In August, the US District Court for the District of Columbia issued its final decision in Bellion Spirits, LLC v. United States, Civ. No. 17-2538 (JEB). The Bellion case was brought by spirits company Bellion Spirits after the Alcohol and Tobacco Tax and Trade Bureau (TTB) refused to approve a series of health claims advanced by Bellion in connection with its vodka products. According to Bellion, the infusion of its vodka with a compound called NTX will mitigate the damage alcohol inflicts on human DNA. (more…)
I. Factual Background
During the 34-day government shutdown occurring between December 2018 and January 2019, producers and importers of beer, wine and distilled spirits needing label approval to bring new products to market were forced to wait until the shutdown was resolved, when TTB could begin again to process COLA applications. The difficulties presented by this situation included the prospect of needing to destroy valuable, perishable inventory.
Unable to obtain a COLA due to the shutdown, Atlas Brew Works (Atlas) filed suit in January in the US District Court for the District of Columbia, challenging the constitutionality of the COLA system. Atlas alleged that the requirement to obtain label approval violates the First Amendment, since, in the event of a government shutdown, the COLA requirement amounted to a prior restraint on protected speech. As the court explained in its opinion, Atlas’s argument boiled down to the claim that “a law that prohibits speech without regulatory approval becomes an outright ban on speech when the approval process is shuttered.” Shortly after the case was filed, the shutdown ended and Atlas received its COLA. The government asked the court to dismiss the case, arguing that it was now moot. After giving the parties several months in which to brief the issue, the court ruled in favor of the government’s motion, finding Atlas’s case moot. (more…)
On August 12, 2019, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published its updated Formula and Process for Nonbeverage Product, TTB Form 5154.1. The Nonbeverage Product approval process is critical to obtain “drawback” (a refund) on most of the alcohol excise tax on distilled spirits used to make such products deemed “unfit for beverage purposes.” The Nonbeverage Formula Form accordingly is important to producers of flavorings and extracts, soft drink concentrates and other non-beverage products made using potable alcohol. (more…)
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.
Originally published in The New Brewer, July/August 2019.
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 March 18, 2019, the Washington Court of Appeals upheld a trial court’s decision that three advertising campaigns for 5-Hour Energy® made by Living Essentials, LLP and Innovative Ventures, LLP (collectively, Living Essentials) violated the Washington Consumer Protection Act (CPA) by making deceptive advertising claims.
Living Essentials makes and markets the energy drink 5-Hour Energy®. The three advertising claims at issue involve claims about the efficacy of the drink. Living Essentials claimed or implied that: (1) 5-Hour Energy® was “Superior to Coffee” (Superior to Coffee claim); (2) decaf 5-Hour Energy® was effective “for hours” (Decaf claim); and (3) 73 percent of doctors would recommend 5-Hour Energy® (Ask Your Doctor claim). The trial court found all three advertising claims in violation of the CPA. It also assessed a civil penalty against Living Essentials of $2,183,747 and awarded the State $1,886,866.71 in attorney fees and $209,125.92 in costs. The court of appeals affirmed.
Living Essentials argued on appeal that the trial court (1) erred by adopting the Federal Trade Commission’s (FTC) prior substantiation doctrine; (2) that the prior substantiation doctrine violates article I, section 5 of the Washington State Constitution and the First Amendment to the United States Constitution; (3) that Living Essentials’ claims were mere puffery which did not require substantiation; (4) the trial court applied the wrong standard for necessary substantiation; and (5) the trial court erred in concluding that Living Essentials’ Ask Your Doctor claim was deceptive. Living Essentials also challenged the trial court’s penalty and award of attorney fees. (more…)
On September 18, 2018, the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued TTB Industry Guidance 2018-10, a webpage consisting of questions and answers related to formulas. According to TTB, this new guidance “essentially replaces” Industry Circular 2007-4, which provided the framework for pre-COLA product evaluations. TTB has removed Industry Circular 2007-4 from its website.
The release of Industry Guidance 2018-10 comes with troubling implications. TTB has essentially revoked an Industry Circular signed by TTB Administrator John Manfreda and replaced it with a series Frequently Asked Questions (FAQs) with no clear authorship or authority. Furthermore, they have deleted Industry Circular 2007-4, preventing industry members from reviewing how these FAQs differ or alter the previous method for determining when formulas are required. Indeed, TTB seems to be significantly expanding the types of products that require formula approval. TTB notes in the new FAQs that “there may be circumstances when we will require a formula . . . even though the product does not generally require a formula.” See Industry Guidance 2018-10, FAB4.
TTB has recently required formulas for products, such as particular varieties of mezcal and spirits aged in previously used cooperage, where formulas were not previously required. It appears where no regulatory restrictions on aging (e.g., length of time or type of barrel) exists for a particular type/class of distilled spirits, TTB will more than likely request a formula approval prior to reviewing a Certificate of Label Approval (COLA) application. Some products may not require a formula if the label text only specifies the type of barrel used for aging, i.e., “Aged in used bourbon barrels.” But if the label mentions any attribute the aging provides to the liquid (e.g., “notes of sweet corn” or “hints of charred wood”) then TTB will likely require a formula.
Although TTB previously made strides in increasing speeds in which COLAs and formulas were reviewed, these new requirements will increase the compliance workload and approval timelines for TTB as well as alcohol beverage industry members. In addition to the challenges created by increasing the number of products requiring formulas, more questions are likely to arise under the anonymous FAQs, which replaced the longstanding protocols in Industry Circular 2007-4.
Changes in Administration and other political shifts can have subtle and, occasionally, not-so-subtle influences in the Alcohol and Tobacco Tax and Trade Bureau (TTB) policies and priorities. In the article, “TTB in a Deregulatory Mood” published by Artisan Spirit, Marc Sorini explores how the Trump Administration’s desire to reduce regulatory burdens on business has already influenced TTB’s regulatory priorities. Particularly, in the most recent “Unified Agenda,” a bi-annual compilation of federal regulatory initiatives, TTB placed a priority on deregulatory projects, several of which would alter the regulatory environment for the industry. Marc discusses how the change in administration appears to have an effect on TTB’s rulemaking efforts.
Originally published in Artisan Spirit, Spring 2018.