant industry rather than by the judicial branch,” the court wrote, noting that it made no sense—and would be inefficient—to continue litigating the case while the FDA was mulling questions at the heart of the litigation.

Today’s ruling directly applies only to the Kane case, but other courts are likely to follow a similar path while awaiting guidance from regulators, rather than expending time and energy on continued litigation that could be rendered moot. The stay comes as other courts within the 9th Circuit and elsewhere are considering similar class actions involving alcoholic beverages, including from consumers claiming they were misled by labels calling popular products “handmade.” Although there are currently no pending FDA proceedings considering use of the term “handmade,” cases involving that word could also end up subject to a stay if that changes. As it is, some courts have dismissed such claims on the grounds that no reasonable consumer can believe spirits brands are “handmade” or because the use of such terms is non-actionable “puffery,” but others have been allowed to proceed.




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A Practical Blueprint for Distribution

Whether you’re an experienced brewer getting ready to enter a new state, a startup packaging brewery looking to serve your home market, or a brewpub expanding to provide products to local retailers, you need a viable distribution plan. In recent years, individual brewers have deepened their understanding of industry dynamics in the heavily regulated beer distribution system. While many are effectively advocating reforms to accommodate new brewery business models, change occurs slowly in the political process. Those in business today who want to remain in business tomorrow need to deal with the existing realities of the marketplace. The following is a primer of common questions and answers related to distribution.

Read the full article, originally published in the March/April issue of The New Brewer.




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Tied House Laws and Category Management: A Continuing Quandary

On March 16, the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) published a list of frequently asked questions expanding further on a ruling issued in February on application of the federal “tied house law” to industry promotional activities, specifically category management practices employed by retailers.

TTB claims that a formal rulemaking to revise its tied house regulations is not necessary: “TTB Ruling 2016-1 merely provides guidance as to the plain meaning of the existing regulation under 27 CFR 6.99(b). It does not change TTB’s longstanding position, nor does it change the meaning of the plain language of this regulatory exception.” So let’s look at the plain language:

The act by an industry member [supplier or wholesaler] of providing a recommended shelf plan or shelf schematic for distilled spirits, wine, or malt beverages does not constitute a means to induce within the meaning of section 105(b)(3) of the [Federal Alcohol Administration (FAA)] Act.

That statement on its face is an open-ended authorization to provide shelf schematics. It says nothing about the products of other industry members or whether the plan is written on a napkin or in a sophisticated IT system that is used for inventory management at hundreds of stores.  (more…)




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TTB Issues Ruling on Category Management under Federal Tied-House Statute

Today the Alcohol & Tobacco Tax & Trade Bureau (TTB) released TTB Ruling 2016-1 (Ruling), addressing category management practices.  The Ruling seeks to clarify TTB’s position toward category management under the federal tied-house statute and regulations, which generally prohibit an alcohol beverage supplier or wholesaler from providing a “thing of value” to alcohol beverage retailers.

The federal tied-house statute and the TTB regulations implementing that provision require TTB to show both an “inducement” of a retailer leading to “exclusion” of competing products for TTB to find a tied-house violation.  TTB regulations also list specific activities that are exceptions to the general rule that providing anything of value to a retailer constitutes an “inducement.”  Those exceptions include shelf schematics.  See 27 C.F.R. § 6.99(b).

Ruling 2016-1 recites the history of the shelf schematics exception and exhibits an element of “buyer’s remorse,” as the narrative suggests that TTB’s predecessor, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), discounted the possibility of abuses that TTB seems to believe are occurring today.  The Ruling then makes it clear that TTB will strictly interpret the schematics regulation as applying only to the schematics themselves, and not “additional services.”  Current category management practices often involve other activities not directly linked to the provision of shelf schematics, although these other activities (at least arguably) relate to developing, creating and updating shelf plans.  Ruling 2016-1 lists the following examples of “additional services” that may prompt TTB scrutiny:

  1. Assuming a retailer’s purchasing or pricing decisions, or shelf stocking decisions involving a competitor’s product;
  2. Receiving and analyzing confidential and/or proprietary competitor information for a retailer;
  3. Furnishing to a retailer market data from third party vendors;
  4. Providing follow-up services to monitor and revise schematics that involve communicating with a retailer’s stores, vendors, representatives, wholesalers and suppliers concerning daily operational matters; and
  5. Furnishing a retailer with human resources to perform merchandising or other functions, with the exception of stocking, rotation or pricing as permitted by TTB regulations.

Ruling 2016-1 does not provide significant guidance on when category management services may lead to the exclusion of competing products.  Instead, the Ruling generally repeats and/or cites to TTB’s exclusion regulations, which were adopted in the mid-1990s.

In short, Ruling 2016-1 provides only modest specific guidance to the industry.  It does, however, signal quite clearly that TTB will likely direct enforcement resources at current category management practices.




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National Transportation Safety Board Targets Impaired Driving

Industry professionals should remain aware of trends in policy and technology that may lead to changes in our nation’s laws to combat drunk driving.  On January 13, 2016, National Transportation Safety Board (NTSB) Chairman Christopher Hart announced the “2016 Most Wanted Safety Improvements,” a comprehensive set of transportation safety goals that the NTSB will advocate in the year ahead.  One priority is to “end substance abuse in transportation.”[i]  The NTSB is a federal agency charged with investigating serious transportation accidents.  While it is not a policymaking body, its recommendations carry significant weight with members of US Congress, state legislators and law enforcement personnel.

While enormous progress has been achieved in reducing drunk driving deaths in the US since the 1980s, the absolute number of fatalities resulting from drunk driving accidents has hovered around 10,000 over the last three years.  The cost of deaths and injuries is estimated at $37 billion annually by the National Highway Traffic Safety Administration.[ii]  These figures are in part the result of an increase in miles traveled by a growing American population, an improved economy and lower gas prices.  Nevertheless, the human and economic toll is substantial.

A key recommendation on the NTSB’s “Most Wanted” list is adoption of new state definitions of drunk driving covering with a blood alcohol content (BAC) of 0.05 or lower.  The current federally-mandated BAC standard is 0.08.  The NTSB also urges pursuit of technologies to make vehicles safer, which includes development of vehicles that cannot be operated by an impaired driver.  Substantial federally-funded research is devoted to a variety of technologies to immobilize vehicles and to track consumption by individuals with prior drunk driving offenses.

Many practical solutions offered by industry members contributed to the long-term reduction in drunk driving and changes in social norms.  Examples include practical programs, such as encouraging use of designated drivers and providing safe rides for customers.

[i]  See, https://www.ntsb.gov/safety/mwl/Pages/mwl8-2016.aspx

[ii] See, https://www.nhtsa.gov/Impaired.

 




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