Category archives for “Alcohol Legislation”

California ABC Announces 2017 New License Authorizations

August 07, 2017

August in California means one thing to alcohol beverage attorneys – ABC priority license announcements! Every year the California ABC announces which counties are eligible for new on-sale and off-sale general licenses based on population growth within each county. The 2017 figures have been released, and the numbers this year are sure to excite a lot of retail applicants. In addition, recent legislation granted the ABC the ability to authorize new on-sale general licenses in certain counties regardless of population growth. Along with the authorized priority licenses, the ABC will be accepting applications for licenses in the following counties: Napa (5), Inyo (5), and Alpine (4). Applicants for these licenses will need to meet certain restaurant seating capacity requirements.

The Low-Down

General retail licenses authorize the sale of beer, wine, and distilled spirits. They are restricted by county population and must typically be purchased on the open market from an existing licensee, often for a very high premium. Licenses are usually confined to the county in which originally issued, so prices vary drastically across the state. Every year, during the ‘priority application period,’ the ABC accepts new license applications. In addition, they announce a number of inter-county transfer allowances – where an applicant in a priority county can purchase a general license on the open market from a licensee in any other county and transfer it into the priority county.

If you’re in the market for an Off-Sale General Package Store License (Type 21), an On-Sale General Eating Place License (Type 47), or a Special On-Sale General Club License (Type 57) within a county where licenses are available, you should apply. Note that an applicant may be approved for an On-Sale General Public Premises License (Type 48), but only if the applicant is able to establish during the formal application process that there is a substantial public demand that cannot otherwise be satisfied.

County Availability

The maximum number of priority applications the ABC typically authorizes for each category (new on-sale, new off-sale, inter-county on-sale, inter-county off-sale) is twenty-five. The ABC has authorized the maximum number of priority applications in several counties, including Alameda, Contra Costa, Los Angeles, Orange, Riverside, Sacramento, San Bernardino, San Diego, and Santa Clara. For a complete list of license available by county, click here.

Deadlines

ABC District offices will accept priority applications by mail or in person from September 11-22, 2017. If by mail, it must be postmarked on or before September 22nd. If the ABC receives more applications than licenses available, a public drawing will be held at the District office, usually in early-mid October. Successful applicants will have 90 days to complete a formal application.

Fees

Priority application fees are $13,800 for new general licenses and $6,000 for inter-county transfers. A certified check, cashier’s check, or money order must be submitted along with the priority application. Unsuccessful applicants will be refunded the application fee, minus $100 service charge.

Additional Requirements

Residency requirements specify that every applicant must have been a resident of California for at least 90 days prior to the scheduled drawing. For corporations, limited partnerships, and limited liability companies, the 90-day residency clock starts ticking upon registration with the California Secretary of State.

An applicant doesn’t need to have a specific premises secured to apply for a priority license, but if successful, will need to submit a formal application for a specific location (within that same county) within 90 days. The applicant will be required to present a lease with at least a two-year term for the premises. Priority licenses are subject to certain conditions, including a prohibition against transferring the license for two years after issuance.

If you’re interested in applying for a new or inter-county on- or off-sale general priority license, contact an attorney at Strike & Techel.


Off-Premise Retail Caps - Are They Constitutional?

May 02, 2017

A South Carolina law preventing an entity from holding an interest in more than three off-premise retail liquor licenses was deemed unconstitutional earlier this year. The South Carolina Supreme Court accepted an argument by Total Wines & More that the state’s cap on liquor stores had no legitimate basis. Numerous bills had been filed with the state legislature over recent years to have the cap overturned, but without success. The Supreme Court majority, however, found that the state had not offered a persuasive argument on why the restriction was a proper use of its general police power. The only justification provided by the state in the case was that the law was designed to support small businesses, and preserve the right of small, independent liquor dealers to do business, which the court identified as simple economic protectionism.

A number of other states have caps on ownership of retail off-premise liquor licenses, particularly across the Northeast. Similar laws have survived constitutional challenges in states like New Jersey, New Hampshire, and Massachusetts. In these states, justifications for these laws have included reasons such as intensifying the dangers of liquor sales stimulation through retail concentration, preventing monopolies, avoiding indiscriminate price-cutting and excessive advertising, and discouraging absentee ownership. The success of the suit in South Carolina is likely to encourage a new wave of challenges to these laws, as the chain stores focus more efforts on expansion of their model in the region. The ongoing legislative and judicial dispute between Total Wine & More and the State of Connecticut, for example, on the statutory minimum pricing restrictions there, follows a similar path of seeking to open up a market more friendly to chain store liquor retail.

Since the decision was handed down on March 29, the South Carolina Senate has already approved a move to legislate around it, by passing an amendment to the state budget. The change would delay the implementation of the court’s decision for a year, and would require an applicant for a fourth store to pay the equivalent of a year’s gross sales from one of its current stores before it could get the new license. The amendment now passes to the General Assembly for consideration. In the interim, the state has publicly said
that they are accepting liquor store applications in light of the new ruling.

It goes without saying that the elimination of the retail cap in South Carolina is likely to significantly alter the retail liquor landscape there, and that other similar decisions in other states would affect the retail market nationwide. If you want more information on retail liquor licensing, please contact one of the attorneys at Strike & Techel.


Illinois SB 2989: Unlicensed Direct Wine Shippers Beware

September 01, 2016

On Friday, August 26, 2016, Illinois Governor Bruce Rauner signed Senate Bill 2989 (“SB 2989”) into law. SB 2989 amends various sections of the Illinois Liquor Control Act that affect direct wine shipping into Illinois as well as use of third party providers (“TPPs”). This post summarizes the changes made by SB 2989, which take effect on January 1, 2017. The higher license fees, described below, take effect immediately.

Harsher Penalties for Direct Wine Shipping Violations

SB 2989 imposes tougher penalties on direct wine shipping violations. Any person, including wineries, importers, and retailers, who distributes or sells 108 liters or more of wine (144 bottles of wine), 45 liters or more of spirits (5 12/750 cases), or 118 liters or more of beer (more than 28 12-packs of beer) without a license is guilty of a Class 4 felony for each offense, which has a minimum sentence of 1 year. Prior to SB 2989, the first offense was a business offense with a fine of not more than $1,000, and any subsequent offense was a Class 4 felony. For illegal shipments of less than 108 liters of wine, less than 45 liters of spirits, or less than 118 liters of beer, the penalty for the first offense is still classified as a business offense with a fine of not more than $1,000, and the penalty for subsequent offenses remains a Class 4 felony. Furthermore, any person who has already been issued a cease and desist notice from the State Commission could face the same felony charges.

New Disclosure Requirements for Winery Shipper’s Licensees and Reporting Requirements for TPPs

For new and renewing applicants of an Illinois winery shipper’s license, SB 2989 requires disclosure of all third parties authorized to ship the licensee’s wine, excluding common carriers, to the Illinois Liquor Control Commission (“ILCC”). Licensees must submit each third party’s name and address and file a copy of the written appointment of the TPP with the ILCC. SB 2989 provides that a TPP, other than a common carrier, shipping wine on behalf of a winery shipper’s licensee is the agent of the licensee, and that the licensee is responsible for the acts and omissions of the TPP. In turn, SB 2989 requires that each TPP consent to the jurisdiction of Illinois and the ILCC. Furthermore, SB 2989 imposes a new audit requirement on any appointed TPP, which will be required to file with the ILCC, by February 1 of each calendar year, a statement detailing each shipment made to an Illinois resident. The ILCC also has the power to deny any third party appointment if the TPP previously violated the Liquor Control Act.

Higher License Fees

Across the board, SB 2989 increases license fees for manufacturers, wholesalers, and retailers. The fees for a winery shipper’s license for a winery producing under 250,000 gallons annually have been increased from $150 to $350 for the initial application and $200 for an online renewal. The fees for a winery shipper’s license for a winery producing over 250,000 gallons, but under 500,000 gallons annually have been increased from $500 to $1,000 for the initial application and $750 for an online renewal. The fees for a winery shipper’s license for a winery producing 500,000 gallons or more annually have been increased from $1,000 to $1,500 for the initial application and $1,200 for an online renewal.

For more information about the changes to the Illinois direct shipping laws, contact an attorney at Strike & Techel.


California ABC Announces 2016 New License Authorizations

August 15, 2016

It’s that time of year when the ABC announces priority applications, and this year’s numbers are sure to make a lot of retail business owners very happy! Every year the California ABC announces which counties are eligible for new on-sale and off-sale general licenses based on population growth versus existing license ratios within each county. The 2016 figures have been released, and the numbers this year are higher than usual.

What is a Priority application?

General retail licenses authorize the sale of beer, wine, and distilled spirits. They are restricted by county population and must typically be purchased on the open market from an existing licensee, often for a very high premium. Licenses are usually confined to the county in which originally issued, so prices vary drastically across the state. Every year, the ABC announces a ‘priority application period’ when they will accept new license applications. In addition, they announce a number of inter-county transfer allowances – where a business owner in a priority county can purchase a general license from a licensee in any other county and transfer it into the priority county.

If you’re in the market for an Off-Sale General Package Store License (Type 21), an On-Sale General Eating Place License (Type 47), or a Special On-Sale General Club License (Type 57) within a county where licenses are available, you should apply.

Licenses Available by County

The maximum number of priority applications the ABC typically authorizes for each category (new on-sale, new off-sale, inter-county on-sale, inter-county off-sale) is twenty-five. The ABC has authorized the maximum number of priority applications in several counties, including Alameda, Contra Costa, Los Angeles, Orange, Riverside, Sacramento, San Bernardino, and San Diego. For a complete list of license available by county, click here.

2016 Filing Period

ABC District offices will accept priority applications by mail or in person from September 12-23, 2016. If by mail, it must be postmarked on or before September 23rd. If the ABC receives more applications than licenses available, a public drawing will be held at the District office. Successful applicants will have 90 days to complete a formal application for the specific premises.

Fees

Priority application fees are $13,800 for new general licenses and $6,000 for inter-county transfers. A certified check, cashier’s check, or money order must be submitted along with the priority application. Unsuccessful applicants will be refunded the application fee, minus $100 service charge.

Residency Requirements

Every applicant must have been a resident of California for at least 90 days prior to the scheduled drawing. Exact drawing dates vary by District office, but all are in mid-late October. For corporations, limited partnerships, and limited liability companies, the 90-day residency requirement starts ticking upon registration with the California Secretary of State. Individual and general partnership applicants must submit proof of California residency.

If you’re interested in applying for a new or inter-county on- or off-sale general priority license, contact an attorney at Strike & Techel.


Changes to Small Brewery, Winery and Distillery Bonding, Reporting and Filing Requirements

March 11, 2015

The general rule for excise tax reporting for alcohol producers is that returns must be filed semi-monthly (i.e. twice a month). A special exception to that rule allows a small producer, who does not reasonably expect to be liable for more than $50,000 in excise tax in the year, to file quarterly returns. Each small producer is required to make a choice of whether to file quarterly or semi-monthly, with that choice impacting the bonding requirements for the production facility. The less frequent the excise tax payment, the higher the required bond amount. Very small wineries currently benefit from even longer reporting and tax deadlines. Wineries that expect to pay less than $1,000 in wine excise taxes in the coming year may file excise tax returns annually. Operations reports may also be filed annually if the winery doesn’t expect to produce more than 20,000 gallons of wine in any one month in the calendar year.

Now, under recent guidance from the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), small brewers will be forced to file returns quarterly rather than semi-monthly. This change will affect around 90% of licensed brewers. With the mandatory quarterly filing, the required bond is set at a flat $1,000 amount (previously, the bond for a brewer paying $50,000 in excise tax would have been $5,000 if filing semi-monthly, and close to $15,000 if filing quarterly). A brewery filing quarterly tax returns must also file a quarterly report of operations. To further lessen the burden of reporting for both brewers and TTB employees, the information required in the reports has been revised, with two sections removed. To see the full guidance, click here.

In addition to the TTB changes for small breweries, there is also a bill pending in the Senate that could reduce the compliance burden for all small producers. It would exempt small breweries, wineries and distilleries (i.e. not liable for more than $50,000 in excise tax in the year) from all current bonding requirements and would allow any small producer – not just small wineries—owing less than $1,000 a year to file annually. The proposal passed the Senate Finance Committee on February 11, 2015, and is awaiting consideration on the Senate floor. It has not yet been introduced in the House.

If you have any questions about brewery, winery or distillery operations reporting or taxes, contact an attorney at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2015 • All Rights Reserved •


New California ABC Advisory on Merchandising Services by Suppliers

January 07, 2015

In December 2014, the California ABC posted a new Industry Advisory about merchandising services. Free services provided by suppliers to retail licensees, such as stocking shelves, pricing inventory, rotating stock, etc., are prohibited things-of-value under California Business & Professions Code sections 25500 and 25502. However, a number of permitted exceptions are separately provided for in Section 25503.2. The Advisory was posted in response to inquiries and complaints about the scope of permissible activity. When ABC receives multiple complaints about impermissible conduct, investigations and license accusations may well follow, so it would be prudent for suppliers to review the scope of permissible merchandising activities.

Permitted activity varies depending on the type of retailer and the products involved so we created a simple chart below to help keep it straight.

Note that in all cases, any merchandising activities can only be done with the retailer’s permission. In no case can a supplier move the inventory of another supplier, except for “incidental touching” to access the space allocated to the licensee providing the merchandising service.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2015 · All Rights Reserved ·


California Revises On-Premises Wine & Spirits Consumer Tasting Law

October 01, 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 ·


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

August 07, 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 ·


TTB Loosens the Reins on Malt Beverage Formula Requirements

June 16, 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 ·


Clarifications from the ABC on Sweepstakes and Contests in California

October 17, 2013

On June 13, 2013, guests attending ShipCompliant’s “Direct 2013” conference heard from Matthew Botting, General Counsel to the California ABC, on supplier participation in sweepstakes and contests under California’s new law. We’ve previously blogged about the new law here and here.

California Code of Regulations Title 4, Section 106 (“Rule 106”) has always allowed suppliers to “sponsor” a contest, meaning suppliers could give money or otherwise participate when the contest was organized by “bona fide amateur or professional organizations.” Previously, the privilege was limited. Now, the privileges are broader: suppliers (including wineries) can now “conduct” a contest under recently enacted Business and Professions Code Section 25600.1, and conduct or sponsor a sweepstakes under 25600.2. Mr. Botting discussed the different available privileges and their limitations:

* “Conduct” means the promotion is managed and organized by the supplier.
* “Sponsor” means it is someone else’s sweepstakes or contest and the supplier is providing a prize or other sponsorship of the promotion.
* For the time being, suppliers can only sponsor a contest in accordance with the existing Rule 106, which means sponsorship is limited to a contest conducted by bona fide amateur or professional organizations.
* Sponsoring a sweepstakes and conducting a sweepstakes or contest is now covered by Business and Professions Code Section 25600.1 and 25600.2. Sweepstakes or contests cannot require a visit to a licensed premises of any kind, so there must be an alternate method of entry (“AMOE”) if entry forms are available at a licensee.
* Sweepstakes and contests cannot be conducted on retail premises (e.g., a grocery store, liquor store, bar or restaurant). A “retail premise” includes some locations you might not think of, such as: an unlicensed premises if a licensed caterer is present, or at an event held by a nonprofit under a one-day permit. The ABC considers events held with a caterer’s license or a nonprofit one-day permit to occur “at the premises of a retail licensee,” and therefore a supplier may only provide a means of entry at either of these types of events.
* While suppliers may provide a means of entry for the contest or sweepstakes, the contest or sweepstakes may not be conducted at a winery or brewery’s duplicate tasting room.
* A contest or sweepstakes can only be advertised at a retailer if it is advertised at a minimum of three different retailers, and winners shouldn’t be picked at a licensed retail event nor in a tasting room.

The full presentation by Mr. Botting can be seen here (starting at the 5:00 minute mark).

Before conducting or sponsoring any contest or sweepstakes, be sure to consult the relevant laws, Business & Professions Code Sections 25600.1, 25600.2, and, if applicable, Rule 106 (regarding contests), and pay particular attention to whether the supplier involved holds a license that allows it to participate.

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

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


California On Sale General Public Premises (Type 48) Licensees Must Post Human Trafficking Notificat

September 24, 2013

To raise awareness and provide resources to potential victims of human trafficking, California Civil Code Section 52.6 now mandates that, as of April 1, 2013, all On Sale General Public Premises (Type 48) retail licensees, along with certain other types of businesses, must post a notice about human trafficking. The United States Department of State estimates that 14,500-17,500 victims are trafficked into the United States each year, with California as one of the country’s top four destination states.

The notice must be posted in a conspicuous place (near the public entrance or in clear view of the public and employees), measure at least 8.5 inches by 11 inches, and the following message must appear in at least size 16 font:

“If you or someone you know is being forced to engage in any activity and cannot leave—whether it is commercial sex, housework, farm work, construction, factory, retail, or restaurant work, or any other activity—call the National Human Trafficking Resource Center at 1-888-373-7888 or the California Coalition to Abolish Slavery and Trafficking (CAST) at 1-888-KEY-2-FRE(EDOM) or 1-888-539-2373 to access help and services. Victims of slavery and human trafficking are protected under United States and California law.

The hotlines are:

Available 24 hours a day, 7 days a week.
Toll-free.
Operated by nonprofit, nongovernmental organizations.
Anonymous and confidential.
Accessible in more than 160 languages.
Able to provide help, referral to services, training, and general information.”

This notice must be in English and Spanish, and a model notice is available here. Depending on the county, the notice may also be required in another language. A list of those counties is available here.

For more information on this posting requirement, call the Victim Services Unit at the California Attorney General’s Office toll free: (877) 433-9069.

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


Winery Direct Shipping Coming Soon to Montana

August 26, 2013

Starting October 1, 2013, Montana will allow the direct shipment of wine to Montana residents by wineries that hold a Direct Shipment Endorsement. Holders of a Direct Shipment Endorsement may sell and directly ship up to 18 nine-liter cases of wine annually to an individual in Montana who is at least 21 years of age. Any in-state or out-of-state winery that is already registered with the Montana Department of Revenue must pay $50 and file associated paperwork to receive a Direct Shipment Endorsement, and wineries not already registered with the state will be able to simultaneously register with the state and apply for a Direct Shipper Endorsement. Applicants must submit a signed affidavit that they will contract only with common carriers that agree that wine will be delivered only to an individual in Montana who is at least 21 years old and who signs upon receipt of the wine. Records may be due every month and every quarter, and must be held for state inspection for up to three years. All taxes must be paid quarterly and tax records submitted monthly (by the 15th date of the following month) to the Department of Revenue. If a holder of a Direct Shipment Endorsement uses a bonded wine warehouse for fulfillment purposes, the endorsement holder must file a written notice that includes the name and address of the warehouse. The state also requires pre-approval of all wine labels to be shipped into the state. Stay tuned as Montana will likely issue regulations and step-by-step instructions in the coming months.

If you have any questions about shipping wine directly to Montana residents, or residents of any other state, 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 ·


Kentucky Changes Alcohol Beverage Laws – Requires Out of State Shipper’s Licenses for Wine and Spiri

August 14, 2013

With the passage of Senate Bill 13 (“SB 13”), effective June 25, 2013, Kentucky modernized its alcoholic beverage laws in an effort to make them more effective and efficient for manufacturers, distributors and retailers alike. This modernization included consolidating licenses, simplifying the licensing process, and most importantly for out of state wine and spirits suppliers, it created an out of state shipper permit. Prior to the revisions, beer suppliers were required to hold a license to ship to Kentucky distributors but suppliers of distilled spirits and wine were not.

The new Out-of-State Distilled Spirits/Wine Producers/Supplier license application is available here: http://abc.ky.gov/License%20Applications%202013/outofstate.pdf

Three classes of the new Out-of-State Distilled Spirits/Wine Producers/Supplier license are available:

- Out of State Producer/Supplier for 50,000 gallons or more ($1,550 a year/$3,100 for 2 years);
- Limited Producer/Supplier for 2,001 to 49,999 gallons ($260 a year/$520 for 2 years); and
- Micro-Producer/Supplier for 2,000 gallons or less ($10 a year/$20 for 2 years).

Below are some of the other key changes ushered in by the passage of SB 13:

- Consolidates 88 different license types into 44, changing the names of the licenses and fees associated with each, but keeping unchanged the privileges afforded to the licensees. A few examples: A “Vintner” license is now a “Winery” license, a “Blender’s” license was eliminated and its privileges consolidated into the “Rectifier’s” license.
- Allows a two-year license term renewal for manufacturers and wholesalers, in addition to a one-year license option.
- Bundles together several non-quota retail-drink licenses.
- Creates a Transporter license, consolidating six former transportation-related licenses into one.
- Eliminates bond requirements for many license types
- Changes the licensing structure for microbreweries.

For more information on the changes to Kentucky’s alcohol beverage laws, visit the Kentucky Liquor Control’s information page at http://www.klc.org/UserFiles/files/KACOinfosheet.pdf

And of course, you can always call one of the attorneys at Strike & Techel if you have any questions about any of the changes to Kentucky’s alcohol beverage laws, or if you have any general questions about shipping to distributors in any state.

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


TTB Issues Guidance on Social Media Advertising

July 09, 2013

The Alcohol and Tobacco Tax and Trade Bureau (“TTB”) recently released Industry Circular 2013-1, “Use of Social Media in the Advertising of Alcohol Beverages.” Most importantly, TTB dispels any notions that the advertising regulations in 27 CFR parts 4 (wine), 5 (distilled spirits), and 7 (malt beverages) don’t apply to social media, and confirms that those rules “apply to all advertisements… in any media, including social media.” The Circular goes on to address unique issues for advertising within specific social media platforms, including Facebook, Twitter, and YouTube.

TTB regulations define an advertisement as “any written or verbal statement, illustration, or depiction which is in, or calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail, whether it appears in a newspaper, magazine, trade booklet, menu, wine card, leaflet, circular, mailer, book insert, catalog, promotional material, sales pamphlet, or any written, printed, graphic, or other matter accompanying the container, representations made on cases, billboard, sign, or other outdoor display, public transit card, other periodical literature, publication, or in a radio or television broadcast, or in any other media.” Content that qualifies as an advertisement must contain certain information, including a responsible advertiser statement that includes the name and address of the industry member responsible for the ad, as well as the product’s class, type, or distinctive designation. Certain content is also prohibited from appearing in ads, such as statements that are false, that disparage a competitor’s product, or that are obscene or indecent.

TTB’s Circular addresses how the advertising regulations apply to specific social media platforms. Particularly relevant points include the following:

- Facebook: A “fan page” constitutes one advertisement, so mandatory statements need to appear only once on a page, and should appear on the industry member’s “profile page;” rules on prohibited content apply to all material posted by the industry member, including material the industry member re-posts.

- Twitter: Mandatory statements are not required in each tweet, and instead must appear on the industry member’s profile page or equivalent.

- YouTube and other video-sharing websites: Videos that fit the definition of an advertisement must include mandatory statements within the actual video, not only on the page where the video is located.

- Blogs: Industry member blogs qualify as ads to which the rules on mandatory and prohibited content apply.

- Mobile Applications: Apps must include the company name or brand name of the product advertised.

The main take-away from TTB’s Circular is that industry members should monitor all social media channels to ensure that content complies with TTB regulations. Consult TTB’s guidance or call one of the attorneys at Strike & Techel for guidelines on advertising through a particular social media platform.

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


Taking Advantage of the California Sweepstakes and Contests Laws

May 14, 2013

As most alcohol suppliers are now aware, California added two new statutes this year permitting alcohol suppliers to conduct contests and sweepstakes that are open to California residents. California had long been the only U.S. state that prohibited alcohol suppliers from including its residents in these kinds of promotions, but that changed in January. We previously blogged about these new laws here. The new laws offer suppliers new avenues to conduct promotions in California but it’s important to note that only specifically listed types of supplier licensees are authorized to conduct contests and sweepstakes in California. Authorized licensees are: winegrower (Type 2 License), beer and wine importer general (Type 10 License), beer manufacturer (Type 1 License), out-of-state beer manufacturer certificate holder (Type 26 License), distilled spirits manufacturer (Type 4 License), distilled spirits manufacturer’s agent (Type 5 License), distilled spirits importer general (Type 13 License), distilled spirits general rectifier (Type 24 License), rectifier (Type 7 License), out-of-state distilled spirits shipper’s certificate holder (Type 28 License), brandy manufacturer (Type 3 License), and brandy importer (Type 11 License).

The statutes specifically exclude wholesalers (Type 17 and 18 Licenses) and retailers of all types. They also exclude beer and wine importer general (Type 10 License) and distilled spirits importer general (Type 13 License) licensees that hold “only a wholesaler’s or retailer’s license as an additional license.” So, although the laws include Type 10 and Type 13 importers, those licensees would be excluded if they also hold a wholesaler’s license and no other supplier license. Accordingly, holders of the popular 9/17/20 license combination, and holders of 10/17 and 13/18 combinations are not eligible to conduct contests or sweepstakes under the new provisions. The exception to this would be if they hold another specifically included license type, such as a winegrower’s license.

We received a number of calls from suppliers unclear on whether they are included in the new laws so we hope this post helps to clarify. If you have any questions about the contest/sweepstakes laws or other promotional activities, in California or elsewhere, 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 ·


Recent California Statutory Revisions Clarify the Scope of Permissible Retailer Listings by Supplier

April 29, 2013

Effective January 1, 2013, California AB 2349 amended Business and Professions Code Section 25500.1 and repealed Section 25500.2. The two sections (25500.1 and 25500.2) were duplicative in that both permitted suppliers to list the names of two or more restaurants that carry their products. Section 25500.2 included beer, wine and distilled spirits suppliers, while 25500.1 pertained to suppliers of wine and brandy. The newly amended 25500.1 covers suppliers of beer, wine and distilled spirits. In addition to consolidating the two laws, the newly amended Section 25500.1 removes the requirement that the listed on-sale retailers be restaurants - suppliers can now list bars and clubs that do not serve food. The new Section 25500.1 also clarifies that suppliers can list “other electronic media” with the retailers’ names, addresses and websites, which would include the retailers’ twitter accounts, Facebook pages, and other social media forums.

The revised Section 25500.1 parallels the existing and unchanged Section 25502.1, which pertains to supplier listings of off-sale retailers. Section 25502.1 has not been revised to include “other electronic media” as a means to list the retailers’ information, but we believe it is intended to parallel the on-sale provisions of Section 25500.1. Note that the on-sale and off-sale statutes both include restrictions, e.g., the listings may not include retail prices; the supplier must list at least two unaffiliated retailers; and the retailer may not pay for the listing.

For information about these statutes or any other California trade practices questions, please contact any of the attorneys at Strike and Techel.

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


New Rules for Party Buses

January 03, 2013

Assembly Bill 45 became law January 1, 2013, and closes a loophole that held limousine operators, but not charter buses, responsible for underage drinking. The law requires chaperones and ID checks on party buses that carry both alcohol and underage passengers.

The law is also known as “the Studebaker Law,” named after Brett Studebaker, of Burlingame, who died in 2010 when he was 19 years old. Studebaker died in a collision on Highway 101 near San Mateo on his way home from San Francisco, when his car crashed into a barrier and then into another car. He had been drinking for several hours on a party bus, after which he was attempting to drive himself and another man home when the crash occurred. The passenger sustained serious injuries, but survived. Studebaker’s blood alcohol level was reportedly more than three times the legal limit for drivers over the age of 21.

Another incident which may have played a part in getting the bill signed occurred last summer and involved a party bus and a physical altercation between two young women, one of whom was underage. The bus was traveling from a concert at the Shoreline Amphitheatre in Mountain View to Santa Cruz on Highway 17. During the fight, the women fell out of the bus, which was traveling at 45 mph, and one of the women was run over and died.

The new law will require party bus companies to ask customers during booking whether there will be any passengers under 21 years of age and if there will be alcohol served. If so, the customer must designate a chaperone who is at least 25 years old to be present throughout the trip. The chaperone is responsible for making sure the underage passengers aren’t drinking. If at any time a minor is found drinking alcohol, the chaperone must inform the bus driver, and the trip must be terminated. The chaperone is then responsible for making sure the minors that were drinking alcohol get home or safely into the care of their parents.

The law also holds drivers accountable for verifying the age of passengers they suspect to be under 21. If there are underage passengers and there isn’t supposed to be alcohol onboard, the driver must check for alcohol if it is suspected. If the driver finds alcohol, then the trip must be terminated unless the alcohol is locked under the bus.

If party bus companies do not comply with the new law, they could face up to $2,000 in fines and their permits may be suspended for up to 30 days or revoked. Bus drivers and chaperones could face misdemeanor charges for noncompliance.

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


Strike & Techel Welcomes Dan Kramer, Linda Gago-Seco and Manny Diaz

December 12, 2012

Strike & Techel is pleased to announce three recent additions to its alcoholic beverage licensing practice.

Daniel Kramer joins Strike & Techel as a partner. Mr. Kramer represents local and national hotel, restaurant and general retail companies in all aspects of alcoholic beverage licensing, including license acquisitions and transfers, entity structuring, and the preparation of concession agreements, interim management agreements, and restaurant purchase and sale agreements.

Linda Gago-Seco joins Strike & Techel as a paralegal. Ms. Gago-Seco has spent the last 14 years as an alcoholic beverage licensing specialist and previously worked for the California Department of Alcoholic Beverage Control.

Manny Diaz joins Strike & Techel as a consultant. Mr. Diaz previously worked for the California Department of Alcoholic Beverage Control for over 30 years, including as Assistant Director of the Northern Division, before becoming a licensing consultant.

We are thrilled to have Dan, Linda and Manny join us.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·


Sweepstakes Now Permitted in California!

September 25, 2012

On Monday, California Governor Brown signed into law Senate Bill 778, which allows alcoholic beverage suppliers to run contests and sweepstakes in California. California has been the only state in which consumers have not been permitted to enter contests and sweepstakes sponsored by alcoholic beverage suppliers, so the new law is a welcome change for both industry members and consumers. The bill adds Business & Professions Code Section 25600.1, which covers contests, and Section 25600.2, which addresses sweepstakes, and it will go into effect on January 1, 2013. The new code sections will also supersede some of the provisions of CAL. CODE REGS. tit. 4, § 106 (“Rule 106”), which specifically prohibits contests and sweepstakes. An updated version of Rule 106 is expected in 2013.

The new law permits alcohol suppliers, including wineries, breweries, distilleries, and importers to run contests or sweepstakes. A contest is defined as “a game, contest, puzzle, or similar activity that holds out or offers to participants the opportunity to receive or compete for gifts, prizes, gratuities, or other things of value as determined by skill, knowledge, or ability rather than upon random selection. Skill, knowledge, or ability does not include the consumption or use of alcoholic beverages.” A sweepstakes is defined as “a procedure, activity, or event for the distribution of anything of value by lot, chance, or random selection where the odds for winning a prize are equal for each entry.”

The new code sections are very detailed with respect to the requirements to run a contest or sweepstakes in the state, and the following are only a few of the requirements of the new sections:

- Entry or extra chances in a contest or sweepstakes shall not be made available via the purchase of an alcoholic beverage.

- A contest or sweepstakes may not be conducted for the benefit of any retailer.

- Entry forms may be provided through electronic or other media, including point of sale.

- The authorized licensee shall provide at least one means of entry that does not require a visit to a licensed premises.

- Alcoholic beverages may not be awarded as a prize.

- No entry fee may be charged to participate in a sweepstakes.

The new law on contests and sweepstakes has many requirements, so be sure to read the new statutes thoroughly or consult one of the attorneys at Strike & Techel for more details before conducting a contest or sweepstakes.


New North Carolina Beer Franchise Act Now Effective

June 15, 2012

Revisions to the North Carolina malt beverages franchise act became effective yesterday when the Governor signed Senate Bill 745. Last year’s similar bill was stalled after brewers took issues with some of the terms. Senate Bill 745 is a compromise bill that passed the legislature with wide margins. Among the changes, the new law explicitly states that the meaning of “good cause” for termination purposes cannot be modified from the definition set forth in North Carolina law; however, there is a provision in the law that allows brewers that obtain self-distribution approval from the North Carolina Alcoholic Beverage Control Commission to terminate a wholesaler franchise relationship without good cause if “fair market value for the distribution rights for the affected brand” is paid to the wholesaler. Fair market value is determined not as an average price, but must be “highest dollar amount at which a seller would be willing to sell and a buyer willing to buy.” See Senate Bill 745, § 18B-1305(a1). The bill also revises what constitutes good cause, what factors a supplier may consider when approving an assignment, transfer or merger of a wholesaler, treatment of brand extensions, and prohibited acts by suppliers.

The new law also introduces a mandatory mediation requirement. If a dispute arises among a supplier and a wholesaler that is likely to lead to litigation, then the North Carolina Alcoholic Beverage Control Commission can require the parties to submit to mediation in an effort to resolve the dispute. This requirement may arise solely by the initiative of the Commission, or either party to the dispute may request that the Commission mandate the mediation. See Senate Bill 745, § 18B-1309. This new provision makes North Carolina one of the few states with laws on mediation for resolution of conflicts between beer suppliers and wholesalers. California and Maryland are the only other two states that discuss mediation in their beer franchise acts. See Cal. Bus & Prof. Code § 25000.2; Md. Code Ann. § 21-103.

It remains imperative for suppliers to review a state’s laws and regulations when entering into a distribution agreement and also to give oneself enough time for review and negotiation of the agreement, especially in light of the fact that states like North Carolina are further restricting the ability of suppliers and wholesalers to contract around franchise act laws. For more information about distribution agreements and franchise acts, please see our prior post available here or feel free to contact an attorney at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·


New York Wineries Branching Out Under New Law

August 16, 2011

If you didn’t partake in the toast that New York wineries made at the end of July when New York Governor Andrew Cuomo signed bill S4143A into law, perhaps now is the time. The bill, known as the Fine Winery Bill, made a number of revisions to the state’s alcoholic beverage code regarding wineries and farm wineries. A number of the revisions to the law were originally suggested by the industry member group the New York State Grape Task Force in a 2008 report to the commissioner of the Department of Agriculture and Markets. Below is a brief outline of the legal changes:

Branch Offices

The licensing process for up to five branch offices of a farm winery was simplified through the elimination of separate licenses for each branch. Perhaps more importantly, the privileges of the branch offices now mirror those of the farm winery, as opposed to those of an off-premise retailer as was previously the case.

Custom Crush

Farm wineries also gained the legal authority to perform custom crush services. The individual requesting a custom crush must be present during the entire production process and purchase the final wine product.

Charitable Events

Wineries can now obtain an annual permit allowing them to participate in events sponsored by charitable organizations. Previously, participation in a maximum of five events was allowed and the licensing process was more arduous.

Other Events & Tastings

Wineries may now charge for use of their premises and for wine tastings.

Reporting

Farm wineries can now maintain interstate shipping reports on their premises and present them when requested by the State Liquor Authority as opposed to filing those reports semiannually with the State Liquor Authority, thereby reducing reporting expenses.

Elimination of Redundant Licensing

Farm wineries that produce less than 1,500 gallons of wine annually are no longer required to apply for a micro-winery license in addition to their farm winery license.

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


New Law on California Beer Tasting Rooms

August 11, 2011

California beer fans are sure to toast the passage of AB1014, which Governor Jerry Brown signed into law on August 1st. The bill, presented by Assemblymen Fletcher (R) and Chesbro (D), amends California’s Health and Safety Code to exempt beer manufacturers’ beer tasting areas from the strict health and sanitation codes applied to food service locations. Beer manufacturers include those holding a beer manufacturer’s license, an out-of-state beer manufacturer’s certificate, or a beer and wine importer’s general license. Wine tasting rooms have been exempt from such provisions for years. The health and sanitation codes are lengthy and expensive to comply with; thus, compliance costs typically outweighed the benefit of a beer tasting room for many brewers, especially small craft operations. Compliance with the new exemption requires that the only foods served on the premises are crackers and pretzels. Additionally, only beer and “prepackaged nonpotentially hazardous beverages” may be offered. A copy of the revised Section 113789 of California’s Health and Safety code is available here.

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


Food Safety Modernization Act Will Require Industry Members to Implement New Food Safety Standards

July 13, 2011

The Food Safety Modernization Act (“FSMA”) was passed into law early in 2011, and will affect several areas within the alcohol beverage industry. The FSMA is meant to implement a prevention-based model for food safety, and places new requirements on the FDA, food facilities, and importers. Most new guidelines and requirements under the FSMA will not go into effect until at least the middle of 2012, but given the comprehensive nature of the Act, those affected will likely want to begin preparing for the changes in the near future.

The FSMA and related FDA laws include alcohol in the definition of “food,” and the Act applies to “Food Facilities.” A Food Facility includes any “factory, warehouse, or establishment (including a factory, warehouse, or establishment of an importer) that manufactures, processes, packs, or holds food,” not including restaurants and other retail food establishments. Accordingly, many in the alcohol industry stand to be affected by the FSMA, including wineries, breweries, distilled spirits plants, and alcohol beverage distributors, importers, warehouses, and wholesalers.

The first major requirement placed on Food Facilities is a requirement to implement written preventative control plans, including: (1) evaluating the hazards that could affect food safety, (2) specifying what preventive steps, or controls, will be put in place to significantly minimize or prevent the hazards, (3) specifying how the facility will monitor these controls to ensure they are working, (4) maintaining routine records of the monitoring, and (5) specifying what actions the facility will take to correct problems that arise. The final rule implementing this requirement is due 18 months after enactment of the FSMA, which falls in July 2012. Wineries should also be aware that the FDA must implement new mandatory produce standards by early 2013.

Food importers also have new responsibilities under the FSMA. Most notably, importers will have a responsibility to verify that their foreign suppliers have adequate food safety controls in place. The final regulation detailing this provision is due in January 2012. The Act also establishes a program by which third parties can become accredited to certify that foreign foods comply with U.S. food safety standards. This system will be established by early 2013. Other provisions that may affect importers include: a) establishment of a voluntary qualified importer program, which will enable expedited review and entry of foods by those importers; and b) increased FDA authority to deny entry of imported food.

Other key provisions of the FSMA include: increased frequency of inspections of high risk facilities; new standards imposed on FDA for food-testing laboratories; the FDA will have more authority to make mandatory recalls, detain products, and revoke registrations; a model for improved product tracing capabilities; additional record-keeping requirements for high risk foods; and, a plan to strengthen partnerships between FDA and state and foreign agencies.

Look for specific guidelines late this year or early in 2012.

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


TABC Steps Up Enforcement Against Direct to Consumer Wine Shipments by Retailers

June 07, 2011

The Texas Alcoholic Beverage Commission (TABC) issued a press release on Friday, June 3rd advising that it has entered into agreements with FedEx and UPS to halt the shipment of wine by out of state retailers to Texas consumers.

The direct shipping situation in Texas has been in a state of flux for years following the seminal Granholm v. Heald decision, which opened up many states to direct shipment of wine by wineries in 2005. Following Granholm, plaintiffs in a number of states have filed lawsuits to determine the scope of the court’s ruling, particularly whether it applied to retailers or only wineries.

Lawsuits filed in Texas alleged that Texas laws preventing direct to consumer sales by out of state retailers violated the commerce clause of the U.S. Constitution because retailers within Texas were permitted to make such shipments. The cases were decided last year on appeal to the Fifth Circuit Court of Appeals, which ruled that Texas was not required to allow out of state retailers to ship wine to Texas consumers, but could continue to permit in-state retailers to do so.

Following the Court of Appeals’ ruling, the TABC began notifying retailers that shipments to consumers in Texas were not legal. More recently, the TABC has provided FedEx and UPS with the names of out of state retailers who have recently shipped wine to Texas consumers (TABC has not said how it came to identify such retailers.) FedEx and UPS in turn have agreed to notify the listed retailers that such shipments violate the retailers’ shipping agreements with the companies and may lead the shippers to refuse to ship packages for the involved retailers. For its part, TABC says it will contact the retailers directly and may also contact the alcoholic beverage control agencies in the retailers’ home states in cases where the retailers fail to comply with the TABC’s requests.

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


Direct Shipping Enters New Mexico

April 28, 2011

New Mexico Senate Bill 445 was signed by Governor Martinez earlier this month making New Mexico a permit state, as opposed to a reciprocal state, for winery direct shipping purposes. New Mexico was the last remaining reciprocal state and the change brings the state into compliance with the U.S. Supreme Court’s Granholm v. Heald ruling in 2005. The law becomes effective on July 1, 2011. The new law only applies to wineries, not retailers. It allows them to ship up to two nine-liter cases of wine per month to a New Mexico consumer, provided the winery has the required shipping permit. The permit will have an annual fee of $50 and be valid from July 1 to June 30 of the following year.

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


Have Wine, Will Travel

February 25, 2011

It is called everything from the bombastic “corkage” to the everyperson “BYOB,” but it means the same across all fifty states and beyond: bringing ones own bottle of alcohol to a restaurant for consumption with ones meal. Not every state allows the practice, but Virginia is on the brink of joining the list of states where brown-bagging is permissible. On February 8th, the Virginia Senate passed SB 1292 (27-Y, 13-N) and the bill passed the House on February 22nd (78-Y, 18-N), leaving only Governor Robert McDonnell’s signature to make it official. The bill was introduced by Republican state Senator Jeffrey McWaters, who argued passage of SB 1292 would help boost Virginia’s restaurant and wine industries. SB 1292 will add Section 16 to § 4.1-201(A) of the Code of Virginia, thereby allowing licensed restaurants to permit customers to consume legally acquired wine on a restaurant premises and allowing the restaurant to charge a corkage fee if desired.

Each state that allows BYOB has its own unique set of regulations. Virginia’s neighbor to the South, North Carolina, has a “brown-bagging” permit, which allows customers in permitted establishments to bring and consume on the premises “up to eight liters of fortified wine or spirituous liquor, or eight liters of the two combined.” Restaurants, hotels and community theaters are only allowed such permits if they are located in a county where the sale of mixed beverages has not been approved. Eight liters of fortified wine, which in North Carolina is defined as 16-24% alcohol by volume, or distilled spirits, may seem like an exorbitant amount of alcohol. However, unlike Virginia’s SB 1292, North Carolina’s law is not about enjoying a glass of ones own wine with dinner, but rather about consuming a gin and tonic at ones local haunt when such establishment is not allowed by law to sell gin. Attending “liquor locker” provisions in North Carolina allow patrons to store their brown-bagged alcohol in individual lockers at licensed facilities, so that they can drain their provisions over time. Traditional bottle opening fees do not apply in such situations, rather the restaurant makes money selling the mixer used by the patron, commonly referred to as a “set-up.”

The North Carolina arrangement would be defined as an illegal “bottle club” in California. California only allows people to bring their own alcohol to a licensed premises, and one can only bring alcohol that could have been sold by the licensee at the establishment. So if a restaurant only sells beer and wine, one cannot bring in vodka. Also, in California any unfinished portion of the BYOB must be left at the restaurant, so if you bring a bottle of expensive wine to a restaurant, bring enough friends to drink it all!

As we head into the weekend, we’ll leave you to ponder these burning questions: Is it counterintuitive for California to forbid people from bringing wine to restaurants that do not serve it, but permit patrons to bring wine to restaurants with the exact same bottle available for sale on their wine list? Also, who pays more in BYOB alcohol costs—North Carolina patrons bringing in eight liters of distilled spirits or New York patrons (blind item) dining at a well known restaurant with a $90 corkage fee?

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


TTB Considers New Grape Varieties for American Wines

February 10, 2011

Only a grape variety name approved by the TTB may be used as a varietal “type” designation for American wine. The TTB is considering adding more than 50 names to their list of approved varietals to catch up with the explosion of U.S. wines made from obscure grape varietals. The full list of varietals up for public comments is here.

Some of the proposed varietals are not so obscure (e.g. Blaufränkisch, Carignan, Garnacha, Grenache blanc, Grüner Veltliner, Lagrein, Vermentino), but others are extremely unusual, particularly the submissions from the Minnesota Grape Growers (Louise Swenson, Sabrevois, St. Pepin), which highlighted the cold-weather resiliency of the grapes

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


California ABC Stakeholder Meeting

February 08, 2011

Last week, partners Barry Strike and Kristen Techel attended the California ABC’s annual Stakeholder Meeting in Sacramento. The meeting covered everything from furlough status and budget to planned action items for 2011 and 2012. Stakeholder working groups were established to further investigate and provide recommendations to the new ABC Director, Jacob Appelsmith. The four groups will cover issues related to Third Party Providers, Brands and Trademarks and other Things of Value, Licensing Process and Industry Training, and Public Convenience or Necessity.

Interestingly, during the meeting Matt Botting, General Counsel to the ABC, indicated they had not seen many applications for the new tasting permit for off-sale retailers, which we originally discussed here and here. If you’re interested in learning more about or applying for the new instructional tasting license, please 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 ·


Extended Comment Period on TTB Notice 109: Use of Winemaking Terms

January 14, 2011

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 ·


2011 New Year’s Resolutions: Employee Training on Sales to Minors

December 17, 2010

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 ·


Update on New Sampling Rules at Retail Stores in California

December 07, 2010

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 ·


Alcoholic Energy Drinks are Out, What’s Next?

December 06, 2010

At this point, we’ve all recovered from the landslide ban on alcoholic energy drinks that crossed the U.S. in November. We covered the opening act, here, when Michigan, quickly followed by Washington, banned the sale of alcoholic energy drinks. New York then reached an agreement with certain suppliers and distributors that halted caffeinated malt beverage sales in that state (review our coverage here). After that, the U.S. Food and Drug Administration (FDA) issued warning letters to four caffeinated alcoholic beverage companies. The letters warned those producers that caffeine added to their malt alcohol beverage products constitutes an “unsafe food additive.”

Substances added to food products, which includes beverages, are considered food additives and are subject to review and approval by the FDA, unless the substance is specifically excluded from the definition of “food additive,” has been sanctioned by the FDA, or is recognized by qualified experts as adequately safe when used as intended. This third category is referred to as Generally Recognized as Safe or GRAS.

As many know, the FDA isn’t the usual stop for federal regulation of alcoholic beverages, but rather the Alcohol and Tobacco Tax and Trade Bureau (TTB) which operates under the Federal Alcohol Administration Act (FAA Act). In this instance, the FDA’s statements meant that the beverages in question were considered adulterated under the Federal Food, Drug and Cosmetic Act (FFDCA). The TTB takes the position that adulterated beverages, even if their formulas and labels have been approved by the TTB, are mislabeled under the FAA Act. This means that shipping and selling such beverages violates the FAA Act, which can result in license revocations and misdemeanor penalties. As the TTB stated, “…each producer and importer of alcohol beverages is responsible for ensuring that the ingredients in its products comply with the laws and regulations that FDA administers. TTB’s approval of a label or formula does not imply or otherwise constitute a determination that the product complies with the FFDCA, including a determination as to whether the product is adulterated because it contains an unapproved food additive.”

Producers of alcoholic energy drinks likely thought their products fell under the GRAS status. The FDA’s announcement ended that assumption. The question is, what other assumptions might it have ended? Alcoholic beverage producers have been using caffeine in their products for years, the most popular being coffee. In the FDA’s Questions and Answers section about the warning letters, it states that the letters are not directed at “alcoholic beverages that only contain caffeine as a natural constituent of one or more of their ingredients, such as a coffee flavoring.” However, in that same section the FDA also stated that, “Other alcoholic beverages containing added caffeine may be subject to agency action in the future if the available scientific data and information indicate that the use of caffeine in those products is not GRAS. A manufacturer is responsible for ensuring that its products, including the ingredients of its products, are safe for their intended use and are otherwise in compliance with the law.” Further, the TTB stated that if requested by the FDA, it would share “formulas for beers containing added caffeine that are approved under 27 CFR Part 25 [TTB regulations].” In the upcoming months, and perhaps years, it will be interesting to see how the GRAS standard is applied to other alcoholic beverages containing some form of caffeine.

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


California Sampling at Retail Stores

November 22, 2010

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:

Sample Limitations
Beer 8 oz. per person per day
Wine 3 tastings per person per day, 1 oz. per sample
Spirits 3 tastings per person per day, ¼ oz. per sample

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 .(JavaScript must be enabled to view this email address).

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


New York State Seals the Fate of Four Loko Alcoholic Energy Drinks

November 17, 2010

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.


Alcoholic Energy Drinks Banned in Michigan and Washington

November 12, 2010

In the span of a week, both Michigan and Washington have banned alcoholic energy drinks. On November 4, 2010, the Michigan Liquor Control Commission issued an Administrative Order rescinding its approval of all alcoholic energy drinks, effectively banning them in the state of Michigan. Manufacturers have 30 days from the date of the Order to remove their products from Michigan stores. The ban covers a total of 55 drinks offered by nine different suppliers. According to supporters of the ban, the high alcohol content—around 12% for a 24-ounce can, compared to 4-5% for a 12-ounce beer—combined with flashy packaging, flavors such as grape and watermelon, low prices (around $2 to $5), and the combination of stimulants such as caffeine, taurine, and guarana, along with alcohol, make the drinks dangerous to teenagers and college-aged students. As the Commission’s news release stated, “The Commission believes the packaging is often misleading, and the products themselves can pose problems by directly appealing to a younger customer, encouraging excessive consumption, while mixing alcohol with various other chemical and herbal stimulants.”

On November 10, 2010, at the request of Governor Chris Gregoire, the Washington State Liquor Control Board approved an emergency rule banning the sale of alcoholic energy drinks. The emergency ban will remain in effect for 120 days, during which time the Liquor Control Board will work to make the ban permanent. The Washington ban was partially spurred by nine Central Washington University students who became ill after consuming alcoholic energy drinks. As Gov. Gregoire stated in the Liquor Control Board’s press release, “By taking these drinks off the shelves we are saying ‘no’ to irresponsible drinking and taking steps to prevent incidents like the one that made these college students so ill.”

Michigan and Washington are not the only states with some form of limitation on alcoholic energy drinks. Both Utah and Montana reclassified such beverages as liquor, thus restricting the locations where such items can be sold. In 2009, the U.S. Food and Drug Administration announced it would look into the health risks associated with caffeinated alcoholic beverages. The FDA has never approved caffeine as an additive to alcoholic beverages, although it has approved it as an additive to soft drinks. Beverages without FDA approval can still be lawfully marketed, but their use must be subject to a prior sanction or deemed Generally Recognized As Safe, or GRAS. Given the extensive media coverage surrounding beverages containing caffeine and alcohol, it appears likely that these products will continue to attract regulatory attention.

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


The Votes are In: Washington Remains a Control State

November 09, 2010

There was a lot of shake-up in Congress this election season, but things stay the same for Washington’s alcoholic beverage system. Washington remains one of 18 “control” states, which hold broad reign over the wholesale distribution of alcohol. Further, Washington remains one of 12 states that are involved in the retail distribution of alcohol.

Initiatives 1100 and 1105 would have privatized the state’s liquor distribution and sales system. Initiative 1100 would have made sweeping changes to Washington’s alcoholic beverage laws, not only privatizing liquor sales, but eliminating many of the state’s distribution regulations, including price controls, restrictions on volume discounts, and prohibitions against paying on credit for beer and wine sales. Initiative 1105 was less expansive. It called for a privatization of the liquor sales systems, but left most of the distribution laws regarding beer and wine intact, although it relaxed such distribution laws related to liquor.

The two campaigns were at odds with each other. Initiative 1100 was backed largely by Costco Wholesale Corp., while Initiative 1105 was backed mostly by beer and wine distributors. Unions, including the Washington State Council of Firefighters, came out against both initiatives, arguing they would result in more access to alcohol throughout the state and greater public safety concerns.

Both measures failed, though it was a close race for Initiative 1100. Initiative 1100 received a 53.21% “No” vote to 46.79% “Yes.” Initiative 1105 received a 64.51% “No” vote to 35.49% “Yes.” Despite what was surely a significant financial investment in both initiatives by their respective supporters, for the time being it’s business as usual in Washington State.

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


Pine Mountain/Mayacmas AVA

August 17, 2010

We’re closely watching an application to designate a swath of Sonoma County as the “Pine Mountain/Mayacmas” AVA. You can track the status of the petition yourself here: http://www.ttb.gov/wine/wine-rulemaking.shtml. Comments on the petition are due September 9, 2010.

AVA designation is a labor-intensive and expensive process, but can result in significant cache for vineyards meeting the designation. We always find the process interesting. Sometimes there are issues about the actual space; e.g. is the climate unique? Is the area easily geographically defined? If those issues can be resolved, the real issues center around the chosen name; e.g. is the name tied to the place? Does the name conflict with existing trademarks? Will the name cause consumer confusion?

Real fireworks start if the proposed AVA is within Napa Valley, which triggers California Business & Professions Code 25241 as well as the involvement of the Napa Valley Vintners Association. In the past years, the Calistoga and Tulocay AVA petitions were quite controversial, and thus extremely interesting to watch.

Information on the interplay of B&P 25241 and the Tulocay AVA application can be found here: www.ttb.gov/nprm_comments/ttbnotice68/0680023.pdf.

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


Pay Close Attention: H.R. 5034

June 21, 2010

House Bill 5034 has been making the news since its introduction in mid-April. If you are in the business of alcoholic beverages, you need to be watching this bill. It could be a game changer.

The bill is referred to as the CARE Act, which is short for Comprehensive Alcohol Regulatory Effectiveness Act of 2010. If passed, the bill will strengthen state control over alcoholic beverage regulation by making it nearly impossible to challenge state alcoholic beverage laws, even if there is a conflicting federal law.

Though it is a short bill, it has three very significant elements:

1) State laws are presumed valid

2) Any person challenging a state law has the burden of proving the invalidity of the state law by clear and convincing evidence in all phases of the legal action

3) The state law will be upheld unless the challenging party proves the law has no effect on:

  1. The promotion of temperance
  2. The establishment and maintenance of orderly alcoholic beverage markets
  3. The collection of alcoholic beverage taxes
  4. The structure of the state alcoholic beverage distribution system
  5. The restriction of access to alcoholic beverages by those under the legal drinking age

You can track the bill by entering HR 5034 under “bill number” here: http://thomas.loc.gov/

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


IMBIBE+BLOG

May 30, 2010

Welcome to IMBIBLOG, the blog of Strike & Techel. We are attorneys specializing in the laws and regulations governing alcoholic beverages, also known as liquor law or alcohol law. Liquor law is a specialized area of legal practice. Compared to other areas of legal specialization, there are relatively few lawyers specializing in alcoholic beverage law. If you are considering starting a business related to alcohol, you will benefit from working with a competent liquor lawyer.

The team at Strike & Techel is experienced and can serve as your TTB lawyer, ABC lawyer, beer lawyer, wine lawyer or distilled spirits lawyer. We are familiar with TTB law as well as state ABC law in California and across the country. Preparing and applying for the necessary alcohol beverage licenses is a big part of the alcohol beverage practice and Strike & Techel is highly experienced with ABC license applications and TTB license applications.

We are based in San Francisco and are particularly familiar with the alcohol laws and regulations of our city. The attorneys at our firm practice alcoholic beverage law exclusively. This blog is our place to tell you about current issues of interest for those in the business of making, promoting, and selling alcoholic beverages.


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