Advertising and Marketing Archives

Advertising and Marketing

FDA’s Delay of the Menu Labeling Rule Challenged

by McDermott Will & Emery | Jun 29, 2017 | Advertising and Marketing, Food Safety and FDA

Two consumer advocacy groups recently sued the Food and Drug Administration (FDA) for delaying the compliance deadline for the agency’s 2014 menu labeling rule for a fourth time. The menu labeling rule requires menu items offered for sale in restaurants with 20 or more locations to disclose nutritional information and the number of calories in each standard menu item. FDA and Congress previously extended or delayed compliance with the menu labeling rule three times in 2015 and 2016. Before the latest delay, the most recent “compliance date” for the menu labeling rule was May 5, 2017.

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En Banc Opinion Could Set Precedent for Tied-House Laws

by McDermott Will & Emery | Jun 15, 2017 | Advertising and Marketing, Legislation, Trade Practices

Yesterday, the en banc (full) Ninth Circuit Court of Appeals issued the attached opinion in the case of Retail Digital Network v. Prieto, No. 13-56069.

As you may recall, the Retail Digital Network case concerns the legality of sections of California’s tied-house laws, California Business and Professions Code Section 25503(f)-(h), which prohibit manufacturers and wholesalers (and their agents) from giving anything of value to retailers in exchange for advertising their products. Retail Digital Network (RDN), which installs advertising displays in retail stores and contracts with parties to advertise their products on the displays, sought a declaratory judgment that Section 25503(f)-(h) violated the First Amendment after RDN’s attempts to contract with alcohol manufacturers failed due to the manufacturers’ concerns that such advertising would violate these tied-house provisions.

The District Court found Section 25503(f)-(h) constitutional under a Ninth Circuit case from 1986, Actmedia, Inc. v. Stroh, in which the court upheld Section 25503(h). Then in January 2016, a panel of the Ninth Circuit reversed, holding that Actmedia is “clearly irreconcilable” with the Supreme Court’s 2011 opinion in Sorrell v. IMS Health Inc. The panel accordingly would have remanded the case to the District Court for further proceedings under Sorrell’s allegedly more restrictive First Amendment standard. But the state requested an en banc (full court) rehearing, which the court granted.

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Federal Trade Commission Reminder about Advertising Disclosures

by Arthur J. DeCelle | Apr 24, 2017 | Advertising and Marketing, Import/Export, Trade Practices

In mid-April, the Federal Trade Commission (FTC) sent out 90 letters to advertisers, celebrity endorsers and influencers who use their fame and the power of digital advertising to help promote products. The facts in each letter vary, but the FTC’s message was a strong reminder that clear and conspicuous disclosure is required if a “material connection” exists between and endorser and the marketer of a product.

Typically, the marketer is a manufacturer, importer or an advertising agency that establishes a relationship with an endorser. In 2009, the FTC created endorsement guides to ensure that consumers are on notice that an endorser or influencer is being compensated by a marketer. In 2015, the FTC published an Enforcement Policy Statement on Deceptively Formatted Advertisements. Those sources provide straightforward guidance to inform consumers that an endorser is acting on behalf of a marketer and to differentiate advertising from truly independent news or reviews of products.

Throughout history, producers of consumer goods marketed their wares with endorsements from famous people and “satisfied consumers.” Social media provides an enormous boost to the most ancient form of marketing, “word of mouth.” An image of your product with a celebrity or the perfect “ordinary consumer” in a creative setting can quickly go viral to millions of consumers or receive hundreds of thousands of likes on Facebook.

All ads should be truthful, targeted appropriately, and compliant with industry codes. If appropriate, ads should also be clearly identified as paid endorsements or advertising material to reduce the risk of consumer deception. These principles are especially important in the digital domain where viewers tend to move rapidly from one destination to another.

A successful ad that includes use of celebrities or influencers should meet the FTC’s standards to avoid future enforcement initiatives. The reputation of the advertiser and endorser as well as the integrity of the brands should not be placed at risk by the failure to include clear and conspicuous notices or disclaimers. Congress granted the FTC broad jurisdiction to police deceptive ads. The FTC’s guidance has now been around long enough to be on the checklist of every advertiser—particularly those under pressure to publish the next iconic image on Facebook or Instagram!

Legal, Political and Practical Challenges in Regulating Recreational Marijuana

by Arthur J. DeCelle | Apr 5, 2017 | Advertising and Marketing, Cannabis, Distribution, Food Safety and FDA, Import/Export, Trade Practices, Transactions

On March 30, eight bills were introduced by senior members of Congress from both parties to legalize, regulate and tax marijuana. The bills were referred to at least five House Committees, as they address federal criminal law, taxation, banking, transportation, immigration, veterans’ affairs, access to federal benefits and other issues. The legislative activity follows establishment of the Congressional Cannabis Caucus in February. Leaders of the new caucus represent four of the eight states where voters have approved recreational use of marijuana by adults.

In the initial press conference held by Cannabis Caucus members and in statements explaining the new legislation, House and Senate members made frequent reference to laws regulating alcohol beverages. Bills introduced earlier in the current session of Congress also call for state-by-state regulation using language similar to the Section 2 of the Twenty-first Amendment, which authorized each state to regulate the delivery and use of “intoxicating liquors” within its borders.

The failure of national Prohibition of alcohol beverages is often cited as a rationale to legalize recreational marijuana use. Before proceeding toward wider legalization, policymakers should gain a deeper understanding of the history of Prohibition and the regulatory scheme that emerged after repeal. Government regulation is necessary in a complex and pluralistic society of 320 million, but effective marijuana regulation is a tall order.

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Environmental Claims in Advertising

by Arthur J. DeCelle | Mar 27, 2017 | Advertising and Marketing, TTB COLAs and Formulas

Arthur DeCelle wrote this bylined article describing how brewers can use product labels, point of sale (POS) advertising, social networks, and other media to tell customers about their environmental responsibility efforts. Such information “must be truthful and substantiated by evidence [and] must not be deceptive to reasonable consumers,” Mr. DeCelle wrote, urging brewers to “carefully consider the language you use and any potential for consumer deception [regarding] false or deceptive environmental claims.”

Read the full article.

Originally published in New Brewer, March/April 2017.

Implications of EU Ingredient Labeling Proposal for US Suppliers

by Arthur J. DeCelle | Mar 21, 2017 | Advertising and Marketing, Food Safety and FDA, Import/Export, Legislation, Trade Practices, TTB COLAs and Formulas

On March 13, the European Commission approved a report that calls on members of the alcohol beverage industry to develop a comprehensive self-regulatory system of ingredient and nutritional labeling for beer, wine, and distilled spirits. The Commission is composed of representatives of each member nation of the European Union (EU) with a range of administrative responsibilities and authority to develop and propose legislation for consideration by the European Parliament.

The European Commission characterizes access to ingredient and nutrition information as a right of EU consumers, and called on industry members to develop a self-regulatory proposal over the next year. Current EU policy on alcohol beverage labeling is analogous to US policy. The EU regulation on food labeling exempts alcohol beverages containing more than 1.2 percent alcohol-by-volume.

The European Commission proposal warrants careful attention by US alcohol beverage suppliers across all beverage categories. The initial industry response by European suppliers will likely start a lengthy process leading to new ingredient disclosures.

US regulations are largely based on the presumption that consumers have a working knowledge of ingredients in alcohol beverages. Alcohol & Tobacco Tax & Trade Bureau (TTB) and its predecessor agency considered and rejected mandatory ingredient labeling proposals several times since 1970s. TTB’s most recent assessment of ingredient and nutritional labeling of alcohol beverages was an advance notice of proposed rulemaking published in 2005 soliciting public input on the existing TTB policy. No further rulemaking activity followed the TTB inquiry.

Existing TTB regulations focus on disclosures of certain ingredients that pose unique health risks or allergic reactions. Industry members are permitted to disclose ingredients on a voluntary basis. A few alcohol beverages are subject to US Food and Drug Administration (FDA) regulations, which require comprehensive ingredient and nutritional labeling.

Many US products are exported for consumption in the EU. If a new system is adopted in the EU, producers in the US must provide ingredient and nutritional information to their customers overseas with no corresponding requirements in their home markets. EU suppliers are major players in the US market and may decide to voluntarily provide the same information to their American customers that they will ultimately have to provide in their home markets.

These dynamics will likely reinvigorate calls by consumer advocacy organizations and government agencies (e.g., Federal Trade Commission, Food and Drug Administration, and National Institutes of Health) in support of ingredient labeling of alcohol beverages in the US. In the current era of dwindling government resources, the European Commission’s call for an industry self-regulatory initiative provides an opening for a similar initiative in the US. Industry members and associations should monitor developments in the EU and consider appropriate responses directly to the EU initiative and to analogous proposals in the US.

An English version of the European Commission proposals is available here.

Proposed Regulation in Texas on Name and Address Labeling for Malt Beverages

by McDermott Will & Emery | Mar 7, 2017 | Advertising and Marketing, Trade Practices

Last week, the Texas Alcoholic Beverage Commission (“TABC”) circulated a draft amendment of Texas’ name and address labeling regulation for “malt beverages” (beer). A copy of the proposed amended regulation (with a redline of the changes) is can be found here.

Consistent with TTB regulations on name and address labeling for malt beverages, the current regulation requires only the name and address of the importer, with foreign producer information optional. The revised regulation, in contrast, requires:

On labels of containers of imported malt beverages, the name and principal place of business of the foreign manufacturer, bottler or shipper must be stated

The proposed regulation accordingly marks a significant Texas departure from federal labeling rules. First, it requires foreign producer information on the label. Second, it requires the label to show the name and principal place of business address of the foreign producer. This could require substantial changes to the labels of malt beverages sold in Texas.

The TABC is scheduled to hold a hearing in Austin on its proposed new regulation on Friday, March 10, 2017.

President Trump Issues Executive Order Aimed at Reducing Regulation and Controlling Regulatory Costs

by McDermott Will & Emery | Feb 13, 2017 | Advertising and Marketing, Alcohol Excise Taxes, Food Safety and FDA, Legislation, Non-Beverage Alcohol, Trade Practices, TTB COLAs and Formulas

On January 30, 2017, President Trump issued Executive Order No. 13771, entitled “Reducing Regulation and Controlling Regulatory Costs.” A link to Executive Oder 13771 appears here. The Order provides:

For Fiscal Year 2017 (which ends September 30, 2017):
1. For each new “regulation” published for notice and comment “or otherwise promulgated,” the agency in question must “identify” two existing regulations to be repealed. Notably, the Order does not require the repeal to be concurrent with the publication or promulgation of the new regulation.
2. For Fiscal Year 2017, each agency must ensure that the total incremental costs of all new and repealed regulations shall not exceed zero, unless otherwise required by law or as consistent with the advice of the Office of Management and Budget (OMB). The Order does not specify whether the costs in question represent costs to the agency, costs to the government or total societal costs. It also does not provide any guidance on how to calculate such costs.
3. To the extent permitted by law, the costs of any new regulations shall be offset by the elimination of costs associated with at least two existing regulations. Once again, the Order provides no guidance on what constitute costs of a regulation or how to calculate such costs.
4. The OMB is directed to provide agencies with guidance on how to implement the Order.
Beginning with Fiscal Year 2018 (which begins October 1, 2017):
1. The semi-annual Unified Regulatory Agenda for each agency must: (i) identify for each new regulation “that increases incremental cost,” two offsetting regulations; and (ii) provide an approximation of the total costs or savings for each new and repealed regulation.
2. Each regulation approved by the OMB shall be included in the Unified Regulatory Agenda.
3. Unless otherwise required by law, agencies may not issue new regulations that were not listed in the most recent Unified Regulatory Agenda.
4. During the budgeting process, the OMB shall notify agencies of the total costs per agency that will be allowed in issuing and repealing new regulations for the upcoming fiscal year.
5. The OMB shall provide agencies with guidance on implementing the Order’s requirements.

Executive Oder 13771 applies to each “executive department or agency,” but leaves a number of government regulatory functions outside of its scope. These include agencies involved in military, national security, and foreign affairs functions, as well as any government organization arising from the Legislative or Judicial branches. Nevertheless, the Order applies to a vast swath of the federal bureaucracy.

On its face, Executive Order 13771 could have a significant impact on the pace of federal rulemaking during the Trump Administration. The “two-for-one” requirement, in particular, appears to be a blunt instrument aimed at shrinking the Code of Federal Regulations. Moreover, the explicit requirement for cost estimates and “zero” total costs flowing from the rulemaking process plainly seeks to halt the growth and costs of the federal administrative state.

But the jury remains out on the practical impact of Executive Order 13771. Longstanding observers of the federal bureaucracy will, no [...]

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The TTB Proposes New Definition of Hard Cider

by McDermott Will & Emery | Feb 10, 2017 | Advertising and Marketing, Alcohol Excise Taxes, TTB COLAs and Formulas

On January 23, 2017 the Alcohol & Tobacco Tax & Trade Bureau (TTB) published a Temporary Rule and a Notice of Proposed Rulemaking (NPRM) related to the new definition of hard cider. Congressional action required a new definition when Congress amended the Internal Revenue Code in December 2015 by enacting the Protecting Americans from Tax Hikes (PATH) Act. The Temporary Rule lays out TTB’s current thinking on regulations to implement the revised definition, while the NPRM requests comments on the regulations spelled out in the Temporary Rule.

We view the following provisions as most significant:

1. Requiring a new mandatory tax classification statement on all products eligible for the hard cider tax rate, effective January 1, 2018.

2. Requiring the words “sparking” or “carbonated” on all hard cider with carbonation in excess of 0.392 grams per 100 ml.

3. Codifying in the regulations (although this reflects longstanding TTB policy) that materials like honey, hops, spices and pumpkin may be added to hard cider without jeopardizing the hard cider tax rate.

4. Establishing a .009 gram per 100 ml tolerance for carbonation in cider.

5. Suggesting in the pre-amble that treating materials, regardless of source, could render a product ineligible for the hard cider rate if those materials imparts a fruit flavor other than apple (under the new regulations apple or pear).

6. Codifying in the regulations for the first time (although this reflects longstanding TTB policy) that the hard cider definition and most rules also apply to imported hard cider.

The current deadline for comments on the proposed regulations is March 24, 2017, but TTB generally grants reasonable extensions (typically 60 or 90 additional days) upon request.

Avoiding Misleading Labeling

by Eleanor B. Atkins and McDermott Will & Emery | Feb 8, 2017 | Advertising and Marketing, TTB COLAs and Formulas

Current conventional wisdom in the craft beer business holds that being local helps sell more beer. This has led many brewers to emphasize their local roots on their labels and in their marketing efforts. In some ways, the trend has a “back to the future” feel, as labels and marketing materials once again feature place names that often became the brand names for many of the first generation of craft brewers in the 1980s.

But the emphasis on place can come with a price: the prospect of legal hurdles, including lawsuits, over allegations that a brand name, label, or advertisement misrepresents the beer’s place of production. Legally this subject usually goes by the name “geographic misdescription,” itself a subset of false advertising law. How can brewers minimize their chances of becoming the target of a lawsuit or government investigation alleging that a beer’s labeling or marketing deceived consumers?

Read the full article, originally published in the January/February 2017 issue of The New Brewer.