On Friday, March 13, 2019, in the wake of growing concerns and related mass cancellations of large events all across the United States, the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) announced that it is relaxing federal restrictions on alcoholic beverage returns that might otherwise violate prohibitions associated with consignment sales.
In another blow to the constitutionality of alcohol beverage laws, the Court of Appeals for the Eighth Circuit struck down on First Amendment grounds a number of Missouri’s alcohol beverage advertising laws on the basis that Missouri failed to meets it burden to demonstrate that such laws both advanced the state’s substantial interest and were narrowly tailored to achieve that interest.
Over the past several months, 15 notable deals have taken place in the craft beer space, continuing a trend toward consolidation in the industry. While the terms of most transactions remain undisclosed, the deals generally fall into three buckets:
McDermott’s Marc Sorini, Thomas Conaghan and Daniel McGuire walk through notable strategic deals, asset/capacity purchases and restructurings.
Originally published in The New Brewer, November/December 2019.
Sharp disagreements in the Second Circuit over whether a Connecticut liquor law runs afoul of antitrust law, recently exposed in a bitter dissent, highlight a circuit split that some experts predict will be taken up by the US Supreme Court.
A three-judge panel upheld the law in February by batting down a retailer’s challenge to three parts of Connecticut’s liquor sales law, including a controversial “post and hold” provision that lets wholesalers match each other’s prices. The panel rejected the retailers’ claim that the provision forced wholesalers into illegal price-fixing deals.
“There is a split, and it’s an important area,” said Raymond Jacobsen Jr., McDermott partner, backing the retailer’s view that the “post and hold” requirement creates a clear state-sanctioned violation of the Sherman Act. He said he believes it’s a question that will intrigue the justices.
Originally published on Law360, September 2019.
As virtually everyone in the US alcohol beverage industry knows, last week the US Supreme Court handed down its opinion in Tennessee Wine and Spirits Retailers Assn. v. Thomas, S.Ct. No. 18-96 (June 26, 2019). Now that over a week has passed since the release of that decision, it’s time to reflect on what it means and what is coming next. (more…)
For those who follow developments in the law and craft brewing with equal passion, every year has its share of substantial issues. This year has been no exception, with a pending Supreme Court case; a substantial upswing in federal trade practice enforcement activity; a massive rewrite of US Tax and Trade Bureau (TTB) labeling and advertising regulations; and prospects for extending the biggest cuts in the excise tax on beer since the repeal of Prohibition.
As these developments play out over the next year, we may see changes translate into the marketplace. Find out what you can expect.
Originally published in The New Brewer, May/June 2019.
The spring edition of the federal government’s semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions (Regulatory Agenda) has been published. Like other federal agencies, the Alcohol and Tobacco Tax and Trade Bureau (TTB) uses the Regulatory Agenda to report on its current rulemaking projects.
The Regulatory Agenda provides glimpses into TTB’s policy focus and aspirations. But, readers should recognize that TTB rulemaking moves very slowly, and the Agency often does not meet the aspirational dates published in the Regulatory Agenda. (more…)
On Friday, March 29, the US District Court for the Eastern District of Missouri handed down its decision in Sarasota Wine Market v. Parson, No. 4:17CV2792. The decision upholds Missouri’s laws permitting in-state retailers to sell and deliver directly to consumers’ homes, but withholding that same privilege to out-of-state retailers. Plaintiffs had challenged the Missouri statutes under both the so-called “dormant” Commerce Clause and the Privileges and Immunities Clause of the Federal Constitution.
The decision is not surprising, as Missouri lies within the jurisdiction of the US Court of Appeals for the Eighth Circuit. The Eighth Circuit, in a challenge to a residency requirement in a case entitled Southern Wine & Spirits v. Division of Alc. & Tobacco Control (2013), previously held that state laws regulating retailers and wholesalers are immune from dormant Commerce Clause scrutiny under the 21st Amendment. The Sarasota Wine Market decision relies heavily on Southern Wine & Spirits in rejecting the plaintiffs’ dormant Commerce Clause challenge. And, the court reasoned that because the right to engage in the wine trade is subject to the limitations of the 21st Amendment, the Privileges and Immunities Clause is not implicated.
Whether the 21st Amendment insulates state laws regulating retailers and wholesalers from dormant Commerce Clause scrutiny is currently pending before the Supreme Court in the Tennessee Wine & Spirits Retailers Association v. Blair (f/n/a Byrd) case. Thus, the Sarasota Wine Market opinion faces almost-certain reversal or affirmance, depending on how the Supreme Court rules in Blair. In the meantime, the decision serves to underscore the stakes of the question currently pending before the Supreme Court.
Last week, the Massachusetts Supreme Judicial Court upheld a $2.6 million fine against beer wholesaler Craft Brewers Guild (a Sheehan family-owned company) for violating anti-price discrimination statutes and commercial bribery regulations. In the same decision, the Court overturned a fine lodged against a bar that received such kickback payments, holding that Massachusetts retailers do not violate commercial bribery regulations by accepting kickback payments.
Beginning in 2013, Craft Beer Guild, LLC d/b/a Craft Brewers Guild (CBG), a licensed wholesaler, implemented a “pay-to-play” scheme involving alcohol beverage suppliers, retailers, and various management and marketing companies associated with licensed retailers. CBG paid “rebates” to these third-party companies in exchange for their associated retailers agreeing to sell CBG products at their bars and restaurants. To hide these unlawful payments to retailers, the third-party companies billed CBG for various unperformed services such as “marketing support” and “promotional services.”
CBG did not offer these rebates to all retailers, and rebate amounts differed among the retailers involved. Rebel Restaurants, Inc. d/b/a Jerry Remy’s (Rebel), a licensed retailer, received a $20 rebate for each keg sold in exchange for carrying CBG-distributed brands. Rebel received the payments through its associated third-party company, Rebel Marketing. Rebel Marketing was not a licensed retailer.
Last week, in Connecticut Fine Wine and Spirits LLC v. Seagull, the US Court of Appeals for the Second Circuit affirmed a lower court’s motion to dismiss a lawsuit from Total Wine & More challenging parts of Connecticut’s Liquor Control Act and related regulations. Though the decision represents a victory for state alcohol regulatory regimes, the Second Circuit’s ruling was decided on the basis of established antitrust law and did not raise or rely on state regulatory authority under the 21st Amendment. Nonetheless, state alcoholic beverages regulators will embrace the court’s ruling.
In Connecticut Fine Wine, Total Wine challenged three sets of provisions in Connecticut’s alcohol laws. First, Total Wine challenged “post-and-hold” provisions. Under the post-and-hold provisions, state-licensed wholesalers are required to post a “bottle price” and “case price” each month with the Connecticut Department of Consumer Protection. Those prices are then made available to industry participants. During the four days after prices are posted, wholesalers may “amend” their posted prices to match—but not drop below—lower prices offered by competitors. Wholesalers are then obligated to “hold” their prices for a month.
Second, Total Wine challenged the state’s minimum-retail-price provisions. The minimum-retail-price provisions require retailers to sell alcohol beverages to customers at or above a statutorily defined “cost,” which is determined by adding the posted bottle price and a markup for shipping and delivery. Combined with the post-and-hold provisions, the minimum-retail-price provisions bind retailer prices to wholesaler prices.
Third, Total Wine challenged the state’s price discrimination and volume discount provisions. The price discrimination/volume discount provisions preclude wholesalers from offering a given product to different retailers at different prices and from offering discounts to retailers who are high-volume purchasers. (more…)
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