NEW CALIFORNIA WARNINGS FOR ALCOHOLIC BEVERAGES AND CANNABIS PRODUCTS TAKE EFFECT AUGUST 30, 2018, NOW INCLUDING ADDENDUM REGARDING 2014 CONSENT AGREEMENT PARTIES AND PARTICIPANTS

On August 30th new regulations requiring warning signs about Proposition 65 dangers, cannabis exposure and BPA in packaging come into effect.  It’s a trifecta of new compliance requirements, and it’s going to expose California alcohol and cannabis licensees to significant penalties for those that don’t pay attention.

The Proposition 65 warnings – not the warning you are used to!

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Rebecca Stamey-White presents Emerging Issues in Wine Law

On Wednesday, February 18th, Hinman & Carmichael LLP partner Rebecca Stamey-White gave a continuing legal education presentation to the Business Law Section and Intellectual Property Committee of the Palo Alto Area Bar Association (PAABA) on Emerging Issues in Wine Law.  During her presentation, Rebecca gave an overview of the complicated legal history of alcohol beverage regulation in the United States; a primer on tied house law, the three-tier system and investment/investor qualification considerations; and discussed other issues that may affect business and intellectual property counsel working with wineries and other licensee clients. Rebecca covered some of the emerging trends in the industry, including recent legal shifts in the regulation of private and control labels, the growth of unlicensed third party providers (such as online marketers, special event companies and local delivery platforms), the legal complications facing wineries advertising on social media and the growth of the legal cannabis industry and how it may affect California wineries if cannabis is legalized in the state.  The presentation was well-received with a lively discussion from the participants and of course was complemented with winetasting, which always pairs best with wine legal education!

DC Weighs in Strongly on Third Party Marketer Delivery Services

On August 13th the District of Columbia ABC Board issued an Advisory Opinion directed at third party marketers who develop websites and apps that allow consumers to purchase alcoholic beverages from brick and mortar retailers and have them delivered.  The DC Advisory is not directed at any particular company, but there are a number of such third party providers (“TPPs”) opening up in various cities throughout the U.S. this year and the service they are providing is a fairly new one.  No state regulators have weighed in on this particular model, other than the New York State Liquor Authority in its declaratory ruling last fall on Drizly.

The DC ABC Board does allow TPPs to “connect customers through the internet to a licensed off-premise retailer, as long as the transaction to purchase alcoholic beverages occurs between the consumer and the licensed retailer.”   The retailer must retain control over the transaction funds, and must be the one who makes the decision whether to fill the order or not; the retailer also must be the one who stores, packages, fills, and ships the orders.

The DC Advisory cites three other jurisdictions that have issued advisories on TPPs in general – California, New York, and Texas – but ends up going beyond them all in restricting the permissible activities of TPPs.  The following guidelines illustrate this narrow scope:

  • The TPP cannot charge consumers’ credits cards or directly or indirectly collect or receive funds from the consumer.  The Advisory explicitly says it disagrees with the portion of the CA Advisory that allows TPPs to charge the credit card (and pass the full amount of funds to the retailer).
  • The delivery person must be either the retailer, an employee of the retailer, or a “contractor of” the retailer.
  • The sales transaction must occur directly between the consumer and retailer “through a separate written agreement.”
  • The TPP fee cannot “stem from the transaction between the consumer and licensee” – that is, it must either be a flat fee, or else bear no relation to the transactions. It cannot be based on a percentage of the sale price.

The DC ABC Board appears to consider noncompliance with any of the foregoing to constitute (a) a violation by the retailer of the terms of its license (i.e. acting as an agent for a third party who is not a licensee); and (b) a violation by the TPP of DC’s statute prohibiting alcohol sales without a license.

One variation of the TPP delivery models that appears to comply with the DC guidelines is the Drizly model, which received a positive declaratory ruling from the NY SLA last fall.  Drizly is a TPP that markets retailers’ products on its app, and provides the technology necessary for the interface between retailer and consumer via the app, but the consumer’s funds are received directly by the retailer; the retailer or its employees deliver the products; and Drizly’s fees are flat fees rather than a percentage of the sales.

Though not mentioned in the DC Advisory, there is a 1995 Florida regulation that allows certain delivery service providers to act as agents of the consumer and may be helpful to today’s high tech service providers. The California and Texas advisories were directed at TPP models in general, not specifically to smartphone app delivery models, but they provide good guidance for all TPP providers who plan to operate in those markets.  For those looking to service the DC market, the safe harbor just got significantly narrower.

Hard Cider Legislative Update

Hot on the heels of the craft beer revolution, hard cider is experiencing its own renaissance. Small labels are proliferating and widely available at retail locations, and cider bars are opening in major cities across the country. Hoping to capitalize on the craze, even larger producers like Stella Artois and Miller Coors are getting in on the action with Cidre (marketed towards women who would ordinarily choose white wine) and Smith & Forge (marketed towards men who would ordinarily choose beer). With so many new producers and products on the market, the confusing regulatory framework surrounding cider is now in the spotlight. Cider (including perry, or pear cider) has long resided in a legal grey area because it is regulated like wine (as it is made with fermented fruit), but often packaged and distributed like beer. Many consumers also treat cider as a substitute for beer, although this is changing (as Stella Artois is hoping with Cidre). This has led to many practical problems that states and the federal government are wrestling with. Below is an overview of recent legislative issues pertaining to cider – stay tuned for updates.

Federal Regulation

As TTB treats cider like wine for registration and labeling purposes, cider producers must register as a bonded winery, pay tax and follow other rules for winery operation per 27 CFR part 24, including TTB-enforced wine label requirements. However, the FDA, and not the TTB, has jurisdiction over the labeling of “diluted wine and cider” that contains less than 7% ABV.

Further complicating matters, TTB does not always treat cider like wine for the purposes of taxation. Depending on the sugar content of apples and the production technique, cider can be taxed like beer (if ABV is less than 7%), wine (if ABV exceeds 7%), or sparkling wine (if CO2 levels exceed a certain level).  As explained by the United States Association of Cider Makers:

Because many cider producers are small, craft operators, who rely on natural raw materials, they often have little ability to predict and control the precise alcohol content and carbonation level of their product. Meanwhile, cider consumers expect a somewhat high level of carbonation, equivalent to that of most beer.

To address these issues, Senators Chuck Schumer of New York and Patrick Leahy of Vermont are pushing legislation introduced last fall by Earl Blumenauer of Oregon (S 1531/ HR 2921) that would change the Internal Revenue Code to create a specific definition for hard cider (which would include pears) and tax it at the same rate as beer. The definition would also include a higher level of carbonation and align the allowable alcohol-content with the natural sugar content of apples (at least one-half of 1% and less than 8.5% ABV).

California

As mentioned in a previous Booze Rules post, AB 779 now permits a beer manufacturer who produces more than 60,000 barrels of beer per year to also manufacture cider. Until now, anyone who wanted to produce cider in California needed to obtain a winegrower’s license. This is still true for smaller craft producers, as the licensing exception only applies to larger operations. It is yet to be seen whether the small producers will demand equal treatment.

Colorado

HB 1346, backed by AB InBev and Miller Coors, would have allowed companies that make beer and also have an interest in a Colorado distribution company to import cider products directly without having to go through a specially licensed wine and spirits distributors, as cider imports to Colorado do now (because cider is classified as wine, beer distribution companies can’t directly import cider made out of state and sell it to retailers in Colorado). The bill was opposed by small producers and wholesalers who saw the legislation providing an unfair advantage to two wholesalers in the state owned by AB InBev and Miller Coors. Citing complexity and limited time remaining in the legislative session, the bill’s sponsor asked that it be tabled for future debate. More information can be found at the Denver Business Journal.

Maryland

Maryland’s 2014 legislative session included SB 0161, which amended the definition of hard cider to include pears. Hard cider in Maryland is taxed like beer (at 9 cents per gallon) and must be less than 7% ABV.

New York

As mentioned in a recent Booze Rules post, the NYSLA is proposing sweeping statutory revisions intended to revise and streamline the NY ABC law. With respect to cider, direct to consumer shipment rights would be extended to craft cider producers, and any producer with a NY direct shipping permit (including cider producers) would be able to ship products produced by others if those other producers were located within a 50-mile radius of the shipping producer. Additionally, manufacturers and “brand owners” would be able to obtain a permit to sell cider by the glass at special events. Liquor, wine and beer wholesale licenses would include the right to sell cider at wholesale.

 

  1. MISSISSIPPI RISING - A VICTORY FOR LEGAL RETAILER TO CONSUMER SALES, AND PASSAGE OF TITLE UNDER THE UNIFORM COMMERCIAL CODE
  2. California ABC's Cannabis Advisory - Not Just for Stoners
  3. NEW CALIFORNIA WARNINGS FOR ALCOHOLIC BEVERAGES AND CANNABIS PRODUCTS TAKE EFFECT AUGUST 30, 2018, NOW INCLUDING ADDENDUM REGARDING 2014 CONSENT AGREEMENT PARTIES AND PARTICIPANTS
  4. National Conference of State Liquor Administrators – The Alcohol Industry gathers in Hawaii to figure out how to enforce the US “Highly Archaic Regulatory Scheme.”
  5. Founder John Hinman Honored with the Raphael House Community Impact Award
  6. ROUTE TO MARKET AND MARKETING RESTRICTIONS - NAVIGATING REGULATORY SYSTEM CONSTRAINTS
  7. Alcohol and Cannabis Ventures: Top 5 Legal Considerations
  8. ATF and TTB: Is Another Divorce on the Horizon? What’s Going on with the Agency?
  9. STRIKE 3 - YOU REALLY ARE OUT! THE ABC'S STRICT APPLICATION OF PENALTIES FOR SALES TO MINORS
  10. TTB Temporarily Fixes Problem with Fulfillment Warehouse Tax Credits - an “Alternate Procedure” for Paying Taxes & Reporting
  11. CUSTOMERS WHO HAVE HAD ONE TOO MANY - THE FREE TRANSPORTATION DILEMMA
  12. The Renaissance of Federal Unfair Trade Practices - Current Issues and Strategies
  13. ‘Twas the week before New Year’s and the ABC is out in Force – Alerts for the Last Week of 2017, including the Limits on Free Rides
  14. Big Bottles, Caviar and a CA Wine Strong Silent Auction for the Holidays!
  15. The FDA and the Wine and Spirits Industry – Surprise inspections anyone?
  16. NORTHERN CALIFORNIA WILDFIRES: UPDATED REGULATORY AGENCY DISASTER RELIEF RESOURCES AT A GLANCE
  17. NORTHERN CALIFORNIA WILDFIRES: REGULATORY AGENCY DISASTER RELIEF RESOURCES AT A GLANCE
  18. Soon to come to your Local Supermarket– Instant Redeemable Coupons of the digital age!
  19. The License Piggyback Dilemma – If it Sounds Too Good to be True, it Probably is
  20. A timely message from our Florida colleagues on the tied house laws, the three-tier system and the need for reform
  21. ABC Declaratory Rulings – A Modest Proposal Whose Time has Come
  22. More on FDA Inspections - Breweries, Distilleries and Questions
  23. WHY THE FDA IS INSPECTING WINERIES
  24. Senate Bill 378—The Proposed Demise of Due Process for Alcohol Licensees
  25. ABC Enforcement - Trends and Predictions
  26. The Corruption Chronicles – Volume One: A New Hope
  27. New Alcohol Delivery Oversight on the Horizon
  28. Michigan: Canary in the DtC Coal Mine?
  29. California ABC and Federal Credit Laws – Active Enforcement and Lots of Questions!
  30. Big Bottles For The Holidays - The Highest Calling Of The Winemaker's Art
  31. FINAL COMMENTS TO TTB NOTICE 160 DUE ON WEDNESDAY DECEMBER 7TH – WE ARE ASKING THE TTB TO EXTEND THE COMMENT PERIOD AGAIN TO ALLOW FOR INDUSTRY NEGOTIATION AND ALIGNMENT OF INTERESTS
  32. SONOMA COUNTY WINERY USE PERMITS, EVENT RESTICTIONS AND DTC
  33. New TTB Labeling Requirement Regulations: Out-of-State Bottling Is Not Created Equal and Consumers Right to Know Where the Grapes in their Wine Come from is Compromised
  34. Isn't A Written Agreement With A Distributor Worthless In A Franchise State?
  35. Crowd Funding for Alcohol Producers and Retailers – Down the Rabbit Hole with the Tied House laws
  36. Everything you ever wanted to know about the BPA Warning Statement but were afraid to ask
  37. AB 2082 - A Hunting License for Police and a Lethal Weapon for Politicians that Deprives Licensees of Currently Available Due Process Rights
  38. “Better Late Than Never”-- Judge in Illinois Dismisses 201 Sales Tax Cases against Retailers
  39. The Day the Music Almost Died: The Story of the BottleRock ABC Accusations, the ABC Appeals Board and a Victory for a Common Sense Interpretation of the Tied House Laws
  40. The Arsenic in Wine Class Action Dismissal – what it means
  41. Counterfeit or Artisanal Mexican Spirits? Pick your Poison, or your lime wedge
  42. Warning - CA ABC enforcement teams are on the prowl this weekend!
  43. RELIEF AT LAST! ILLINOIS MOVES TO FIX THE SALES TAX LAWSUITS AGAINST OUT-OF-STATE SELLERS BUT PROPOSES TO PENALIZE WINERIES AND RETAILERS THAT SHIP WITHOUT PERMITS
  44. The TTB Speaks on Category Management or, be Careful What you Ask for Because you might Get it!
  45. Hinman & Carmichael LLP Announces the Addition of Jeremy Siegel to its team of top beverage law lawyers
  46. 2016 LEGISLATIVE UPDATES: Part IV
  47. 2016 LEGISLATIVE UPDATES: Part III
  48. 2016 LEGISLATIVE UPDATES: Part II
  49. 2016 LEGISLATIVE UPDATES: Part I
  50. Hinman & Carmichael LLP is Hiring!
  51. John Hinman Presents NBI Webinar on Basics of Alcohol Beverage Law
  52. ABC DISMISSES SAVE MART GRAPE ESCAPE ACCUSATION BUT REFUSES TO ADOPT JUDGE’S DECISION FINDING NO STRICT LIABILITY FOR ABC VIOLATIONS
  53. Speakeasies are still with us, and proliferating!
  54. The War for the Soul of Sonoma County – the Winery Working Group Battle
  55. Santa Claus isn’t the only one coming to town this Christmas!
  56. Arizona's Direct to Consumer Shipping Rules - An Exercise in Complexity
  57. AB 780 - Social Media and the ABC: The California Legislative “Fix” that Fails
  58. Illinois Finally Offers Certainty and Relief for Victims of Sales Tax Lawsuits, but Prompt Action is Required in Pending Cases
  59. A Modest Proposal – Adopt the federal rule on Tied-House liability in California
  60. The Grapes Escaped - Why the First Amendment Matters
  61. Appellate Court Ruling Strikes Blow Against State’s Arbitrary Beer Label Ban
  62. Illinois Attorney General's Office Announces Intention to Dismiss False Claims Act Against Liquor Retailers
  63. Commercial Speech And Alcoholic Beverages - Part III
  64. Commercial Speech And Alcoholic Beverages - Part II
  65. Craft Beverages: Social Media Marketing the Effective and Compliant Way
  66. Commercial Speech And Alcoholic Beverages - Part I
  67. A LAYPERSON LOOKS AT ARSENIC IN WINE
  68. The Biggest Retailer in the World vs. the TABC
  69. Rebecca Stamey-White presents Emerging Issues in Wine Law
  70. Top Beverage Alcohol Law Firm Adds and Elevates Partners
  71. Illinois Qui Tam Lawsuits—Private Enforcement Of a State Claim: A Bonanza For A Plaintiff’s Lawyer And A Rip-Off Of Retailers
  72. BOOZE RULES OF SOCIAL MEDIA: The Retailer Right to Pay Exception
  73. LIONS AND TIGERS AND TWEETS, OH MY!
  74. AB 2004: Brewer's Incremental Parity with Wine Makers
  75. Expanding, Proud Of It, and Wanting to Tell the World
  76. DC Weighs in Strongly on Third Party Marketer Delivery Services
  77. “Visual Links” between Beer, Wine and Spirits Labels and Retailers Ruled Unlawful in California — the tied house laws run amok
  78. Hard Cider Legislative Update
  79. New Marketing Model for New York – Lot 18 and the NYSLA
  80. Sweeping Changes in Proposed NYSLA Bill Include Expansion for Craft
  81. Minimum Resale Price Policies - How to Control Price-Cutters
  82. AB 2130 – Gloves Off?
  83. “Gluten-Free” Labels for Wine, Beer and Distilled Spirits. We’re Still Waiting.
  84. AB 1252: Sanitation Overkill?
  85. Growlers: Not Just for Beer Anymore
  86. California Legislative Roundup 2014
  87. Build It and They Will Come: Craft Products Get New Privileges in CA and TX
  88. AB 1128: Veto of the “Serve a Minor” Felony Penalty Bill, or How to Lose a Winery in One Sale
  89. California Grocers Association v. ABC, Part 2: California Appeals Court Vacates ABC’s Adoption of a Trade Advisory That Correctly Guided Licensee Conduct
  90. California Grocers Association v. ABC, Part 1: California Appeals Court Prohibits Alcohol Sales at Self-Check Out Stands
  91. AB 1128: The “Serve a Minor” Felony Penalty Bill, or How to Lose a Winery in One Sale
  92. The New York SLA and Online Wine Sales: A Work in Progress
  93. California SB 635: What the 4am Bill Really Means for California Communities
  94. Electronic Invoices in California: Welcome to the 19th Century
  95. The History of Amazon and Wine: What Has Changed?
  96. Third Party Marketing Checklist
  97. BOOZE RULES – PROMOTIONAL APPEARANCES AND AUTOGRAPHS
  98. Washington State: Down the Rabbit Hole of the Tied-House Laws