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Updating our post of late last week, the New Jersey Senate last Thursday voted 23 to 13 in favor of Bill S-3172, permitting wineries to ship directly to New Jersey consumers.  Now that it has passed the Senate, the New Jersey Assembly has to vote on the bill by January 9, 2012, the last day of the legislative session.  Under the bill, New Jersey Farm Wineries, New Jersey Plenary Wineries that produce 250,000 gallons or less of wine a year, and out-of-state wineries that produce 250,000 gallons of wine or less each year and that obtain an out-of-state shipping license would be able to ship up to 12 cases of wine per year to any New Jersey consumer.  If passed, New Jersey would become the 39^th state to allow direct shipping.  Check back in early 2012 for an update!

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2011 · All Rights Reserved ·

The general rule with alcoholic beverage licensing is that you cannot be involved in more than one “tier” of the industry, meaning that suppliers and importers can’t be wholesalers, wholesalers can’t be retailers, retailers can’t be suppliers, and vice versa.  The objective, which came about following the repeal of prohibition, was to promote the organized and responsible distribution of alcohol.  It was thought that by keeping the three tiers separate, suppliers would not exert undue influence over retailers, consumers would not be encouraged to over consume, and the societal ills that led to prohibition in the first place would not be repeated.  In the 75+ years since the creation of the three-tier system, dozens of exceptions have found their way into the California ABC Act.  The tiers are no longer entirely separate and some licensees are permitted to hold licenses in other tiers.  For example:

12/18 (Distilled Spirits Importer)/(Distilled Spirits Wholesaler)

17/20 (Wine and Beer Wholesaler)/(Wine and Beer Retailer)

9/17/20 (Wine and Beer Importer)/ (Wine and Beer Wholesaler)/(Wine and Beer Retailer)

There are restrictions on operating under each of these combinations, but the ability to hold them in combination remains a privilege available in California that is not available in many other states.  The “tied-house” rules have implications that extend well beyond the licensing structure. If you are interested in learning more about tied-house issues, feel free to contact any of the attorneys here at Strike & Techel.

 Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·

The deadline has been extended for comments on the Alcohol Tax and Trade Bureau’s (“TTB”) proposed amendment to regulations regarding common winemaking terms used on wine labels and advertisements.  Written comments are now due by March 4, 2011.  The TTB set out their proposed new regulations in Notice 109, “Use of Various Winemaking Terms on Wine Labels and in Advertisements”, published November 3, 2010 in the Federal Register.  The comment period was extended at the request of Napa Valley Vintners (“NVV”).  NVV has formed a subcommittee to research and survey members on the proposed new regulations. 

There are four main proposals set forth by the TTB in Notice 109.  First, the TTB proposes requiring the use of the terms “estate grown,” “estate,” and “estates” to meet the higher threshold definition it currently ascribes to “estate bottled.”  Second, the TTB proposes codifying its policy of only allowing the terms “proprietor grown” and “vintner grown” if 100% of the grapes used in a wine are grown on vineyards owned or controlled by the bottling winery.  Third, the TTB proposes to codify its current position that “single vineyard” may only be used when 100% of the grapes used in the wine come from one vineyard.  Further, it would extend that reasoning to the terms “single orchard,” “single farm,” and “single ranch.”  Fourth, the TTB is considering codifying definitions for the following terms: “Proprietors Blend,” “Old Vine,” “Barrel Fermented,” “Old Clone,” “Reserve,” “Select Harvest,” “Bottle Aged,” and “Barrel Select.”  The TTB made the proposals in an effort to ensure that consumers are not misled by wine labels and advertising.  Should these changes occur the TTB could revoke its approval of previously approved labels.

The Federal Alcohol Administration Act (“FAA Act”) sets forth the regulations for alcohol labeling and advertisements, including wine.  The TTB is responsible for the administration of the FAA Act and the promulgation of regulations thereunder.  The specific wine labeling and advertising regulations can be found in Title 27 of the Code of Federal Regulations.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·

The California ABC actively enforces the alcoholic beverage laws of the state.  We’ve been posting a series of “ABC Violation Round-Up” items discussing some of the violations we have seen in recent enforcement actions.

This week….. failure to observe license conditions.

The Violation: It is common for the ABC to issue a conditional license, particularly when issuing a retail license in an over-concentrated or high-crime area.  A conditional license contains restrictions in excess of the rules typically applicable to a license of that type.  For example, a conditional license might restrict operating hours, prohibit loitering, or restrict the sale of single cans of beer or malt liquor. If a conditional license is issued,  the printed conditions must be available for review upon request by any ABC investigator and  all listed conditions must be followed. Failure to comply with any condition is grounds for ABC discipline, which can include license revocation.

How to Avoid It:  If you have a conditional license, make sure the printed conditions are kept in a secure place at the licensed premises and are available upon request by the ABC or other law enforcement personnel.  Make sure the limitations are reviewed with all of your employees and that they understand the importance of compliance.  Take particular time to review the conditions with employees who have worked at an alcoholic beverage licensee in the past.   Since conditions are license-specific, they may have worked under different restrictions in their prior employment.

Petition to Remove Condition: If a conditional license has been in place for a year or more, and the grounds that led to imposition of a condition no longer exist, it may be possible to petition the ABC to have the condition removed from the license. Our firm routinely files Petitions to Remove Conditions and any of our attorneys can discuss the process with you.

Statute: California Business and Professions Code § 23804

Standard Penalty: 15 day suspension with 5 days stayed for one year.  Penalties vary depending on the specific condition violated.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·

If it’s not already there, move employee training to the top of the resolution list for 2011.  In January, California’s Department of Alcoholic Beverage Control (“ABC”) will begin awarding grants to local law enforcement agencies to continue the implementation of Minor Decoy and Shoulder Tap programs.  The operational period for the grants and this round of programs will run from February 1, 2011 through June 30, 2011.  California law enforcement has been using the Minor Decoy program since the 1980s.  For details on the Minor Decoy program, see our prior post here.  The Shoulder Tap program is a newer program where an underage individual working with the police asks adults near alcohol retailers to purchase alcohol for the individual.  The grants for this cycle of programming range from $2,500 to $10,000.  While employee training is always important, given the likelihood of increased enforcement beginning in February 2011, now is a good time to review, revise, and update policies and make sure employees understand the consequences of selling to minors.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010 · All Rights Reserved ·

This holiday season, thousands of households will be checking “whipped cream” off their shopping lists.  The Alcohol and Tobacco Tax and Trade Bureau, or TTB, wants to make sure those households are putting the right product in their cart come shopping time.  A handful of whipped cream products made with alcohol have popped up over the last year.  The products are typically made with grain alcohol and look like traditional whipping cream.  But they pack an alcoholic punch of around 16% alcohol per volume, or a little over 30 proof.  Such items are not considered food products, but rather alcoholic beverages.  As one manufacturer stated in the FAQ section of its website, they’ve never had the product tested for caloric content as it is “not a food product and is not subject to FDA [U.S. Food and Drug Administration] labeling requirements; it is an alcoholic beverage.” 

The fact that the product is an alcoholic beverage as opposed to a food product means it is regulated by the TTB.  For more information on the TTB’s relationship with the FDA, refer back to our post on caffeinated alcoholic beverages.  As the TTB reminded producers last week, all alcoholic beverage products must abide by federal labeling requirements that prohibit consumer deception.  Product labels for distilled spirits are required to have a statement of the class, type and alcoholic content, along with the government warning required by 27 U.S.C. 215, among other things.  Additionally, such manufacturers must comply with Federal Alcohol Administration Act, or FAA, advertising laws and the various relevant state regulatory laws.  If you are of the legal drinking age and decide to try one of these alcoholic whipped cream products this holiday season, just remember, as always, to imbibe in moderation.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010 · All Rights Reserved ·

We’ve posted about alcohol and social media before, but are revisiting the issue to discuss geo location and location-based advertising.

Websites and mobile apps like Foursquare, Shop Kick, and Facebook Places allow advertisers to identify the location of their audience members and then send an offer based on the consumer’s location.  The marketing potential for alcoholic beverage suppliers and retailers is epic.  Presume a social media savvy consumer, Joe, who checks in everywhere he goes and provides personal information across a variety of web platforms.  Joe likes craft beer, and he likes to drink it in San Francisco’s Haight district.  These geography-based applications will allow the brewers, bars and restaurants that Joe interacts with online and via the geo apps to know when Joe is in the Haight and send him a coupon for a discounted pint of craft beer, expiring in only a few hours. The opportunities for a personalized call to action are profound.

Though the technology is very cool, there are plentiful legal pitfalls. Leaving aside regulatory acronyms all mobile advertisers should heed (e.g. MMA, FCC, FTC, TCPA, CTIA), there are alcoholic beverage law issues with geo targeting. The rules on alcohol discounts vary by state and by the party selling the alcohol.  How will these programs ensure that the underlying offers are legally compliant? How will the geo location sites identify users who are underage or have a chronic drinking problem? What about states where solicitation requires a license, or is prohibited? We expect to see alcohol advertising tiptoe into geo location in 2011, and expect to see regulators follow quickly.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010 · All Rights Reserved ·

A few weeks ago, we wrote about the new permit available to California off-premise consumption retailers that will allow suppliers to come to their premises and conduct instructional consumer tastings.  The ABC just released an industry advisory with additional helpful information.  The industry advisory is available here. 

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010 · All Rights Reserved ·

Effective January 1, 2011, California off-sale retailers will be eligible for a $300 instructional tasting license that will allow wine, beer and spirits suppliers to conduct free consumer tastings on the retail premises.

The instructional tasting license will be available to most off-sale retailers.  Off-sale retailers with a gas station are not eligible unless the retail store is over 10,000 sq. ft.  Premises under 5,000 sq. ft. are not eligible unless 75% of gross sales on the premises are alcohol. This will tend to exclude convenience stores and small markets but will enable small wine and liquor stores to obtain the license.  Permits may also be denied to retailers in “overconcentrated” areas, i.e., locations with more than the statutorily authorized number of ABC licenses.

Retailers obtaining the permit must separate the tasting area with a barrier and post signage prohibiting minors from entering the tasting area. The retailer is responsible for making sure no minors are in the tasting area and no open containers leave the tasting area. Tastings may only be conducted between the hours of 10:00 a.m. and 9:00 p.m., provided the retail license allows sale of alcohol within that time period.

The tastings must be free, and sample size is limited as follows:

Each tasting event can only involve one class of product and one “authorized licensee” tasting per retailer per day, so a single tasting event may not combine beer and wine tastings or multiple suppliers. “Authorized licensees” who may conduct the tastings are California licensed: winegrowers, winegrower’s agents, beer and wine importer generals, beer and wine wholesalers, wine rectifiers, distilled spirits manufacturers, distilled spirits manufacturer’s agents, distilled spirits importer generals, distilled spirits rectifiers, distilled spirits general rectifiers, rectifiers, out-of-state distilled spirits shipper’s certificate holders, distilled spirits wholesalers, brandy manufacturers, brandy importers, California brandy wholesalers, beer manufacturers, or an out –of-state beer manufacturer certificate holders.  

The alcohol tastes are to be served by the “authorized licensee” or her/his agent. The exception is that beer and wine wholesalers, though “authorized licensees”, may not serve tastes unless they hold additional licenses. Wine and spirits for the tasting may be supplied by the “authorized licensee” or bought from the retailer at the original invoiced cost.  Beer cannot be provided by an “authorized licensee”, but may be purchased from the retailer at invoice cost. Unused product must be removed at the conclusion of the tasting.

An “authorized licensee” must be present for the tasting, unless the event has been previously advertised and the “authorized licensee” can’t attend. On that note, the “authorized licensee” can advertise the retailer event in advance, subject to restrictions.  Retailers are also allowed to advertise the events on their own initiative. Special rules apply if the off-sale retailer already has a Type 42 on-sale license for a tasting bar.

For the complete rules, see Cal. Bus. & Prof. Code §23396.6 and §25503.56.

If you would like assistance in applying for the instructional tasting license, please contact licensing paralegal Lindsay McCarthy at lindsay@strikeandtechel.com.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010 · All Rights Reserved ·

New York is the latest state to jump on the alcoholic energy drinks ban-wagon.  On Sunday, November 14, 2010, New York Governor David Paterson and Chairman of the State Liquor Authority Dennis Rosen announced a voluntary agreement with Phusion Products, the makers of Four Loko, to stop shipment of caffeinated alcoholic beverages to New York by Friday, November 19, 2010.  Additionally, the largest beer distributors in New York State agreed to stop selling malt beverages containing caffeine and other stimulants.  Those distributors have until December 10, 2010 to sell off the remainder of their in-state inventory.  The voluntary agreement effectively bans the products from New York State.  In addition, Phusion Products agreed to fund educational alcohol awareness programs concerning binge drinking.  The agreement comes after NYPD sting operations revealed sales of Four Loko products to minors by numerous stores in the Bronx area.

On Tuesday, November 16, 2010, New York Senator Charles Schumer went further, indicating that the Food and Drug Administration was expected to release findings that caffeine is an unsafe food additive for alcoholic drinks.  Were such findings made, the Federal Trade Commission would send letters to manufacturers of such beverages warning that marketing such products could be illegal.  The FDA spokeswoman Siobhan DeLancey did not confirm whether or not such findings were expected or when any findings on the matter would be released. 

Precluding the need for any such findings, however, Phusion Products announced that same day, via their website, that it would remove caffeine, guarana and taurine from Four Loko.  Phusion Products maintains that their products as originally formulated were safe; however, the company felt changes were necessary due to the current regulatory environment.  Phusion Products isn’t the first company to remove ingredients from an alcoholic energy drink in response to regulatory pressure.  In 2008, MillerCoors announced it would remove caffeine, guarana, ginseng, and taurine from its Sparks beverages after voluntary negotiations with various state attorney generals.  Anheuser-Busch InBev underwent a similar reformulation process with its Tilt beverages in 2008.

Imbiblog is published for general informational purposes only and is not intended as legal advice.