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Category archives for “alcohol regulations”

Custom Crush vs. Alternating Proprietorship: Starting a Cheaper Wine Business

October 13th, 2014

There is a long running joke that it is easy to make a million dollars in the wine industry, you just start with two million dollars. Joking aside, there are relatively low cost ways that you can get started in the wine business, without having to invest in planting your own vines and building your own winery. These options allow you to get started making and building your brand without having the considerable overhead of vineyards and winery buildings. Two ways exist of doing this: you can enter into a custom crush relationship with an existing winery to make wine for you, or you can get your own winery license, based at an existing licensed winery, in what is referred to as an alternating proprietorship or AP arrangement. In both cases, you own and develop your own wine brand or brands. We have put together some information on both systems here, and also recommend that you read the full Industry Circular from the Alcohol and Tobacco Tax and Trade Bureau (TTB) on the differences between them.

Custom Crush

In a custom crush situation, you contract with a winery to make wine for you. Even if the grapes that are used for the wine are grown or purchased by you, the produced wine belongs to the winery until state and federal excise taxes are paid and it is sold to another properly licensed entity. The winery gets the label approval and maintains all records and reports. You, as the brand owner, generally obtain a wholesale license so that you can buy the tax-paid wine from the winery and then resell it to wholesalers and retailers, depending on your state licensing. Each state has a different way of managing this. In Oregon, for example, custom crush customers often get a state winery license alongside a federal wholesale license. In California, it is possible for a wholesaler to also obtain a retail license and market wine direct to consumers, although shipping to other states with such a license is limited to the small number of states which allow an out-of-state retailer to ship to their residents.

Alternating Proprietorship (AP)

The TTB will allow licensed premises to alternate between owners, such as in an AP agreement where more than one winery is licensed in the same location. Premises can also alternate between types of licenses, so that a facility can alternate between a winery and a brewery or distillery, for example. In an AP situation, the TTB will allow more than one licensee to operate a winery in the same location, and even for some of the same staff to be used, provided that each owner makes independent decisions evidencing authority and control over the winemaking process. The TTB requires and will review the written AP agreement between the parties, often referred to as “host” and “tenant,” to make sure that each licensee has a bona fide plan to conduct its own winery operations. Although an AP arrangement involves more permitting and recordkeeping than the custom crush approach, it carries some significant benefits. First, the AP tenant is licensed as a winery and will be able to benefit from the rights of a winery licensee in that state. These can include being able to sell direct to consumer in almost all states, operate one or more tasting rooms, and produce or blend other types of alcohol. Second, an AP tenant is likely to be eligible for the small domestic producer tax credit, as production is based only on the AP tenant’s production, which is not likely to exceed 250,000 gallons in the start-up phase (note that there are no minimum federal production requirements for a winery but California, for example, requires at least 201 gallons of wine a year to be made by a licensed winery). It should be noted that winery licensing under an AP agreement may trigger some grape sourcing requirements that you should be aware of, and you will need to research local planning issues more closely in an AP structure than a custom crush relationship.

If you are interested in learning more about custom crush and alternating proprietorships in California or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

California Revises On-Premises Wine & Spirits Consumer Tasting Law

October 1st, 2014

On September 30, 2014, the California Governor signed into law Assembly Bill 520, which revises the state’s laws on consumer instructional tastings at on-premises licensed retailers (i.e., bars and restaurants). Prior to the revision, Cal. Bus. & Prof. Code § 25503.5(c) permitted winegrowers, distilled spirits manufacturers, or an “authorized agent” of those licensees to conduct consumer tastings. The new legislation removes the consumer tasting provisions from Section 25503.5 (which now deals only with tastings for licensees and their employees) and creates a stand-alone consumer tasting statute in new Section 25503.57. The new law contains the same essential provisions as the old law, e.g., the event should be instructional in nature and can include information about the history, characteristics, and methods of serving the product; limited to 3 tastings per person, per day; tasting size limited to ¼ oz. for spirits and 1 oz. for wine.

The new law expands the list of licensees authorized to conduct consumer tastings to include a “winegrower, California winegrower’s agent, beer and wine importer general, beer and wine wholesaler, wine rectifier, distilled spirits manufacturer, distilled spirits manufacturer’s agent, distilled spirits importer general, distilled spirits rectifier, distilled spirits general rectifier, rectifier, out-of-state distilled spirits shipper’s certificate holder, distilled spirits wholesaler, brandy manufacturer, brandy importer, or California brandy wholesaler.” The authorized licensee may also use a “designated representative” to conduct a tasting. The law expressly excludes wholesaler/retailer combination licensees (Type 9/17/20) and limited off-sale wine retailer licensees (Type 85).

The new law also clarifies that both authorized licensees and retailers can advertise the events in advance, subject to the usual restrictions (suppliers cannot list prices or include laudatory statements about the retailer – name and address only – and cannot pay for the retailer’s ads). Only one licensee’s products can be promoted at any one time and a “designated representative” can only represent one licensee at a tasting. The new law takes effect January 1, 2015.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Selling Alcohol to California Consumers Online

September 4th, 2014

Traditionally a customer wanting a bottle of alcohol in California would go to their local package or grocery store to get it or, if they were lucky enough to be in wine country, directly to a winery. In recent years, with consumers actively experimenting and looking for more variety, and with the boom in online shopping generally, consumers have a lot more options to find that elusive boutique wine, craft beer or small batch spirit brand that they have heard about and have been looking for. All of this means that consumers are turning more and more to the internet to find the alcohol that they want to serve at home. A quick Google search of internet alcohol sales in California yields more than 10 million results.

SPIRITS: Only a California Type 21 off-sale general licensee can sell a bottle of distilled spirits direct to consumer (DTC). Although a distiller can host a customer at the distillery to taste the products that are made there, a distiller cannot sell a bottle of spirits to a customer to take home.

BEER: There is a bit more leeway for beer with brewers being able to offer tastings and sell beer to customers. The CA law was revised just this year to make it very clear that a brewer can only sell its own beer to customers, and not beer made by other brewers, unless it gets a retail license. As a matter of policy, the ABC will allow a beer manufacturer to also make an online sale of its beer to a consumer. An on-premises retailer like a restaurant or a bar can also sell beer to customers to take home, and by the same ABC policy can sell online.  Off-sale retailers like grocery stores can sell beer to consumers online.

WINE: As with other alcohol, wine can be sold DTC by off-sale retailers. An on-sale retailer can also sell wine online, under ABC policy allowing online sales by retailers. A winery can also sell wine DTC, both at the winery and online, including through wine clubs. The state also offers two opportunities for the online retail sale of wine without a traditional brick and mortar store. The first of these is with a 17/20 wholesale and retail combination, or a 9/17/20 import/wholesale/retail combination. In both cases, wine can be sold online to customers and indeed can only be sold by direct mail, telephone or the internet from a location which is not open to the public. The license combination is often located right at the warehouse, enabling the licensee to easily pick and pack and ship out customer orders. The 17/20 combination allows the holder to sell directly to retailers as well as consumers and, with the addition of the type 9, the licensee can bring in wine from out-of-state and get it all the way to a consumer without passing through any other licensee’s hands. The second option is more recent and consists of a type 85 license, which gives the licensee the ability to sell wine at retail without the added wholesale or import rights. The chief distinction between the 85 and the 17/20 combination is that the 17/20 licensees have a wholesale license so they are required to make sales to retailers in addition to consumers, whereas the type 85 licensee sells only to consumers.

OUT-OF-STATE SELLERS: If you are a seller of alcohol located out-of-state, only wine can be sold DTC to California consumers and only under certain circumstances. A licensed winery in another U.S. state can get a direct shipper’s permit to sell DTC. For a licensed retailer in another state, the laws are murkier. California has a “reciprocity” statute which only permits out-of-state retail sales from states which allow a California retailer to ship to that state’s consumers. Currently, only thirteen states and the District of Columbia allow such sales. However, the concept of “reciprocity” was criticized by the Supreme Court in its 2005 decision in Granholm v. Heald, 544 U.S. 460, with specific reference to this California law. The law itself has not been challenged and thus the limitation remains on the books.

If you are interested in learning more about direct shipping laws in California or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

Supplier-Funded Instant Rebates No Longer Permitted on Beer in California

August 7th, 2014

On July 18th, California Governor Jerry Brown signed into law Section 25600.3 of the Business and Professions Code, which expressly prohibits beer manufacturers, importers, and wholesalers from offering, funding, sponsoring, or furnishing any type of coupon whereby a consumer gets an instant discount on beer, cider or perry, at the time of purchase. Prohibited coupons include instantly redeemable coupons (IRCs) of all kinds, whether paper, digital or electronic. The bill also prohibits retail licensees from accepting or possessing any such coupon funded by a beer wholesaler or manufacturer, although it does not prevent a retailer from offering its own coupons as set out below.

Per the bill sponsor, beer IRCs have been targets for fraud and have created liability issues for beer suppliers, as well as creating an imbalance in the beer marketplace among major breweries and the burgeoning craft beer market. The bill received major support from MillerCoors and Anheuser-Busch.

Not affected by the law are mail-in rebates, retailer-sponsored coupons, instant coupons for distilled spirits and wine (provided the coupons do not also discount beer), and instant rebates offered by beer manufacturers at the production facility or other premises owned or operated by the manufacturer. This last exception keeps the door open for small brewers licensed with a Type 23 license to offer instant rebates at brew-pubs owned and operated by the brewery.

Suppliers and retailers should be careful with all beer, cider and perry coupons as they may be affected by the new prohibition. We have put together a chart below to show what coupons are caught by the law. You should check each license that is held by the sponsor to see if the law prevents the coupon.

California IRCs  by Alcohol and ABC License Type

            

 

 

Beer Manufacturer (CA or out-of-state)

Beer and Wine Wholesaler

Beer and Wine Importer

Winegrower (if wholly owned by a Beer Manufacturer)

Winegrower (not owned by Beer Manufacturer)

Retailer

Malt beverages (incl. beer)

No

No

No

No

N/A

Yes

Cider

No

No

No

No

Yes

Yes

Perry

No

No

No

No

Yes

Yes

Wine/spirits

N/A

Yes

Yes

Yes

Yes

Yes

Rebate regulations vary from state to state. For more information on coupon laws for wine, beer, and distilled spirits, contact an attorney at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

Wine Liberty for All (Adults) in Massachusetts

July 17th, 2014

Massachusetts wine consumers will soon have equal access to Napa Cabs, Oregon Pinot Noirs, and New York Rieslings, as the commonwealth finally joins the ranks of direct shipping states with the passage of House Bill 294. Effective January 1, 2015, the bill will allow the Massachusetts Alcoholic Beverages Control Commission to issue licenses allowing out-of-state and in-state wineries to ship a limited amount of wine, by common carrier, directly to Massachusetts residents.

Prior to the passage of HB 294, out of state wineries were effectively shut out by the Massachusetts direct shipping law, which purported to allow direct shipping, but included so many restrictions and limitations that it was unworkable. Despite a successful court challenge to the existing law, in which the 1st Circuit Court of Appeals ruled that Massachusetts shipping law was discriminatory, the legislators have been unable until now to pass replacement legislation. In 2013, House Representative Theodore Speliotis introduced HB 294, and with the help of fellow lawmakers and a celebrity endorsement from New England Patriots quarterback-turned-Washington state vintner Drew Bledsoe, the measure was approved and has now been signed by the governor July 11th 2014. Under the new law, all U.S. wineries with a federal basic permit and home state winery license may obtain a license to ship up to 24 cases of wine per year to a Massachusetts resident 21 years of age or older. Like most direct shipper licenses, the Massachusetts license will also require the winery to submit a yearly report to the Commission and Department of Revenue detailing the total gallons of wine shipped, as well as require taxes be paid on all products shipped. The initial license fee will be $300.00 per winery, with a $150 annual renewal fee.

Common carriers delivering in the state are required to have a fleet permit and each vehicle transporting alcohol under the permit must have a certified copy of it in the vehicle, at a cost of $50 per certified copy.

The new law has drawn some criticism because it permits shipments only from U.S. wineries, effectively prohibiting direct shipment of imported wines to Massachusetts consumers. The Massachusetts law is not alone in this restriction; importers and retailers are excluded by the direct shipping laws of some other states, as well. But the law nonetheless represents another step forward in direct to consumer wine sales. Only eight states continue to have a complete ban on winery shipments direct to consumer. If you are interested in learning more about direct shipping law in Massachusetts or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

TTB Loosens the Reins on Malt Beverage Formula Requirements

June 16th, 2014

In an industry ruling issued June 5, the Alcohol and Tobacco Tax and Trade Bureau (TTB) announced that malt beverages made with certain ingredients, including honey and certain fruits and spices, would no longer be subject to formula approval requirements. Additionally, the ruling exempts beer aged in barrels previously used in the production of wine or distilled spirits from the need to get a formula approval. Under the TTB regulations, ingredients and processes used in the production of malt beverages must be deemed “traditional” in order to be exempt from formula and certain labeling requirements. Until the ruling was issued, TTB had a very limited view of what met the requirements for “traditional” malt beverage production.

The ruling stems from a years long battle with the Brewer’s Association, which petitioned back in 2006 and 2007 to exempt certain ingredients and processes from rigorous approval requirements in light of growing experimentation and trends in the beer industry. The petition identified the most popular ingredients and processes, and urged the TTB to broaden their definition of “traditional” brewing methods. Initially, the TTB gave a limited response and exempted beers with added brown sugar, candy sugar or lactose from approval and special labeling requirements. With the new ruling, the options for adding ingredients to standard beers and other malt beverages without needing to go through the formula approval process are greatly expanded. Additionally, there is an opportunity for brewers to request exemption from formula requirements even if their ingredients are not already on the approved list.  A full list of the approved ingredients and processes can be viewed here.

Before the ruling, if flavors were added before, during, or after the fermentation process, that had to be included on the label. Now, the requirement for flavors is that the statement be truthful and in accordance with trade understanding. So for example, a brewer cannot say “ale brewed with cherries” if the cherries were added after the brewing process. To be clear, a statement must still appear on the label to show the addition of any non-standard beer ingredient; the ruling now simply allows for more relaxed processing and avoids the need for formula approval.

The TTB’s expanded ruling of “traditional” brewing ingredients and methods bodes well for brewers and importers looking to get a quick(er) approval for their products and will help speed up all formula approvals due to the reduced TTB workload. Currently approved formulas and labels will not be affected by the ruling.

For questions about brewing requirements, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

More New York Industry Guidance on Limited Availability, Brand Registration and more

June 3rd, 2014

Following our blog post on May 6 (http://strikeandtechel.com/2014/05/06/nysla-expands-suppliers-ability-to-entertain-consumers/), regarding the new advisory from New York covering supplier events, here are some more advisories recently published by New York. The advisories summarized here cover limited availability items and closeout sales, new brand registration rules, growler information for beer and cider, and the use of third party agents for consumer tastings.

Limited Availability Items – #2014-5

New York is one of a number of states around the country which continues to require its wholesalers to post prices for wine and spirits around five weeks in advance of sale. The retail posted pricing (from in-state manufacturers and wholesalers to retailers) is available to any retailer who wants to buy the products at the posted price. In the case of products with limited availability, or in the case of closeout sales with limited inventory, the SLA published an advisory in 2013 and now replaces it with this one.

A limited availability item is one where the New York manufacturer or wholesaler believes that demand will exceed supply. As an exception to the general, and strongly enforced, rule against channel pricing, limited availability items can be allocated differently between on- and off-premises retail buyers. A closeout sale occurs when the manufacturer or wholesaler intends to sell its entire remaining inventory of an older or seasonal item at a price at least 10% lower than the last posted price.

In the case of limited availability items, the SLA is switching over the whole current price posting system to create a new category for these types of items. The new system will allow a manufacturer or wholesaler to indicate how it will allocate limited availability items. The system will also allow a manufacturer or wholesaler to move items to limited availability after prices have been posted if there is an exceptional event like a high score from a trade or consumer publication or a celebrity endorsement. In the advisory, the SLA gives a number of examples of allocation methods which are permitted.

Brand Label Registration – #2014-7

In addition to federal certificate of label approval (COLA) requirements from the Alcohol and Tobacco Tax and Trade Bureau (TTB), New York requires brand labels to be registered with the state for almost all alcoholic beverages. Wines over 7% alcohol which have a COLA do not generally need to be registered. Many of the changes in the new advisory parallel recent TTB changes allowing a number of label alterations without requiring a new COLA.

Brand labels must contain the brand or trade name, the class and type of alcoholic beverage, the net contents and other labeling information required for a COLA. If there is any change to the brand name, the flavor description, age or geographic appellation, or if qualifiers like “kosher” or “organic” are added to a label, a new registration must be obtained. If the alcoholic content of a brand registered product changes more than 1.5%, or 0.5% in the case of a cider or a “wine product,” a new registration must be obtained. Unlike wine, “wine products” can be sold in grocery stores if they meet the state-specific definition, which requires things like carbonation and added flavoring materials.  Registrations are filed by the brand owner, if they are a New York licensee, or otherwise by the New York wholesaler appointed by the brand owner to post prices for and sell the product.

Brand label registrations are valid for a set calendar year depending on the type of alcoholic beverage. Current registrations will remain in effect until they expire and will then be transitioned to the new schedule. There will be additional use-up periods allowed for non-compliant products.

Private labels owned by retailers who sell them exclusively are exempt from price posting requirements. The labels do not have to contain the retailer’s name, but the brand name must belong to the retailer or the retailer must have the legal right to use the name. A retailer can license the brand name from another entity but cannot license a brand name belonging to a manufacturer or wholesaler. The use of terms like “exclusively bottled for” or “exclusive to” cannot be used to try and create a private brand label for a retailer.

Growlers – #2014-11

The advisory covers the sale of beer and cider in growlers by off premise retailers authorized to sell those beverages and confirms that liquor and wine cannot be sold in growlers in New York. In the case of beer and cider, either the consumer can provide the container or the retailer can. Due to local open container laws, retailers serving growlers should provide sealed containers where applicable.

Authorized Agents for Tastings and Bottle Sales – #2014-13

Certain New York licensees, and certain out-of-state suppliers with supplier marketing permits, are allowed to provide tastings in accordance with an advisory published in July 2013. This new advisory confirms that the licensee or supplier can use another manufacturer or wholesaler licensee as its agent for such a tasting. The only exception is that a beer wholesaler is not allowed to act as an agent for a brewer.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

NYSLA Expands Suppliers’ Ability to Entertain Consumers

May 6th, 2014

Suppliers’ ability to run events for consumers in the New York market has been up in the air for a number of years now, and especially since the industry consent orders in 2006. Now, the New York State Liquor Authority (SLA) has given helpful and detailed guidance on how these events can be run.

Supplier Purchases of Alcohol from On-Premise Retailers – #2014-8

This new SLA Advisory covers the ways in which suppliers and wholesalers may purchase alcoholic beverages from on premise retailers for consumers. Under the consent orders issued in 2006, there were three ways in which this could be done: (1) on an incidental basis; (2) for employees or private guests at an invitation-only event; or (3) at a bar spend promotional event open to the general public. The new advisory clarifies the scope of those activities and also expands on them.

Purchases for Consumers on an Individual or Incidental Basis

This is unchanged from SLA’s prior position. It is not intended to be an option for promotional events. It permits a supplier rep to buy themselves a drink and to buy a drink for individual patrons of a retailer.

Business Meetings and Private Events

- Business meetings or business entertainment

This means a gathering of a supplier employees, and/or representatives for entities that do business with a supplier (including other suppliers, distributors and retailers). There must be a legitimate business purpose for the meeting, like discussing product sales, new product introductions etc. It does not include holiday parties or other special occasion events. There are no spending restrictions, or limits on the number of meetings at any particular on premise location. The event must be in a reserved area (can be as little as one table), and at least one supplier employee must be present. Retail licensees and their employees can be invited and an invite can be sent to all employees of a particular retailer.  Media reps can be present.

- Private invitation only events closed to the general public

This is an event not conducted for a business purpose or for promotional purposes. It must be a gathering of invitees who have an identifiable affiliation with a supplier (e.g., a party for employees, vendors or business associates), or a common affiliation or relationship with each other (e.g. journalists, sports teams or non-profit organizations). The language of the advisory makes it clear the group cannot just be a large gathering of a group of consumers or potential consumers without meaningful commonality other than an attempt to market or target a demographic. Invitations must be sent by a supplier to invitees by individual name, each such invitee may bring only one guest. Invites can be by phone, e-mail, letter, in person, etc. Invites cannot be in any type of media advertisement or generic communication to anyone wishing to attend and cannot be sent to a “mailing list” of consumers obtained or created by a supplier. The event must be in a reserved area (can be as little as one table) and at least one supplier employee must be present. Despite the stated non-business and non-promotional purpose of the events, retail licensees and their employees can be invited, as can the media.  A supplier cannot send a general invite to all employees of a retailer or a retail chain.

Promotional Events Open to the General Public – No Invitation Required

Prior to the advisory, a bar spend was limited to $500 (plus 20% tip) and no more than six events per retailer, per year. Now, the limit is $700 (plus 20% tip), and no more than ten events per retailer, per year. A supplier cannot purchase food, non-alcoholic beverages, or anything else from the retailer for such an event. These events can now be advertised, identifying the time, date and location. Invites may also be sent to members of the general public, but the event cannot be restricted to people that received such invitations. There is no longer a need to submit statements after these events; a supplier must maintain a record of each event for two years that includes date, time, location and duration, brands that were purchased, and names of supplier reps or agents who conducted the event.

Promotional Events Open to the General Public – Invitation Required (“Brand Experience Events”)

This is a new category of events which will be extremely helpful for supplier marketing and promotions in New York. The advisory refers to these as “brand experience” events that are “much larger” than bar spend events. At a brand experience event, a supplier can spend up to $10,000 (plus 20% tip), and may purchase alcoholic beverages, non-alcoholic beverages and food. A supplier can also apply to the SLA for advance permission to spend more than $10,000 for an event. A supplier can have up to six such events per retailer per year (whether the event is at a retail premises or whether a retailer caters the event, as catering permits in New York are only held by on premise licensees). Attendees at these events must be invited and an event can be restricted to invitees only. A supplier can invite people individually (by phone, letter, e-mail, in person, etc.), or can also place media advertisements including invitations, generic communications inviting anyone who wishes to attend to register, and “mailing lists” of consumers. A supplier can advertise brand experience events, including date, time and location. Each person registered as an invitee may bring one guest. A supplier must maintain a record of each event for two years that includes date, time, location and duration, brands that were purchased, and names of supplier reps or agents who conducted the event.

Events Where the Supplier or Wholesaler Provides the Alcoholic Beverages

In a very helpful clarification, the new advisory notes that it is only intended to cover occasions where a supplier is purchasing alcoholic beverages from a retailer. It goes on to discuss the fact that a supplier may provide alcoholic beverages for an event without being bound to any of the above exceptions.  Specifically:

- Not-for-profit organizations

A supplier may donate product to a not-for-profit organization for an event which the not-for-profit organization is conducting, either at licensed premises or at an unlicensed location with a permit from the SLA. A supplier can also receive promotional benefits in exchange for the donation to the organization. The only real restriction is that a supplier cannot choose the retailer for the event. The new advisory does not use the same restrictive “bona fide charitable organization” language used in the tasting advisory published in July, 2013. It appears that non-charitable not-for-profit organizations qualify for these events.

- Private/Brand Experience events at unlicensed locations

The new advisory allows a supplier to conduct a private invitation-only event or a brand experience event at an unlicensed location and to provide the alcoholic beverages for that event without having to fit into one of the four event types above. Note that any unused alcoholic beverages must be removed by a supplier after any event under this section.

An appropriate permit must be in place for these events. This means that a supplier should use a retail licensee caterer for such events at this stage. We anticipate a new supplier event permit will available in the future.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Brewing Beer in California

April 14th, 2014

With the explosive growth in craft beers and micro and nano and other really, really small breweries, we at Strike & Techel wanted to put together some helpful tips for anyone looking to brew beer in the state. If you want to make beer commercially, these guidelines will help you work out the best way to start your new business. You will find three ways to get going in the guidelines: small beer manufacturing, beer manufacturing (over 60,000 barrels of beer), and brewpub operations where you get to brew beer and sell it to people in a restaurant or pub setting.

Contact one of the attorneys at Strike & Techel if you have questions about brewing beer in California or other states.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Nevada Signals Intention to More Actively Monitor Trade Practices

March 5th, 2014

Almost three years ago now, as reported on Imbiblog here, the TTB accepted its largest set of offers in compromise ever, for trade practices violations. Some of the biggest names in the business agreed to pay hundreds of thousands of dollars to the TTB even though they denied violating any laws or regulations. The allegations of trade practice violations came from participation by the companies in the 2008-2009 Harrah’s Nationwide Beverage Program. Unlike notable earlier trade practice investigations by the TTB, where there was state participation and a parallel investigation, there were no allegations made against retailers involved in the program, and no fines or penalties assessed against retailers (see for example the 2004-2009 joint investigation by Illinois and TTB into payments made by suppliers and wholesalers to Sam’s Wine & Spirits, Inc., then the largest wine retailer in the country, and its captive third party marketing organization Skyline Marketing, Inc.). The 2011 settlement by TTB was acknowledged to result from a retailer-initiated promotional program. Given that the TTB has extremely limited jurisdiction over alcohol retailers, however, the agency was unable to enforce any allegations against Harrah’s for the promotion. Had the State of Nevada participated in the investigation, it is more likely that charges could have been brought.

Now, the Office of the Attorney-General in Nevada has come out with an open letter to retailers, wholesalers and suppliers of liquor in Nevada in what appears to signal an intention to focus more attention on trade practice issues in the State. The advice contained in the letter is phrased as a “reminder” to the industry of prohibited and restricted activities. It covers the following issues:

-          No loans from wholesalers to retailers of money or other thing of value, no investments by a wholesaler in a retailer, no complimentary furnishing of premises or equipment, and no joint operation of a retail business;

-          Adherence to strict payment terms, with no preference accorded by wholesalers to certain retailers, and with a cessation of sales and monthly service charges in case of delinquency;

-          No substitution of brands without consent, and no delivery of unwanted or unnecessary inventory;

-          No required boycotts of other suppliers;

-          No price fixing down the supply chain by suppliers imposing resale prices on wholesalers, and no profit splitting with the supplier getting a specified portion of the wholesaler’s profit margin;

-          No excessive marketing contributions being required by suppliers of their wholesalers, for promotions outside the wholesaler’s market or beyond the terms agreed by the parties;

-          Strict adherence to the quoted price from suppliers to wholesalers;

-          No discrimination by suppliers among wholesalers (note that Nevada has a franchise law meaning that this refers to discrimination between wholesalers in different parts of the state as only one wholesaler can be appointed in any given market); and,

-          No deceptive trade practices.

The letter refers to concerns with illegal terms or incentives by industry members looking for a competitive edge in the market. It notes that the Attorney General has jurisdiction over these issues and is required by law to take appropriate legal action to enforce the provisions of law setting forth the restrictions above. The Attorney General’s office recognizes in the letter its duty to investigate and prosecute deceptive trade practices in Nevada. Should the type of circumstances in the TTB’s investigation in 2011 arise again, it will be very interesting to see what action is taken by the state in light of this clear signal that it is unlikely to sit by if unlawful trade practices occur in Nevada.

If you have any questions about trade practice issues, in Nevada or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·