On January 17, 2018, the United States District Court for the Northern District of California issued a decision in yet another putative class action alleging that a beer brand’s labeling and marketing was false and deceptive. In this case, the defendant is The 21st Amendment Brewery Café (21st Amendment), a successful California-based craft brewery. See Peacock v. The 21st Amendment Brewery Café, LLC, N.D. Cal. No. 17-cv-01918-JST (Jan. 17, 2018). Continue Reading District Court Denies Motion to Dismiss Deception Claims against Brewer
Last week in its regular newsletter, Alcohol and Tobacco Tax and Trade Bureau (TTB) announced updates to the Fall edition of the semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions (Regulatory Agenda). Like other federal agencies, TTB uses the Regulatory Agenda to report on its current rulemaking projects.
In the updated agenda, a few new items have been added, and many expected publication dates of Notices of Proposed Rulemaking (NPRMs), Advanced Notices of Proposed Rulemaking (ANPRMs) and Final Rules have changed. As always, readers should recognize that TTB rulemaking moves very slowly, and the Agency often does not meet the aspirational dates published in the Regulatory Agenda. Continue Reading TTB Updates to the Semi-Annual Regulatory Agenda
In the past three years, TTB has approved an increasing number of certificate of label approvals (“COLA”) for hemp-flavored vodka, from Mill Six’s hemp, white tea and ginger flavored vodka to Olde Imperial Mystic’s hemp infused vodka. Distillers have designed labels with green smoke-like images and psychedelic sixties-style lettering to hint at their cultural connection to marijuana. As more states have legalized recreational cannabis, distillers have been thinking more ambitiously about combining their distilling business with one or more aspects of the emerging marijuana business.
Originally published in Artisan Spirit: Winter 2017.
On September 29, 2017, the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) issued Ruling 2017-2, which updates and supersedes older agency guidance on allowable returns of beer and malt beverage products that contain “pull dates” or other indicators of product freshness.
The Federal Alcohol Administration (FAA) Act includes a general prohibition on “consignment sales,” 27 USC 205(d). Congress believed that all transactions should be “bona fide” sales. Id. The intent was to prevent a wide range of unscrupulous practices that might occur if manufacturers and wholesalers furnishing alcohol beverages to retailers on consignment or with the right of return.
The FAA Act prohibition on consignment sales does not apply to “transactions involving solely the bona fide return of merchandise for ordinary and usual commercial reasons arising after the merchandise has been sold.” Id. TTB regulations provide an extensive list of reasons that a manufacturer or wholesaler can accept returns. 27 CFR, Part 11, Subpart D. Continue Reading TTB Issues Guidance on Application of Consignment Sales Regulations to Freshness Dating and Returns from Retailers
Today’s off-premises retail landscape is dominated by large chains that rely on practices generally known as category management to maximize the profitability of their stores. Some of the activities falling under the category management umbrella require close interaction between the retailer and the producers, importers, or distributors supplying them product. As a result of this interaction, the federal Alcohol & Tobacco Tax & Trade Bureau (TTB) last year issued a ruling indicating that industry members’ participation in category management activities could result in a violation of the tied-house provision of the Federal Alcohol Administration (FAA) Act and the TTB’s corresponding tied-house regulations.
Originally published in The New Brewer, September/October 2017.
Most brewers are at least somewhat familiar with federal and state laws regulating the interrelationships between members of the different industry tiers. The most well-known are the “tied house” laws, which prohibit or severely restrict brewers or beer wholesalers from owning retail establishments (and vice versa), and substantially limit the ability of brewers or beer wholesalers to provide money, free goods, or other “things of value” to retailers.
Until recently, the laws prohibiting consignment sales in the alcohol beverage industry received little attention. But in the past 18 months, the settlement of two federal investigations involving the beer industry’s biggest players has focused new attention on the subject. This article will explain consignment sale laws in an effort to prevent brewers from inadvertently violating them.
Originally published in The New Brewer, May/June 2017.
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?
Most participants in the alcohol beverage industry are very familiar with the “three tier system.” What will surprise many, however, is learning that the system did not emerge immediately after Prohibition.
On March 16, the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) published a list of frequently asked questions expanding further on a ruling issued in February on application of the federal “tied house law” to industry promotional activities, specifically category management practices employed by retailers.
TTB claims that a formal rulemaking to revise its tied house regulations is not necessary: “TTB Ruling 2016-1 merely provides guidance as to the plain meaning of the existing regulation under 27 CFR 6.99(b). It does not change TTB’s longstanding position, nor does it change the meaning of the plain language of this regulatory exception.” So let’s look at the plain language:
The act by an industry member [supplier or wholesaler] of providing a recommended shelf plan or shelf schematic for distilled spirits, wine, or malt beverages does not constitute a means to induce within the meaning of section 105(b)(3) of the [Federal Alcohol Administration (FAA)] Act.
That statement on its face is an open-ended authorization to provide shelf schematics. It says nothing about the products of other industry members or whether the plan is written on a napkin or in a sophisticated IT system that is used for inventory management at hundreds of stores. Continue Reading Tied House Laws and Category Management: A Continuing Quandary
In December 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). The PATH Act amends several provisions of the Internal Revenue Code of 1986 (IRC) administered by the Alcohol and Tobacco Tax and Trade Bureau (TTB). Those amendments relate to alcohol excise tax due dates and bond requirements, the definition of wine eligible for treatment as “hard cider” for tax purposes, and cover over of rum excise taxes imported from Puerto Rico and the US Virgin Islands. In January 2016, TTB issued an announcement concerning the IRC amendments.
Starting with the first calendar quarter of 2017, taxpayers who anticipate being liable for no more than $1,000 in alcohol excise taxes (for sales of distilled spirits, beer and wine) for the calendar year, and who were not liable for more than $1,000 in such excise taxes the prior year, may make excise tax payments annually (rather than the current quarterly payment requirement). Further, beginning the first calendar quarter of 2017, taxpayers eligible to pay taxes annually under the new provisions, as well as taxpayers currently eligible for quarterly payments of alcohol excise taxes (i.e., taxpayers anticipating being liable for no more than $50,000 in alcohol excise taxes, and who were not liable for more than $50,000 in such excise taxes the prior year), need not file a bond.
The PATH Act also modifies the definition of wine eligible for the tax rate applicable to “hard cider” by (1) increasing the allowable alcohol content from 0.5 percent to less than 7 percent alcohol by volume (ABV) to 0.5 percent to less than 8.5 percent ABV; (2) increasing the allowable carbonation level from 0.392 grams of carbon dioxide per 100 milliliters of wine to 0.64 grams; and (3) expanding the definition by allowing the use of pears, pear juice concentrate and pear products and flavorings in hard cider. These changes apply to hard cider removed after December 31, 2016. The hard cider definition changes do not affect other requirements applicable to ciders above 7 percent ABV under the Federal Alcohol Administration Act, including requirements relating to labeling, advertising and permits.
Another section of the PATH Act extends the temporary increase in the limit on cover over of rum excise taxes to Puerto Rico and the US Virgin Islands from January 1, 2015 to January 1, 2017. This amendment applies to distilled spirits brought into the US after December 31, 2014.