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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Five Tips for Making Boozy Ice Cream That’s Legal

When you think of the relationship between alcohol and food, the classics come to mind: tiramisu, coq au vin and beer cheese. While there is a long culinary tradition of using alcohol in food, the newest trend is to utilize alcohol in innovative ways in the culinary world. Recently, a popular food/alcohol combo has been in the freezer aisle where alcohol has lent its flavor to ice cream and freezer pops. Fans consider this a win-win…it cools us down in the summer and acts as a little adult refreshment at the same time. As the tasty treats gain popularity, more and more states are approving the manufacture and sale of such items.  Recently, New York Governor Andrew Cuomo signed legislation that allows ice cream to be mixed with liquor. He stated this would, “help New York’s dairy farmers, liquor and craft beverage producers, dairy processors and manufacturers, food retailers, and restaurants meet the increasing consumer demand for these new and innovative...

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Ohio Case Will Likely Determine Whether Other States Use 21st Amendment Enforcement Act

As was widely reported in the alcohol trade press, the state of Ohio filed suit against several online retail outlets a week ago after an investigation into direct-to-consumer shipments of wine and spirits into the state. The suit follows an investigation where employees of the Division of Liquor Control ordered wine and spirits online through retail outlets and received the alcohol at the Division’s headquarters. Ohio argues that the online retail outlets did not have a license to ship the alcohol directly to consumers in Ohio, and therefore violated Ohio law. The crux of the suit is that the only way to ship wine to consumers in the state of Ohio is by obtaining an “S Permit”.  Unfortunately for the online retail companies, an “S Permit” can only be obtained by wine manufacturers and importers who produce less than 250,000 gallons of wine per year. The lack of any other license essentially prevents the vast majority of manufacturers, wholesalers and online...

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Non-Alcoholic Beer Regulation 101

As part of the general move to better-for-you beverages, non-alcoholic (NA) options have been and will likely continue to be on the rise. However, how NA is treated, or not treated, as “beer” has significant impact on its potential route to market. The below summarizes the overall treatment of NA beer under US federal law, as well as examples of restrictions on direct-to-consumer (DTC) shipments imposed by certain states. FEDERAL TREATMENT OF NA BEER Tax Treatment: The Alcohol and Tobacco Tax and Trade Bureau’s (TTB) regulations define “beer” as a fermented beverage containing 0.5% or more alcohol by volume (ABV) and brewed or produced from malt, wholly or in part, or from any substitute for malt. (See: 27 C.F.R. § 25.11.) The regulations refer to a malt beverage containing less than 0.5% ABV as a “cereal beverage.” (See: 25.11.) Because NA beer contains less than 0.5% ABV, TTB will not treat it as a “beer” under the Internal Revenue Code (IRC), and...

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Mississippi Supreme Court Rejects ‘Passage of Title’ DTC Theory

Last week, the Supreme Court of Mississippi handed down an opinion in Fitch v. Wine Express Inc., No. 2018-SA-01259-SCT. A state court decision on the rather dry subject of personal jurisdiction often merits little comment, but the Fitch opinion features an emphatic rejection of the legal theory relied upon by many direct-to-consumer retail alcohol sellers today. As a “control” state for wine sales, Mississippi law generally prohibits the importation, transportation and sale of alcoholic beverages (a term that includes wine) outside of the state’s monopoly control system. And, as in virtually every state, the retail sale of wine to consumers is reserved to state licensees and, in the case of control jurisdictions, the state itself. In 2017, the state investigated online wine retailers. While most did not accept orders for shipment to a location in Mississippi, the state found three online retailers that accepted such orders. After further investigation, the...

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Oklahoma Supreme Court Strikes Down New Distribution Statute as Unconstitutional

In a win for alcohol beverage suppliers, on Wednesday the Oklahoma Supreme Court issued an opinion in The Institute For Responsible Alcohol Policy v. State ex rel. Alcohol Beverage Laws Enforcement Comm’n. In a 5-4 ruling, the court struck down as unconstitutional a statute requiring the top 25 wine and spirits brands in the state, by volume, to be offered to all wholesalers without discrimination. The effect of the ruling is that a supplier of any brand of alcohol is free to choose its preferred or potentially exclusive distributor in the State of Oklahoma. As background, Oklahoma has historically prohibited suppliers of wine and spirits from having an exclusive distribution relationship with an Oklahoma wholesaler, and required suppliers to sell their products to any Oklahoma wholesaler desiring to purchase them. For those familiar with the concept of “franchise” laws in the alcohol beverage industry—which typically require suppliers and wholesalers to...

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Craft Beer Mergers and Acquisitions

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: Strategic deals designed to combine leading brands and brewers and leverage distribution capacity; Targeted asset acquisitions designed primarily to expand brewing capacity; and Restructuring transactions. McDermott’s Marc Sorini, Thomas Conaghan and Daniel McGuire walk through notable strategic deals, asset/capacity purchases and restructurings. Access the full article. Originally published in The New Brewer, November/December 2019.

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2nd Circ. Tussle Distills Court Divide on Booze Laws

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. Access the full article. Originally published on Law360, September 2019.

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Cannabis and Hemp Update

Cannabis legalization receives widespread popular support. According to opinion polls, more than two-thirds of Americans support full legalization—a steep rise in support considering that as recently as 2005, almost two-thirds of Americans opposed legalization. The country appears on the path to full cannabis legalization, but until that time, citizens and companies should be aware of the legal risks involved in entering the cannabis space. Access the full article. Originally published in The New Brewer, July/August 2019.

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Implications of the Supreme Court’s Tennessee Retailers Decision

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.  1. Background Tennessee law imposes a two-year durational residency requirement on applicants for a license to operate a retail liquor store. (Two additional provisions struck by the lower courts—one ostensibly requiring 10 years of residency to renew a license and the other mandating that every shareholder of a corporate applicant be a Tennessee resident—were not defended by any party and therefore not at issue in the Supreme Court.) Two applicants that did not meet the residency requirements, one an affiliate of US retail giant Total Wine, sought licensing. The trade group for Tennessee’s liquor retailers, the Tennessee...

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Mississippi Supreme Court Ruling Reinstates Claims Against Anheuser-Busch, Mitchell Distributing

I. Introduction On May 23, the Mississippi Supreme Court published its opinion in the case of Rex Distributing Company v. Anheuser-Busch, LLC, et al. The ruling partially reverses the trial court’s decision to dismiss all of Rex’s claims against Anheuser-Busch and rival distributor Mitchell Distributing Company (Mitchell). The ruling will allow Rex Distributing Company (Rex) to proceed with its lawsuit alleging that Anheuser-Busch violated Mississippi’s Beer Industry Fair Dealing Act (BIFDA) by refusing to approve Rex’s attempt to sell its distribution rights to Anheuser-Busch products. In addition, the ruling will allow Rex to proceed with a claim against Mitchell for tortious interference and civil conspiracy. The ruling clarifies Mississippi beer franchise law by limiting the rights of beer suppliers in the context of distributor transfers, effectively rendering Anheuser-Busch’s “match and redirect” contractual provisions unenforceable under Mississippi’s...

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