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

Pennsylvania Expands Access to Ready-to-Drink Cocktails

by and | Jul 26, 2024 | , , , , ,

On July 17, 2024, Pennsylvania Governor Josh Shapiro signed SB 688 into law, expanding the number of available outlets that can sell ready-to-drink cocktails (RTDs) across the state.

The new law defines “Ready-to-drink cocktails” as “beverage[s], composed in part of distilled liquor … premixed and packaged in original containers by the manufacturer, containing not more than sixteen ounces … The term shall include any beverage consisting of at least one-half of one per centum, but not greater than twelve and one-half per centum, alcohol by volume.” Notably, this term does not encompass beer, malt or wine-based RTD beverages.

Explaining the intent behind the bill, sponsor Senator Mike Regan, in a February 17, 2023, memo, cited the recent growth and overall popularity of the RTD category as the reason why RTD beverages deserve to be treated differently from other liquor-based products.

Prior to the new law, liquor-based RTDs could only be sold through state-run stores, where they compete for limited shelf and cooler space that is not commensurate with their market share. Spirits and all products containing spirits had to be sold by in-state manufacturers and out-of-state vendors to the Pennsylvania Liquor Control Board. The board would then sell to liquor-licensed retailers, such as restaurants and bars, and to its state liquor stores. As a result, consumers would have to purchase RTDs in the same manner they would purchase higher ABV spirit products at a state-run store.

With SB 688’s enactment, Pennsylvania now allows for these spirits-based RTDs to be sold either through the board state-store system or through the state’s independently licensed beer network with the acquisition of an additional permit. Notably for manufacturers – both in-state and out-of-state – Pennsylvania’s franchise laws that cover Pennsylvania beer distribution do not extend to RTDs.

Before buying RTDs for resale, retailers and distributors will need to acquire a new type of permit called a “Ready-to-Drink Cocktail Permit.” Retailers will be able to purchase RTDs from state-run stores (as they do currently), in-state limited distilleries, and distributors and importing distributors.



Growing Regulatory Focus on ‘Crossover Alcohol Products’

by | Jul 10, 2024 | , , , , ,

As more companies – including businesses with and without experience producing alcoholic beverages – move to leverage their brands and brand equity across the beverage spectrum, regulators, trade associations and the companies themselves are focusing on ways to responsibly label, advertise, market and display these products to avoid consumer confusion and potential sales to minors.

Crossover alcohol products are generally categorized as alcohol beverages that use the products and intellectual property (e.g., brand names, logos) of a preexisting non-alcohol brand. While not legally defined (yet), such products include Dunkin’ Spiked Original Iced Coffee, Eggo Brunch in a Jar, Lipton Hard Iced Tea and SunnyD Vodka Seltzer, among others. As illustrated by these examples, products such as Lipton Hard Iced Tea leverage the non-alcoholic Lipton Iced Tea branding for a new product in the alcohol space.

As crossover alcohol products have become more prevalent across the market, state regulators have started taking notice and providing guidance to alcohol producers as to how to assure these products are not “false or misleading,” as defined by alcohol regulations, or tend to induce minors to drink the alcoholic product either through the products’ labels, packaging or store-display locations. The Commonwealth of Virginia, in particular, has taken the lead through the issuance of Circular Letter 23-01, which provides guidelines for alcohol producers as they develop these products. These guidelines focus on the following, among other issues:

  • Ensuring that the crossover product clearly indicates the type of alcohol it contains, with such information visible in at least three to six different locations.
  • Ensuring that the sizes of the alcohol references and warnings are sufficiently large and noticeable in comparison to other writings on the product label.
  • Ensuring that any and all changes to product labels, containers and secondary packaging clearly distinguish the crossover products from the original non-alcoholic products so as to prevent consumer confusion; such changes may involve the color palette, font type, imagery, placement of words, images and descriptions, or background elements.
  • Ensuring that secondary closures, such as foil lids, plastic wrapping, lip guards, stickers or other “child-proof” packaging, are present, to prevent accidental consumption by a minor.

Recently, a coalition including the Distilled Spirits Council of the United States (DISCUS), Wine & Spirits Wholesalers of America (WSWA), FMI – The Food Industry Association, and the National Association of Convenience Stores (NACS) (representing the three tiers of the industry: suppliers, wholesalers and retailers), issued a joint commitment related to the responsible marketing and merchandising of crossover alcohol products. Similar to Virginia’s guidance, the coalition is focused on assuring that these products are not confused for their non-alcohol counterparts and do not appeal to those under the legal purchase age, based on the appeal of the underlying brand. Accordingly, the coalition looks to alcohol producers to commit to responsible production, packaging and marketing of crossover alcohol products by:



US Supreme Court Overturns Chevron Deference

by and | Jul 1, 2024 |

In Loper Bright Enterprises v. Raimondo, the US Supreme Court expressly overruled the doctrine of deferring to an agency’s interpretation of allegedly ambiguous statutory language initially articulated in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.

Under the Chevron doctrine, courts applied a two-step framework interpreting statutes administered by federal agencies. The first step asks whether Congress had “directly spoken to the precise question at issue.” Chevron, 467 U.S. at 842. If the statute is clear as to the interpretive question at issue, courts are bound by and must apply the clear meaning of the statute. If, however, the statute is ambiguous or silent, then courts proceed to the second step where they defer to the agency’s interpretation provided it is “based on a permissible construction of the statute.” Id. at 843.

This doctrine of deference, Loper Bright held, is at odds with the imperative that the Administrative Procedure Act (APA) gives to reviewing courts to “decide all relevant questions of law” and “interpret . . . statutory provisions.” 5 U.S.C. § 706 (emphasis added). Because Chevron required reviewing courts to give “binding deference to agency interpretations” instead of exercising their “independent judgment” as to the best reading of the statute, that doctrine “defies the command of the APA” by ceding the authority to decide some questions of statutory interpretation – those involving ambiguous statutes – to agencies. See Slip Op. 21; see also Slip Op. 14 (observing that § 706 “prescribes no deferential standard” for courts to apply when interpreting ambiguous statutes).

Read more here.



DOJ Proposes to Reschedule Marijuana (Cannabis) to Schedule III

by , , , , and | Jun 3, 2024 | , , ,

On May 21, 2024, the US Department of Justice (DOJ) published the highly anticipated notice of proposed rulemaking (NPRM) to reschedule marijuana (cannabis) from a Schedule I controlled substance to Schedule III, taking the first step to easing federal restrictions on cannabis and potentially opening up the door for further cannabis research and development. This regulatory change could have far-reaching implications for the cannabis, pharmaceutical and banking industries if promulgated in a final rule. Stakeholders interested in submitting comments to the DOJ must do so by July 22, 2024.

Read more here.



Labor Law Update: Union Certification Without Winning the Employee Vote

by , and | May 29, 2024 |

As reported throughout the trade press, alcohol beverage companies are facing escalating pressure from unions and the National Labor Relations Board (or NLRB, the federal agency that enforces labor laws against both unionized and non-unionized companies). As recently as last month, an NLRB administrative law judge ordered Woodford Reserve Distillery to recognize and bargain with a union even though that union lost the election (45 employees voted against the union and only 14 in favor). This case reflects an aggressive tack at the NLRB that, across numerous fronts, poses increasing risk to operations, maneuverability and brand. But these risks are navigable.

BACKGROUND

For context, across all industries, union election petitions are up 35% over last year, and unfair labor practice investigations are up 7%. This follows consecutive years of spikes including a 53% jump in union election petitions in 2022 and a 19% increase in unfair labor practice investigations.

Behind this data are historic changes in law on how unions form. In an August 2023 decision, the NLRB now offers a path to union certification without unions having to win secret ballot elections. A union with signed majority support from their target “bargaining unit” can demand recognition, and have that imposed if the employer does not file a petition for election in two weeks or if it commits unfair labor practices. Where a union files for an election, or the employer does and it is granted, even then the union can be certified without the union actually winning majority employee support.

RECENT DEVELOPMENTS

In a notable example of this development, in an April 2024 NLRB administrative law judge decision against Woodford Reserve, the company was ordered to recognize a union and bargain with it even after employees voted against unionizing. Prior to a November 2022 election, the company announced market-based raises, changed a few work policies for consistency, and provided bottles of whiskey after production targets were reached as it had done in the past on various occasions. The union filed objections to the election result and alleged unfair labor practices. Despite evidence that the company’s actions were for legitimate business purposes and practices and unrelated to the election, the NLRB administrative law judge found that the “timing and circumstances surrounding these actions” were “more than sufficient to infer unlawful motivation.” The employees’ votes and the entire election has been set aside pending potential appeal.

In another case, over 60% of employees at Creature Comforts Brewing Company voted against joining a union in October 2023. But the union filed objections and alleged unfair labor practices by the employer during the nine-month union organizing campaign. The NLRB is investigating, and if the agency finds violations, it may issue a union recognition and bargaining order.

DEVELOPING A RESPONSE PLAN

Despite the NLRB’s trajectory in these cases and in many others, courts that can overrule the NLRB have long recognized the rights of employers to run their businesses, express their views on unionization, and expect due process in investigations and hearing processes. There [...]

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