As most members of the alcohol and beverage industry are aware, Anheuser-Busch InBev (ABI) acquired the global holdings of SABMiller in a more than $100 billion merger in October 2016. The Department of Justice (DOJ) required ABI to divest SABMiller’s United States business, including its ownership interest in MillerCoors. Since November 2016, the parties have engaged in ongoing briefing seeking approval of a Proposed Final Judgment (PFJ) in the US District Court for the District of Columbia.

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On March 20, 2018, a federal district court in Texas issued an opinion in Deep Ellum Brewing, LLC, et al. v. Texas Alcoholic Beverage Commission. The court delivered a blow to Texas craft brewers, upholding Texas’ prohibition on sales of beer by brewers to consumers for off-premises consumption.

Texas authorizes the manufacture and sale of beer by persons holding a: (1) brewer’s permit (allowing the production of beer of more than 4% alcohol by weight (ABW)); (2) manufacturer’s license (allowing the production of beer of 4% ABW or less); or (3) brewpub license. Like many states, Texas’ alcohol beverage laws mandate separation among the three tiers of the alcohol industry: manufacturing, wholesaling and retailing. The three-tier laws generally require alcohol beverages to be sold from manufacturers to wholesalers, from wholesalers to retailers, and finally from retailers to consumers.


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On February 21, 2018, the US Court of Appeals for the Sixth Circuit published its opinion in Byrd v. Tennessee Wine and Spirits Retailers Association, No. 17-5552. The decision, which includes a partial dissent, affirms a Middle District of Tennessee decision finding that the “durational-residency” (residency) requirements imposed by Tennessee law for alcohol beverage retail licensees are unconstitutional under the “dormant” Commerce Clause.

Tennessee law requires an applicant for a retail license to have been a resident of Tennessee for at least the two-year period immediately preceding the submission of the license application. For corporate license applicants, the two-year requirement applies to any officer, director or stockholder of the corporation. Moreover, to renew such a license the law requires Tennessee residency for at least ten consecutive years.

Two prospective retail applicants that did not meet the two-year residency requirement, notably including the Tennessee affiliate of Total Wine Spirits & Beer, sought licenses. Expecting litigation, the Tennessee Attorney General filed a declaratory judgement action in state court seeking to have the residency requirements declared constitutional. The action was removed to federal court, and the Middle District of Tennessee found the requirements unconstitutional.


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Two sections of Craft Beverage Modernization and Tax Reform Act (CBMTRA) that were dropped from the 2017 federal tax reform law were subsequently added to the Bipartisan Budget Act of 2018, signed into law by President Trump on February 9, 2018.

The new law mandates a temporary (two year) change in tax recordkeeping requirements for domestic breweries to eliminate duplicate reports and accounting obligations for breweries that have pub and sampling areas. The intent of the new law is to allow brewers to keep one set of books covering (a) beer removed from brewery for sale for distribution to retailers and (b) beer sold or provided for sampling to consumers at a brewery. Existing regulations and policies led to unnecessary complexity in accounting for brewers and for auditors from the Alcohol and Tobacco Tax and Trade Bureau (TTB). While the recordkeeping changes are required for calendar years 2018 and 2019, TTB may be able to make changes in regulations and policies that will provide permanent relief from unnecessary administrative burdens.
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US Attorneys, state officials and cannabis industry representatives met in Portland, Oregon on February 2 to discuss how to enforcement will change after Attorney General Jeff Sessions announced changes to Department of Justice (DOJ) policies on the prosecution of marijuana cases. The answer: a crackdown on illegal overproduction in states where cannabis production is legal and a focus on reducing the amount of cannabis being diverted to states where it is still illegal.

On January 4th, the DOJ released a memo that directed all US Attorneys to enforce “the laws enacted by Congress” and “follow well-established principles when pursuing prosecutions related to marijuana activities.” The memo rescinded the Cole Memo and other DOJ guidance that reduced the likelihood of federal prosecution of cannabis businesses in states that permit medical and recreational cannabis use. After the DOJ announcement, the cannabis industry was unsure of how these changes would affect cannabis operations legal under state law and uneasy about the future of the industry.
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The Food and Drug Administration (FDA) recently issued a draft guidance on the agency’s voluntary recall process and announced the agency’s intention to notify the public faster when a product is recalled. The guidance aims to assist and provide recommendations to industry and FDA staff regarding the use, content and circumstances for issuance of public warnings and public notifications for firm‑initiated or FDA‑requested recalls. In addition, the guidance discusses what information to include in a public warning, as well as the parties responsible for issuing it. Notably, the draft guidance does not specifically address recalls of alcohol beverage products regulated by the Federal Alcohol Administration (FAA) Act or the primary role of the Alcohol and Tobacco Tax and Trade Bureau (TTB) in seeking and monitoring recalls of such beverages. Comments on the draft guidance are due by March 20, 2018.
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Texas craft beer distributors received an early Christmas present in 2017. On December 15, 2017, the Texas Court of Appeals for the Third District, at Austin issued an opinion in Texas Alcoholic Beverage Commission v. Live Oak Brewing Co., et al. (NO. 03-16-00786-CV) in which the court overturned a lower court’s determination that a statute prohibiting self-distributing brewers from selling the distribution rights to their products was unconstitutional under the Texas Constitution.
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On December 15, 2017, a Mississippi trial court issued a series of orders dismissing a substantial number of the claims brought in Rex Distributing Company v. Anheuser-Busch et al., 2nd Cir. Court No. 24C11:17-cv-00033 (Harrison Circuit Court – Gulfport).

In 2016, Mississippi beer distributor Rex Distributing (Rex) agreed to sell its business to Adams Beverage (Adams) for $50.5 million. Anheuser-Busch (A-B)—by far Rex’s largest supplier—then exercised the “match and redirect” right contained in the distribution agreement between A-B and Rex, directing Rex to sell its business to Mitchell Distributing (Mitchell) on the same terms and conditions as the proposed Rex-Adams transaction. D.G. Yuengling and Son (Yuengling) refused to allow the sale of its brand distribution rights in Rex’s territory to Mitchell, citing Mitchell’s previous refusal to carry Yuengling beer when Yuengling first entered the state. Rex consummated the sale to Mitchell for $3.1 million less than the original sale price due to Yuengling’s refusal to go along. Rex then brought suit against A-B, Yuengling, and several Mitchell entities, and Yuengling filed cross-claims against A-B and Mitchell.
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This post does not constitute tax advice. It summarizes changes in alcohol beverage excise tax laws to assist industry members in planning to implement the changes. Excise tax calculations and liability must be determined for each taxpayer based on numerous variables.

The new tax law formerly referred to as the Tax Cuts and Jobs Act of 2017, provides a temporary reduction in alcohol beverage excise taxes for US brewers, winemakers, distillers and beverage importers. Temporary tax relief is available for beer, wine and spirits removed from a US manufacturing facility or released from Custom’s custody after January 1, 2018, and prior to December 31, 2019. Several provisions of the new law will require the Alcohol and Tobacco Tax and Trade Bureau (TTB) to quickly promulgate new regulations.
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Earlier this month, a Massachusetts Superior Court judge granted beer wholesaler Craft Beer Guild, LLC’s (Craft) motion to dismiss a civil suit, Shelton Bros., Inc. v. Craft Beer Guild, LLC d/b/a Craft Brewer’s Guild, brought against it by beer importer Shelton Brothers, Inc. (Shelton) in connection with Craft’s alleged breach of its distribution agreement with Shelton. Craft distributed beer imported by Shelton throughout Massachusetts.

In November 2016, Shelton filed a complaint alleging that Craft breached a 2009 oral agreement between Craft and Shelton by failing to follow through on its promises regarding pricing and providing two dedicated sales people to support Shelton’s brands. In its complaint, Shelton alleged that sales of its products were in “steep decline” by 2011 due to Craft’s discriminatory pricing of Shelton’s products in the market.
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