Legal Libations

Road Trip

2009-12-19T10:27:00.004-07:00

We are on a road trip across the country - going back East for the holidays. A few months ago I wrote about transporting liquor across state lines. Not that we're doing it, but, driving across 9 state lines, I am thinking about these rules again.

Moving? Can you take your liquor cabinet?

Firing Under-performers Part 2: Why?

2009-12-16T10:38:00.005-07:00

image by Shoes on Wires

In Part 1 of our Firing Under-performers post, we discussed the What of state alcohol franchise laws. Today, we wonder why these are still needed.

The purpose underlying the franchise laws was originally to check the power of suppliers over the middle (distributor) and lower (retailer) tiers. The large manufacturers were able to bully distributors by withholding or canceling contracts for perceived poor performance.

The stakeholders in the different tiers, however, have changed in form and power since these laws came into effect. While smaller distributors (who the franchise laws were initially intended to protect) have consolidated, the number of small craft wineries, breweries and distilleries have grown (the TTB approved 224 breweries and 625 wineries in 2008 alone).

So, now, the wholesale, or middle, tier has additional protections, while the smaller manufacturers can no longer command the attention of the large distribution and retail houses. Most manufacturers and retailers in franchise states often find themselves required to deal with only one or two distributors in a given geographic area.

Not only are smaller manufactures limited to a few distributors, they cannot demand that their product be treated a certain way, cannot impose sales quotas, nor even easily fire a distributor.

Firing Under-performers Part 1: What?

2009-12-11T10:29:00.002-07:00

image by Shoes on Wires

As we mentioned last week, business is not simply business when it comes to the alcoholic beverage industry. A brewery, winery, or distillery unhappy with a distributor cannot simply fire the distributor.

Many states have adopted detailed franchise laws governing the relationship between a manufacturer and its wholesaler, or distributor. State alcohol franchise laws often require a manufacturer to appoint an exclusive distributor for its products in a specific area for a specific time. The manufacturer is then prohibited from allowing any other distributor to sell that brand of beer, wine, or liquor in that location.

The manufacturer also cannot change distributors until the alcohol control division is notified with a document signed by both parties. Imagine how hard it will be to get the distributor you are trying to fire to sign this document. Most of the franchise laws also specify when a manufacturer may terminate its contract with the distributor. In most states with special franchise laws for the alcohol industry a manufacturer may not fire a distributor without just case, or good cause.

Good cause often does not include poor sales records, or even a change of ownership in the manufacturer or the distributor. In fact, in some states the manufacturer cannot enforce sales quotas on distributors. Good cause for terminating a distributor usually does include a revocation of the distributor’s license or the bankruptcy of the distributor. At least there is a little logic in the laws.

So, if a distributor fails to sell your beer, or fails to comply with your reasonable requirements (cold storage), it will be difficult to fire the distributor. And, until the state alcohol division is notified of the change, you cannot use a new distributor to sell that product in the area.

We will discuss the whys of the state franchise laws in the next post.

Drunken Fish

2009-12-09T17:56:00.003-07:00

image by laszlo-photo

We’ve seen various mentions of an Ohio law that makes it illegal to give alcohol to a fish. Really? What were they thinking? We did a little research to see if Ohio legislators are really concerned about drunken fish reeking havoc on the town. Turns out, at least one silly law is no longer on the Ohio books.

But, how did the law make it onto the books in the first place? My first thought was of the gold-fish swallowing fad. Maybe the fish were paralyzed or killed with booze to keep them from wriggling. Or, perhaps to add a little extra punch to the dare.

I also read an explanation that the law was enacted in response to a great depression era activity of pouring moonshine into small lakes full of fish to grab a quick meal. Frankly, I find this less likely than the first scenario. It seems more efficient to drink the hooch than try to get floating fish in a lake.

City's Abuse of Power in Revoking Rights to Sell Alcohol

2009-12-04T13:58:00.005-07:00

image by NoiseCollusion

Many alcoholic beverage laws are reactions to a perceived evil, or a nuisance. While the legislature should protect the public, it should not be able to do so at the expense of private rights.

In the case of the Singhs, who own New Grand Save Mart, the city of Stockton revoked their right to sell alcohol at their store due to crime in the market’s parking lot. The market, which has been selling alcohol legally for 60 years, is in a “high crime area, [and] its parking lot has been a center of criminal activity, from loitering, public drunkenness, gambling and narcotics activity to assaults, robberies and homicides.” The police went after the market’s liquor license because they believed it was the initial attraction for the loiterers, which lead to other crimes.

Rather than fight the bad behavior to reduce the crime problems, the city revoked the Singhs’ rights to sell alcohol. For two years the city did nothing to attempt to fix the problems in the market’s parking lot. Instead, the city placed the blame on the Singhs and “sought revocation without regard to what the law required.”

The California Court of Appeals, in an unpublished opinion, decided that the city had overstepped: “violated the dictates of due process, as well as its own municipal code.” The US Supreme Court has held that police power in abating a nuisance must be reasonable, and “not unduly oppressive upon individuals. The [L]egislature may not, under the guise of protecting the public interests, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations…” In this case, the city did not take, or even consider, less drastic steps to abate the problems before revoking the Singhs’ rights.

Governments should fight the real problems of crime, rather than blame alcohol vendors.

It's Just Business

2009-12-02T20:00:00.004-07:00

image by joebeone

A local couple want to buy a café. A grocer wants to acquire a few more stores. A restauranteur wants to purchase several brewpubs. A venture capitalist wants to buy a vineyard and sell some wine. Simple, right? Negotiate a contract for the sale, sign on the dotted line, and accomplish the goal.

What should be simple business transactions become complicated in the alcohol industry. In all the scenarios above, the new owners must be approved by the appropriate alcoholic beverage control board (and the TTB in the case of manufacturers and wholesalers) before they can take over the business. New owners must independently qualify for a license before any alcohol is produced under their ownership. This means going through the initial application process for an alcohol license (including detailed background checks; personal, business, and bank references; and financial statements).

One of the most often overlooked items in business acquisitions is the alcohol license. By the time anyone remembers it, closing is days away. Unfortunately, the new owners will be operating illegally without their own license, and subject to increased taxes and large fines. In the case of the retail license, only state approval is necessary. Manufacturers of alcohol, on the other hand, need both TTB and state approval. This can lead to last minute price re-negotiations and complicated service agreements.

The regulatory maze of alcohol control is a gremlin in alcohol industry business transactions. A brewer unsatisfied with a distributor’s performance cannot simply fire the distributor. A chef cannot simply decide to serve homemade liqueurs. A conglomerate cannot simply purchase a company that owns hotels and restaurants. We will delve into each of the scenarios described above in the coming weeks.

Happy Thanksgiving!

2009-11-27T16:50:00.000-07:00

image by Vik Nanda

If I buy an entire case, I will drink less.

2009-11-25T15:01:00.002-07:00

image by Tyler Howarth

In Pennsylvania, you must buy your six-packs of beer in bars or restaurants with (special off premises licenses), your cases at beer stores (distributors), and your wine and spirits at state run stores. The beer stores and state run alcohol stores were, until recently, closed on Sundays.

If that were not complicated enough, when you buy beer from a store, you must buy an entire case. You can buy six-packs at bars and restaurants that have a special license to sell less than a case for off premises consumption. But, only two six-packs at one time. Of course, you can take the first two six-packs out to your car, re-enter the bar, and purchase two more.

The law has been in place since the repeal of prohibition. Were legislators in Pennsylvania really thirsty after an excruciating day of law making when they came up with this law? Were strong industry groups in favor of the case law? Or, were legislators convinced that PA residents would drink less if they were required to pay for an entire case?

There has been controversy surrounding proposed changes to the law. Bar owners don’t want to lose their monopoly over six-pack sales. Distributors don’t want to have to re-design their stores, adding coolers and having to break up cases. The real worry, however, is that beer will be sold in supermarkets, and in gas stations.

One of the worst parts of the law for consumers and breweries alike is that people are less likely to try a new beer if they have to buy an entire case. The fastest growing section of the craft beer market is seasonals. This leaves consumers in PA without the option to sample the seasonal first, and then purchase a six-pack, or case. Ultimately, if leaves PA consumers with less choice.

A State Ad on Every Bottle

2009-11-20T15:56:00.004-07:00

image by Tony the Misfit

Florida requires that every bottle of beer sold in Florida have “FL” or “Florida” (“and no other state name or abbreviation of any state name”) in eight point font on the label. Usually, this means that most beers brewed in Florida, even when sold in other states, have “FL” on the label. Any bottle of beer for sale in Florida without the “FL” mark is subject to confiscation.

There is a slightly complicated process to apply for a waiver of this particular label requirement. A manufacturer must have a system in place to accurately (90% accuracy) determine 1) where each bottle of beer originated, 2) the state into which each bottle was shipped, and 3) to which distributors each bottle was shipped. The Florida Alcohol Control Division (the “Division”) must approve the system, and will audit the system each year.

Presumably, this requirement is to ensure that the excise tax has been paid on all bottles of beer sold in Florida. I don't know why Florida is special; other states seem to be able to track beer sold in the state without requiring their state name to be on each individual bottle.

One for the Silly Category

2009-11-18T16:56:00.002-07:00

image by Southernpixel

In Alabama, breweries can set up shop in any wet county. Brewpubs, on the other hand, are only allowed to establish a business in a wet county that had a brewery 90 years ago (pre-prohibition), in a building on the National Historic Register that seats at least 80 people.

These three extra conditions on brewpubs prevent brewpubs from being established in Alabama. In fact, it limits brewpubs to five out of the 67 counties (Jefferson, Montgomery, Madison, Mobile, and Russell).

The Olde Auburn Ale House was allowed to open on a technicality. Lee County had never had a brewery. Before prohibition, however, Lee County and the neighboring Russell County had been one county instead of two. Russell County had been the home of a brewery for more than a decade before prohibition. This loop hole allowed a brewpub in Auburn to open.

It also costs more to open a brewpub than a package brewery, or even a bar, in Alabama. Opening a business in a historic building often requires greater financial investments than other locations.

Bars do not have these restrictions. One could open a beer and wine bar without the brewpub restrictions. The restrictions, in that light, seem arbitrary and overly restrictive. Alabama’s brewpub law is like telling a kid he can have desert after dinner and then giving him an unsweetened quinoa bar with prunes. So many restrictions are placed on brewpubs, it almost makes more sense to open a beer bar.

Will coffee stout be illegal?

2009-11-13T13:01:00.004-07:00

image by zappowbang

Today, the FDA has issued a notice to 30 manufacturers stating that it intends to look into the “safety and legality” of their caffeinated alcoholic beverage products. Alcohol manufacturers receiving the notice have 30 days to prove to the FDA that their products are safe and legal.

Caffeine as an additive has only been approved by the FDA in soft drinks in concentrations of no more than 200 parts per million. The manufacturers now must prove that their use of caffeine is safe, or else their products will be pulled from the market.

Under the Food, Drug, and Cosmetic Act, a substance added to food is not considered safe, or legal, unless: 1) the FDA has approved its use, 2) the substance is subject to a prior sanction, or 3) the substance is generally recognized as safe. “For a substance to be [generally recognized as safe], there must be evidence of its safety at the levels used and a basis to conclude that this evidence is generally known and accepted by qualified experts.”

What is the impetus of this investigation, or, rather, demand? According to the FDA, it is the “increasing popularity” among college students of caffeinated alcoholic beverages, and “reports of potential health and safety issues.” The reports, apparently, came from a letter from 18 Attorney Generals and a city attorney that alleged caffeine masks the effects of alcohol and leads to violent behavior.

Keep in mind that any formula for an alcoholic beverage that is not a traditional process, or including traditional ingredients, must be approved by the TTB prior to is production and sale. So, each of these manufacturers’ beverages have already been approved by one federal agency.

Will manufacturers now have to prove that combining any caffeinated substance with alcohol is safe? There is no clear guidance from the FDA, merely a demand that the manufacturers prove the product is safe and legal.

What does this mean for mixed drinks (Irish Coffees, Red Bull and Vodka)? If the FDA decides that it is not safe to combine caffeine and alcohol, will bar tenders no longer be able to make these mix drinks?

What about coffee stouts? Caffeine is not being added by itself, but there are still trace amounts in the beer. Most likely, coffee stouts will not be affected; the beverages in question actually add caffeine to the product (caffeinated beer, for example).

Depending on what the FDA determines on this issue, the potential for very complicated regulation is high.

Another Onion Layer

2009-11-11T16:24:00.005-07:00

The U.S. Food & Drug Administration (“FDA”) implemented the Reportable Food Registry (“RFR”) in September. The RFR was designed in response to recent outbreaks of food-borne illnesses (caused by, among others, peanuts, spinach, and cookie dough). The system requires any facility that manufactures, possesses, or stores food for consumption in the U.S. (a “responsible party”) to advise the FDA if it finds a “reasonable probability that a food item will cause severe health problems to a person or an animal.”

A responsible party is required to submit an initial report with the RFR system and follow up with additional reports as necessary. The FDA will use the information to track the source and recipients of the tainted food article, and issue public notifications about items that pose a risk to the public.

What does this have to do with alcohol manufacturers? Anyone that manufactures, processes, packs, or holds alcoholic beverages is now required to comply with the requirements of the RFR.

Requirement

If a manufacturer (responsible party) determines that a food article is adulterated, and that there is a reasonable probability that exposure to the adulterated food article will cause adverse health consequences (e.g. spinach contaminated with salmonella), then it must report the issue through the RFR within 24 hours after determining that the adulterated food article poses a risk to the public health. This includes any ingredients received from suppliers, or a food article produced by the manufacturer.

A food article is all “articles used for food or drink for man or other animals, chewing gum, and articles used for components of any such article.”

Exemptions

A responsible party is not required to submit a report on an adulterated item if: the adulteration originated at the responsible party’s facility; and the responsible party detected the adulteration before the product was transferred to another person; and the responsible party corrected the adulteration or destroyed the product.

Testing

The RFR necessarily requires testing of all food articles. The FDA requires test methods that are “sufficiently reliable to trigger the reporting requirement.”

What this Means

The chances of a brewery, winery, or distillery having to report an adulterated food article are low. If the facility receives something contaminated from a supplier, and it is a threat to health, it must be reported. If, however, there is a bad batch of alcohol, that poses a health threat, but it never leaves the facility, that does not need to be reported.

The FDA's guidance on the reporting requirements can be found here.

What are your First Amendment Rights?

2009-11-06T15:51:00.007-07:00

First Amendment Allowable Restrictions on Advertising

The Supreme Court has held that the government may ban forms of commercial communication, without violating the speaker’s freedom of speech, if the communication is “more likely to deceive the public than to inform it, or commercial speech related to illegal activity.” See Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557 (1980).

But, commercial speech that is neither misleading, nor related to illegal activities, cannot be banned or restricted unless the Court’s three part test (from the Central Hudson case) is satisfied.

1) the state must have a “substantial” interest
2) the restriction must be directly related to the state’s interest - it cannot be speculative, or theoretically related; and
3) the restriction cannot be excessive - or, if there is a more limited way to meet the state’s interest, excessive restrictions on speech are unconstitutional

The Supreme Court has struck down advertising bans aimed at protecting children that also keep commercial speech from reaching adults. In 2001, the court struck down a Massachusetts regulation that prohibited outdoor advertising of tobacco products within 1,000 fee of a school or playground. See Lorillard Tobacco Co. v. Reilly, 533 U.S. 525 (2001). The outdoor advertising restrictions failed the final prong of the Central Hudson test - the restriction was not a “reasonable fit between the means and ends of the regulatory scheme.”

The state failed to show that the outdoor advertising regulations were “not more extensive than necessary to advance the State’s substantial interest in preventing underage tobacco use.” The Court also stated that because the purchase and use of tobacco products by adults is legal, the interest of tobacco retailers and manufacturers in conveying truthful information to adults must be considered.

“the governmental interest in protecting children from harmful materials . . . does not justify an unnecessarily broad suppression of speech addressed to adults… a speech regulation cannot unduly impinge on the speaker’s ability to propose a commercial transaction and the adult listener’s opportunity to obtain information about products.”

Self Imposed Industry Advertising Codes

In response to the threat of costly FTC investigations, the alcohol industry has devised self regulating advertising codes for its members. The FTC then uses these advertising codes to determine if an advertiser has violated the FTC Act (disseminated advertising that is unfair or deceptive).

One of the requirements in the alcohol industry’s various codes is that 70% of an ad’s viewers must reasonably be over the legal drinking age. Originally, the standard was at 30%. Recently, the FTC has considered raising the requirement to 85%.

Keep in mind, that the requirement is contained in self imposed standards, rather than through legislation or regulations created by the FTC. The standard, however, is imposed on alcohol advertisers in a back-handed way. Rather than directly promulgate regulations, the FTC, essentially, requires advertisers to self impose the requirement.

Many of the alcohol industry’s advertising codes would not pass the Supreme Court’s tests for unreasonable restrictions on commercial speech. But, while the government cannot unreasonably inhibit useful advertising claims aimed at legal purchasers in its attempt to protect children, an advertiser can voluntarily restrict its speech.

This is one of the reasons FTC’s authority and position in alcohol advertising has not been challenged. The FTC has not created legislation on the matter. There is little standing to challenge the constitutionality of a government restriction on speech.

If the FTC does begin to require an 85% standard, this might effectively prevent alcohol advertisers from advertising in certain traditional media formats. If this does become the standard, how long will it be until, like tobacco product advertisers, alcohol advertisers are completely prohibited from advertising on TV or other forms of media? It is a slippery slope, and alcohol advertisers should consider the potential future ramifications of adopting more and more restrictive advertising codes.

Unchallenged Authority

2009-11-04T17:57:00.004-07:00

As we’ve mentioned before, the FTC takes the position that advertisements that may encourage underage or irresponsible drinking are a violation of the FTC Act. This position has never been challenged by an alcoholic beverage advertiser. But, is it a stretch of authority?

What is unfair and deceptive?

The FTC is charged with protecting consumers in interstate commerce from unfair or deceptive statements, acts, and trade practices - not with generally protecting consumers.

More specifically, the FTC may declare an act or practice in unlawful if it “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.” 15 USC § 45(n).

This means that FTC will find deception if there is a representation, omission, or practice that is likely to mislead a consumer acting reasonably in the circumstances, to the consumer’s detriment.

The statement, act, or practice is considered from the perspective of a reasonable consumer. If the ad is targeted to a specific audience, the FTC will determine the effect of the ad on a reasonable (i.e. ordinary) member of that group. So, if the ad is targeted towards pre-school aged children, an ordinary 4 year-old would be the standard.

One of the legal requirements to the FTC’s findings of unfairness or deception is that the statement, act, or practice must be material - it must be likely to affect a consumer’s choice or conduct, leading to injury to the consumer. Also, recall that the practice is not unlawful if it can be “reasonably avoid[ed] by consumers themselves.”

The FTC’s position that advertisements that may encourage underaged or irresponsible drinking is a far stretch from the legal requirements for deceptive and unfair advertising.

Underaged Drinking

The theory is that children are much more easily deceived by advertisers than are adults. Is anything that encourages them to drink alcohol deceptive advertising? Or, unfair advertising because they cannot reasonably avoid drinking alcohol?

While we do not advocate that Mickey Mouse be used to sell alcoholic beverages, what is the line? Could simply seeing an alcohol ad encourage underaged drinkers to drink alcohol?

Even if you concede the point that children are likely to be deceived by alcohol ads, the truth is that alcohol ads do not target children. The target consumer is one that can purchase the alcohol. Much of alcohol advertising is about brands: educating consumers, convincing drinkers to switch to your brand from the competition. The target consumer is one that can purchase the product.

Irresponsible Drinking

What about the nebulous requirement that alcohol advertising not encourage irresponsible drinking? Is the FTC’s position that the ordinary person cannot understand the effects of alcohol? That the ordinary consumer cannot reasonably avoid irresponsible drinking? Or that the reasonable consumer is not aware that he or she should not operate a vehicle of any kind while inebriated? What is it that consumers cannot protect themselves against?

Requirements that correct alcoholic content be printed on labels or in any ads (which is already required by the TTB), or making unlawful ads that show people engaged in illegal acts while drinking, more clearly fall under the FTC’s authority. The vague sentiment against irresponsible drinking, however, does not. Rather than punish the product, why not punish the act and make the consumer responsible for his or her actions?

Self Regulation

In response to the FTC’s positions, industry groups have created self regulating advertising codes. The FTC’s 1999 report on the alcohol industry’s self regulation codes states that “self-regulation is a realistic, responsive and responsible approach to many of the issues raised by underage drinking. It can deal quickly and flexibly with a wide range of advertising issues and brings the accumulated experience and judgment of an industry to bear without the rigidity of government regulation.”

Self regulation also avoids having to satisfy First Amendment standards for restrictions on free speech that legislation or government regulations would otherwise have to meet. When the FTC calls for certain standards to be met in industry advertising codes, is it really an end-run around the First Amendment?

Resources

2009-10-30T17:41:00.004-06:00

image by how can I recycle this

As we've mentioned before, the FTC's takes a large role in alcohol advertising regulation. The alcoholic beverage industries have responded the threat of costly FTC investigation, and potential legislation, by creating industry member advertising codes. The FTC, in turn, determines whether an advertiser has violated the FTC Act (i.e. used deceptive or unfair statements or trade practices) based on purported violations of the industry self-adopted advertising codes.

Below are the various advertising codes and marketing standards:

- the Wine Institute's Code of Advertising Standards

- the Distilled Spirits Council's Code of Responsible Practices for Beverage Alcohol Advertising and Marketing

- the Beer Institute's Advertising and Marketing Code

- the Brewer's Association's Marketing and Advertising Code

Next week we will cover the FTC's role in alcoholic beverage advertising, as well as how it relates to the freedom of speech rights granted in the First Amendment.

Be Careful Where You Advertise

2009-10-28T17:39:00.003-06:00

image by dailyinvention

Alcohol advertising is governed by a combination of legislation and self-regulation in the United States. One of the requirements of alcohol ads is that they may only be placed in media where 70% of the audience is over the legal drinking age. This is why you don’t see ads on college campuses or during morning cartoons.

How easy is this standard to meet? The standard is that 70% of the audience is “reasonably” expected to be above the legal drinking age. Is it reasonable to assume that someone 18-20 would not be watching programing after 9 PM? Is it reasonable to assume that 70% of people watching football games are of legal drinking age?

Generally, up-to-date audience composition data is available for traditional media. What about internet advertising? Already, alcohol advertisers must confirm a viewer’s age before allowing them into the site. Must an alcohol advertiser request composition data from another website it wishes to advertise on? Is it reasonable for an alcohol advertiser to rely on the data compiled by another website? We would argue yes.

The problem with reasonableness standards is that they don’t mean much. Millions of dollars have been lost in court battles over what was “reasonable under the circumstances,” whether in tort, criminal, or civil cases. The FTC does not give opinions on what would or would not be reasonable, and there are no cases on alcohol advertising to determine the line for reasonableness. What is reasonable to me might not be to you. Arguably, if an alcohol advertiser does not have composition data for a website, it will not be able to advertise on that website.

The FTC has hinted at raising the standard to 75% or even 85%. Will the requirement effectively prevent alcohol advertisers from advertising on TV, other traditional media, and even on other websites that do not require the read to enter a birth date before allowing access?

Ambiguity in the Law

2009-10-23T15:38:00.009-06:00

The caption above says: "Pursue your daydreams." It is suggestive of... well, if you don't know, you are probably reading the wrong blog. Some people might blush talking about the suggestion, some might even find the suggestion obscene.

The federal laws for alcohol advertising make it illegal to disseminate any statement regarding alcohol that is “indecent” or “obscene.” What that means is anyone’s guess. The Federal Trade Commission also has its hand in alcohol advertising, prohibiting any advertising which “encourages underage drinking.” Again, what this means is anyone’s guess.

Would the mere sight of alcohol in a store constitute advertising that might induce someone under the age of 21 to drink? When might someone (who is considered an adult in all other matters) be encouraged to drink? Who decides when something is indecent or obscene?

The short answer is that the decision changes depending on the administration, who is in the office on any given day, and what kind of mood the approver or censurer might be in that day. They standards are entirely subjective.

We cannot look to courts to determine the answer; the definitions of obscene and indecent today are not what they were 20 years ago. The standards also change region to region, even from community to community within the same state. It is up to the advertiser to determine what might be deemed indecent, or what might tempt someone under the age of 21 to drink.

The advertiser cannot even seek prior approval for ads. Even if it were possible, the deciding body might (like the TTB with its label approval rights) have the right to retract its approval if the ad is later deemed obscene or indecent, or that it might encourage an underaged person to drink. An alcohol advertiser, most likely working hard to be within the current nebulous guidelines, might spend thousands on a campaign which it must retract based on the idiosyncrasies of the approver.

We do not advocate that Mickey Mouse be used to sell vodka during the Sunday morning cartoons, but, why not provide concrete guidelines?

A war on alcohol?

2009-10-21T18:13:00.003-06:00

The Center for Consumer Freedom’s article, Behind the Neo-Prohibition Campaign, details just how far the Robert Wood Johnson Foundation (RWJF) goes in funding and manipulating the neo-prohibitionist movement.

The stated mission of the RWJF is: “to improve the health and health care of all Americans. Our goal is clear: To help Americans lead healthier lives and get the care they need.”

It seems, however, that RWJF’s real goal is to fund (to the tune of $265 million over just four years), and to create one voice for the neo-prohibitionist movement. The RWJF, under the cover of distorted “research,” propels anti-alcohol policies based on beliefs that alcohol consumption is a dangerous evil.

Nearly every study disparaging alcohol in the mass media, every legislative push to limit marketing or increase taxes, and every supposedly “grass- roots” anti-alcohol movement was conceived and coordinated at the RWJF’s headquarters.
….
The [RWJF] approach seeks to shift blame from the alcohol abuser to society in general (and to alcohol providers in particular). So the RWJF has turned providers into public enemy number one, burdening them with restrictions and taxes to make their business as difficult and complex as possible. The [RWJF]’s message to typical consumers, meanwhile, is that drinking is abnormal and unacceptable. The RWJF seeks to marginalize drinking by driving it underground, away from mainstream culture and public places.

Under the guise of health care, the RWJF pushes its temperance agenda (increased taxes on the industry, elimination of alcohol marketing, and legislative roadblocks to obtaining licenses) through studies, media, lobbyists, and by villainizing alcohol consumers and manufacturers. The goal is to grow the anti-alcohol movement to the same proportions as the anti-drug campaign. Some advertising funded by the RWJF even analogizes beer drinking to heroine use. The “RWJF game plan: Position alcohol as a drug that cannot be resisted by an individual’s own efforts, and therefore requires legal restrictions to save the individual from himself.”

The fact that many of the results from the RWJF funded “studies” are bald fabrications, based on soft numbers, does not create nearly the flashy headlines that the RWJF study conclusions do. Results can be easily manipulated, and, statistics can be slanted in any direction. The source of funding for a study should always considered before any real conclusion may be drawn. The RWJF frequently creates numbers based on conjectures, and funds studies to create their desired result.

Unfortunately, the RWJF is funds a lot of research into alcohol use, consumption, and effects. Even more unfortunate, is that law makers base laws and regulations on the fabricated results, misleading and soft numbers, and the hysteria created by spurious anti-alcohol headlines, rather than on objective assessment of real facts.

For a foundation focused on health care, perhaps their focus should be on the individual, on educating the individual, rather than declaring a war on the product.

How You Can Help Your Local Craft Brewer

2009-10-16T11:24:00.004-06:00

As we mentioned earlier this week, Hansen Beverage Company has demanded Rock Art Brewery stop selling, advertising, or promoting its Vermonster barley wine. Rock Art is fighting back.

Here are some ways you can help support the craft brewer:

- Check out Rock Art's Save Vermonster site

- Join the Facebook group to show your support for the cause

- Sign the online petition to support the case

Perhaps the most helpful thing you can do to show your support is to donate to help pay the costly defense fees necessary to fight Hansen. You can contact Rock Art at ROCKART@PWSHIFT.COM

Here is an interview with Matt Nadeau, Rock Art's owner.

Fighting the Monster

2009-10-14T15:26:00.008-06:00

Matt Nadeau of Rock Art Brewery in Vermont was accused by the Hansen Beverage Company of infringing on its “Monster” trademark, and of diluting the Monster mark. Hansen demanded that Rock Art stop selling, advertising, and promoting its tenth anniversary Vermonster barley wine. Matt is fighting back.

Infringement

To prove infringement of a trademark, Hansen must prove that the Vermonster beer creates a likelihood of confusion with its own Monster energy drink. Basically, by claiming infringement, Hansen is saying that consumers cannot tell the difference between an energy drink and a bottle of beer, that, in at least a few states, may only be purchased at a liquor store due to its 10% ABV.

The use of a mark in the sale of goods is infringement if it is likely to cause consumer confusion as to the source of those goods, or as to the sponsorship or approval of such goods. Courts look to several factors to determine the likelihood of confusion: the similarity of the goods and the marks, evidence of actual confusion, the similarity of the distribution channels, and, the degree of caution exercised by the typical purchaser.

Hansen’s claim is that the “Vermonster” mark looks and sounds so similar to the “Monster” mark that the average consumer would either confuse the two, or think that the Vermonster is owned, sponsored, or affiliated with Hansen.

Consumers are not likely to confuse a can of energy drink with a 22oz bottle of beer in the specialty beer section. The marketing for the two products must necessarily be different due to the Federal Alcohol Administration Act. The two products have completely distinct distribution channels. Rock Art’s label clearly identifies that a Vermont brewery is behind the Vermonster, and not Hansen. In fact, the only thing the two products have in common is that they are liquid consumables.

Brooklyn Brewery produced a product called Monster Ale long before Hansen introduced the Monster energy drink product. Even if Hansen did want to enter the beer market, it would have to think twice about using the Monster name. Brooklyn Brewery would have a much stronger infringement claim.

Another large problem with Hansen’s argument is that “monster” is not a unique term. It is not a brand name like Coca-Cola or Pepsi. We see the term “monster” in books, movies, on cookie labels at coffee shops, cables and home theater accessories, and even on well known job search engines.

Dilution

Hansen’s second claim against Rock Art is that the Vermonster dilutes the “Monster” mark. A dilution claim is a means for a company to keep its product’s mark from loosing its uniqueness. Xerox and Kleenex have spent large amounts of effort and money on dilution suits and marketing to keeping their brand names unique. Which is why, today, we are supposed to say “copy” and “tissue” rather than use the brand name for other similar products. The mark owners do not want the Xerox and Kleenex brands to be diluted.

Unlike an infringement claim, Hansen does not have to prove a likelihood of confusion with a dilution claim. So, theoretically, Monster could sue a bicycle maker for selling a “monster” bike.

To win a dilution claim, Hansen must prove that its mark is famous and that Rock Art’s use of that mark dilutes the distinctive quality of that mark. Hansen must prove that the power of the “Monster” mark is weakened through its identification with dissimilar goods.

Unfortunately for Hansen, “monster” is a generic term used by story tellers, coffee shops, home theater accessory companies, and even job search engines. It is not a unique name as Xerox and Coca-Cola are. In fact, monster.com does not lead consumers to an energy drink, but to a list of potentially better jobs. Clearly, this is a use of the “Monster” mark in commerce, identified with a very dissimilar good.

The law is on Rock Art’s side, and so, it seems, is the media. Matt’s message has had a viral following thanks to twitter. While we believe companies have the right to protect their property, whether physical or intangible, they do not have the right to frivolously assert claims and shut out other companies.

When is it moonshine?

2009-10-09T08:33:00.004-06:00

image by epicbeer

When visiting family in Romania, I am often served throat searing plum brandy. Usually, distilled at home and poured from an unmarked PET bottle. There it is called ţuică; here, it would be called moonshine. Moonshine is simply a generic term for illegally produced distilled spirits. A term deriving from the moonlit conditions necessary to produce the spirit: enough light to see what you’re making, but still under the cover of night.

In the United States home distilling is illegal. It is even illegal to own an unlicensed still, much less a homemade still. Unlike making beer or wine at home, making your own applejack is a felony punishable by up to $10K in fines and 5 years in jail for each offense - not to mention additional state penalties and fines.

The laws are relics from the prohibition years, but safety concerns are still used to justify them. One is not likely to go blind from drinking home distilled spirits if the first run has been discarded. The first run is more likely to contain methanol, which can damage your vision. This is not totally an urban myth. It has, however, been perpetuated since prohibition, when bootleggers used additional chemicals to speed up the fermentation process or increase the alcohol percentage. The key is not to buy moonshine from strangers, or strange characters.

Excise taxes are another likely reason for the continued prohibition on home distilled spirits. The IRS alone collects $13.50 per gallon of distilled spirits. Compare this to the federal excise tax on beer and wine: $0.23 per gallon for cider; between $1.07 and $3.40 per gallon for wine (depending on the alcohol content); and $0.23 or $0.58 per gallon for beer (depending on how much beer the brewery makes). The states also each collect much higher excise taxes on distilled spirits. Or, perhaps, it’s a strong liquor lobby that is unwilling to compete on the open market.

Despite the many hurdles to overcome, there has been an increase in craft distilleries opening in the United States in the last few years. Maybe it’s time for America to also re-look at home distilling.

There are already guides available for the potential home distiller, presumably, in case the laws do change.

The Art of Distilling Whiskey and Other Spirits

The Alaskan Bootlegger's Bible

The Practical Distiller: An Introduction To Making Whiskey; Gin; Brandy; Spirits; &c. &c. of Better Quality; and in Larger Quantities; than Produced by ... from the Produce of the United States

You can even buy a still on-line: Copper Moonshine Stills. Again, presumably in case the laws do change.

Knit one, pearl two. Or, when do I add the yeast?

2009-10-07T17:19:00.003-06:00

image by iLoveButter

From home canned tomatoes and home smoked bacon to hand knitted sweaters, we are on a national homemade kick. So, why not make our own beer and wine?

The federal government and most states allow “adults” to make beer and wine in certain quantities for personal and home consumption, but not to be sold. The states that do specifically allow residents to make their own beer and wine follow the federal guidelines for quantities: 200 gallons per household each year (if there are 2 or more adults in a household), or 100 gallons per household each year (if there is only one adult in the household). That’s a lot of beer and wine.

One thing to note is that the federal guidelines are contained in the Internal Revenue Code, and an adult is defined as: “an individual who has attained 18 years of age, or the minimum age ... established by law applicable in the locality…whichever is greater.” See §26 USC 5053(e) and §27 CFR 25.205. Of course, the federal government through coercion has mandated a minimum age of 21, so adults between the ages of 18 and 21 may not benefit from the home beer and wine making allowances.

Unfortunately for residents of Alabama, Kentucky, and Mississippi making beer and wine at home for your own personal consumption is illegal. In fact, it is illegal in Alabama to even own the equipment to make beer or wine without a license. Does that make everyone with a 20 gallon stock pot in Alabama a criminal? Not quite. There are other uses for such large stock pots; crawdad boil anyone?

Utah only recently passed a law allowing homemade beer and wine for personal consumption. In other states (Iowa, Ohio, Oklahoma, Louisiana, Maine, and Nevada, among others) the laws surrounding home made beer and wine are ambiguous at best. However, enforcement of the anti home vintner and brewer laws are often lax.

For those of you that live in states explicitly allowing you to make your own libations, here are some good sources to help create the best tasting homemade hooch:

Beer:

How to Brew: Everything You Need To Know To Brew Beer Right The First Time

The New Complete Joy of Home Brewing

Designing Great Beers: The Ultimate Guide to Brewing Classic Beer Styles

Wine:

The Way to Make Wine: How to Craft Superb Table Wines at Home

The Joy of Home Wine Making

The Home Winemaker's Companion: Secrets, Recipes, and Know-How for Making 115 Great-Tasting Wines

Can I get a plastic cup with that?

2009-10-02T17:03:00.004-06:00

image by Nanda*

Almost everywhere in the United States it is illegal to drink in public. That is, it is illegal to have an open container of alcohol on public streets and even in parks. Really, isn’t drinking in a bar “in public?” If not, the paparazzi would not be able to capture so many celebrities imbibing to the point of self-destruction.

This is a hold over from the prohibition years. All those merry picnickers in the park with a romantic wine and cheese spread? They’re criminals.

In most places the police have better things to do and simply do not enforce the law. In Key West, for example, it is common to pour any drink into a plastic cup and walk up and down Duval, directly in front of police. It is not legal, but the law is not enforced to the point that bars sell drinks in plastic cups just off of the sidewalk.

In other countries, it is still legal to drink in public. People may take their wine or beer to the park for a picnic without fear of being arrested. Soon, however, the UK may follow in the footsteps of the United States and outlaw drinking in public. Cities are proposing to ban public drinking purportedly to prevent street fights and other hooligan behavior.

We question whether the ban will actually work its intended effect, or just make criminals out of otherwise law abiding citizens. Binge drinking will still occur in the bars, and patrons will still spill out into the streets inebriated, and, perhaps, ready to fight.

Is the law really intended to prevent public drunkenness? Would it not make more sense to make the bad behavior illegal, rather than criminalize a picnic?

No need for a license to sell to the insane.

2009-09-30T15:53:00.003-06:00

image by Kyle May

One needs a state issued alcohol license to sell and serve alcoholic beverages in the United States. Sometimes there are exceptions for pharmacists selling alcohol in accordance with a doctor’s prescription. Most often there are no other exceptions.

Oregon, however, has a specific exception for hospitals, sanitariums, convalescent homes, rest homes, and retirement homes and facilities. Those entities may not only serve, but may also sell, alcoholic beverages to “patients, inmates… [and] residents,” as well as to visitors and guests.

Yes, those kinds of facilities are required to be licensed by the state of Oregon. But, unlike any other alcohol vendor, they are not required to keep strict inventories or accounts of alcohol sold on the premises. Essentially, the facilities are able to operate bars without being licensed. Slow bars, maybe; but, bars nonetheless.

Barriers to alcohol consumption have been taken down for the elderly, infirm, and unstable, but not for the rest of society. Perhaps the logic is that someone else is responsible for the alcohol consumption in state licensed facilities. Why, then, are guests also allowed to purchase alcohol from the facility? This appears to be an example of a good lobby group at work to keep its historic privileges as new laws and restrictions are imposed.

If I ever need to be committed, I’d prefer to be an "inmate" at the sanitarium that serves alcohol. I’m sure my visiting relatives and friends would also appreciate that.

Special Events

2009-09-25T11:06:00.011-06:00

We are at the Great American Beer Festival this weekend - enjoying good beer and good company.

Beer festivals, wine festivals, even renaissance festivals require special alcohol licenses. And, special insurance. Someone has to be responsible, right?

States allow, for limited days and limited hours, organizations to purchase special event licenses for the sale (by the drink only) of liquor, beer, and wine. Colorado's Special Events Permits Code is useful as an example of what many other states allow, and do not allow.

The key to the special events licenses is that an organization may obtain the license, not an individual. An organization must be incorporated in the state in which the special alcohol license will be issued. The event usually must be for social purposes rather than "pecuniary gain."

Most states, like Colorado, also require that an organization prove that existing facilities are either unavailable or inadequate for the intended event. For something like GABF, that is easy to show. Where else can you accommodate 30,000 people and 450 breweries?

But, what about a small wedding or other intimate celebration? Unless the event is planned through a hotel, other incorporated venue, or caterer, it is impossible to obtain a special events alcohol license. Should the organizers of the event incorporate just to hold a wedding or a large 90th birthday party?

The justification for some of the special event license requirements is to keep criminals out of the alcohol business. It also has the effect of making it impossible for individuals to hold larger events without paying some other organization to obtain the alcohol license.

There is also the separate issue of when a "party" turns into an "event" that requires a special events alcohol license. Most of the time, it is unclear. We will deal with this issue in a separate post.