Archive for the ‘alcohol beverages generally’ Category
From IRS to ATF to TTB to What?
We are starting to get a lot of questions about TTB’s future. Over the years I have marveled and wondered if Bill Clinton or George W. Bush spent much time pondering the fate of ATF or TTB (and, for example, the intricacies of the label approval process). Well, the Obama Administration clearly thinks about it a lot. Late last year, Wine & Spirits Daily wrote:
Obama’s Office of Management & Budget (OMB) is considering “the impact of folding TTB’s tax enforcement and collection functions into IRS, to be proposed in the Budget and implemented in FY 2013,” reports Kane’s Beverage News Daily. The TTB has until Dec 28 to submit a proposal to the OMB “analyzing the feasibility and appropriateness of this proposal, including a discussion of how the missions and goals of these two agencies could be combined.” Furthermore, TTB is to review whether its “regulatory and health-safety functions” can be transferred to the IRS or even the FDA.
Since then, there has been almost nothing in the press about this important story. As recently as today, Google News has not much of any consequence on this issue. I don’t see much on TTB’s website or newsletters. A few days ago, however, The Gray Report set forth some new information on this topic, and it provoked a lively discussion in the comments. W. Blake Gray wrote:
The politics of this potential elimination of the TTB are fascinating, and ultimately why I don’t think it will happen even if Obama wants it. … In this climate where government austerity is seen by many as a good thing, Obama could gain some chips by trying to eliminate a federal agency. … However, the Republicans in the House seem dead-set on preventing him from achieving anything at all, and that will only intensify leading up to November. I think they’ll reflexively oppose it. … But what a conflict it poses philosophically for Republicans. Deregulation is a party tenet — but how would social conservatives react to restrictions being taken off of Demon Rum?
The 2013 Federal Budget is set to be released in a week. According to The Washington Post, “The budget is traditionally released on the first Monday in February — which is Feb. 6 — but the administration has pushed the release to Feb. 13.” Last month, Wine & Spirits Daily wrote:
The TTB has since submitted a plan analyzing the proposal to the Office of Management & Budget, but nothing is public or final at this point. … There are two current speculations as to how the reorganization would go down. One, the organization and all of its functions would be taken in one lump sum and deposited into a corner of the IRS. Two, the TTB’s tax enforcement and collection function could go to the IRS, while its regulatory and health-safety functions could go to the FDA. This is the most extreme scenario. One thing that almost everyone agreed one, however, is that an united alcohol beverage industry has enough power to squash any such proposal if it indeed made its way to Congress.
At least with the TTB the industry is the priority. With the FDA you’re with 25 or 30 other industries.” Even more problematic is that the FDA may have some anti-alcohol types, whereas the TTB is a neutral force.
One of the biggest complaints last year was the TTB’s slow response time when it came to approving labels – a result of less funding by Obama and inevitable lay-offs. As a remedy, the TTB proposed shifting its duties more towards enforcement rather than label pre-approvals, but the industry fought it. Instead, it seems the industry would rather the TTB speed up the COLA process than do away with it.
[I]t doesn’t seem likely that disbanding the TTB would save much money because theoretically it would require the same amount of people to complete the same functions now performed by the TTB, which “is pretty bare bones as it is.” Furthermore, the “TTB is one of the few revenue generating agencies in the federal government. They make a lot of money. It would be hard to split it up effectively.”
Three years ago, as part of the 2010 Budget, the Obama Administration flirted with the idea of imposing user fees for various TTB activities, and not much came of it. In our opinion, to the extent this is some kind of business school-type exercise, or thought experiment (as in, show cause why there should not be a shakeup), it could be useful. But, if any reorganization would take several hundred people from one entity and replace them with a similar number at one or more other entities, it is hard to imagine that the costs would not outweigh the benefits.
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AJ Report on Health Claims, Part 2
AJ’s next target is MGD beer. “Probably the most blatantly illegal advertisement came in early 2009, when a new beer called MGD 64 (boasting just 64 calories) sponsored an online fitness program…” With a claim like that it would be nice to know what makes it “illegal,” if not the imagery of “a thin, toned brunette in a party dress, smiling brightly as she showed off the beer-sponsored body that users could obtain if they joined.” With little analysis or evidence, AJ summarily concludes that the marketing is “patently false and misleading.” By contrast, in my opinion, if you are going to strip most of the calories and body away from a beer, down to a puny 64 calories, you darned well have the right to market it as only 64 calories (especially when the same amount of milk, apple juice or regular beer would have 2-3 times as many calories).
The “Industry Watchdog” lays much of the blame for this sorry state of affairs at the feet of the industry’s failure to properly regulate itself: “Finally, the most important reason for the breakdown in regulatory oversight is the continuing charade of voluntary self-regulation.” AJ says the industry has “created a system of codes, largely designed to convince policymakers they do not need to intervene, and that the industry can monitor itself” and the system is not working. But AJ would be no happier to have TTB calling the shots. AJ claims that “The government officials at TTB have little to no expertise in health. A better choice might be the Food and Drug Administration (FDA).” AJ provides not a scintilla of evidence that FDA would or could do any kind of a better job with a single one of the issues noted above. FDA might be far more likely to allow vitamins in vodka and on the label. FDA does not police the term natural more strictly compared to TTB. FDA would not be likely to restrict the use of organic claims or disallow MGD from marketing itself as low in calories.
In view of the weak examples set out by the report, and with few if any meaningful health claims getting past TTB, it is a wonder to behold what more rigorous enforcement would look like. Should the government ban imagery associated with sound, ripe fruits (because they are “wholesome” and booze is not)? Should Baileys be stripped of all rights to mention dairy cream (because it’s commonly associated with healthfulness)?
Last but not least, AJ sets its sights on the First Amendment. AJ claims:
Another charade in which the industry engages to keep regulators at bay is to argue that the free speech clause under the First Amendment protects companies from any government regulation of advertising. This makes for good political posturing, but from a legal standpoint, it’s simply not true. The First Amendment does not protect deceptive advertising. The government can and should stop such practices.
This would be damnable if it were true. Is anyone arguing the First Amendment protects companies from all advertising regulations? The part that’s simply not true is to suggest that a meaningful number of alcohol beverage companies make this claim. I am not aware of any alcohol beverage company above a handful of employees that has or would make an extravagant claim of this sort. Most of them favor and support a wide variety of sensible controls on labeling and advertising. To put things in perspective, Dr. David J. Hanson has a detailed overview of AJ and Marin (and its funding, methods and history) here. He explains that it’s nothing new for the group to “[crusade] against First Amendment constitutional free speech rights” in pursuit of its prohibitionist agenda.
It’s not like I left out the better examples, or the better arguments. With even the protein-infused vodka (Devotion), where is the actual, documented harm, as opposed to some vague possibility? I would have liked to find more in this report with which I could agree. I do agree with the premise that alcohol beverages still, after all these years, can raise difficult societal and public health issues, and need to be regulated with seriousness and care. But because the AJ report relies so much on exaggeration, distortion and weak examples, for me the report succeeds mostly in showing there is not a substantial problem related to health claims by alcohol beverage companies.
AJ Report on Health Claims
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AJ Report on Health Claims, Part 1
Back in June, Alcohol Justice issued a report entitled “Questionable Health Claims by Alcohol Companies.” I was pretty excited to read this report, because we study such matters closely. Every few weeks I get an exuberant report of a big health claim, on another alcohol beverage product — but it almost always turns out to be a false alarm.
Also, I wanted to give AJ (formerly known as The Marin Institute) a fair chance to persuade me that a lot of companies do in fact go over “the line.” Even though I freely admit that we derive most of our revenue from alcohol beverage companies, I like to think we are fair and open-minded enough to agree with a strong and well-made point.
The report tends to say a large number of alcohol beverage companies are running roughshod over consumers, with phony health claims, and with the rules either insufficient or largely ignored. AJ suggests the rules are “constantly being violated.”
These advertising practices are legally tenuous, morally unsound, and potentially dangerous. … Using health messages to sell products that can cause such widespread harm is not only unethical, it’s illegal, and yet the regulatory system has failed miserably to protect the American public. … This report examines this disturbing trend to promote alcohol as a health and fitness product…
I was eager to see the evidence at long last. I have seen many a company try and fail, to find a way to meekly suggest that their product might have some positive attributes beyond taste. I recall when a few wine labels tried but failed to suggest, after much litigation, that it might not be a bad idea to check with your doctor about the health effects of wine. Mind you, there was no reference to health benefits. I was eager to see the examples of wine labels promoting heart health; I was eager to see the various digestif labels promoting longevity and improved digestive function; I was eager to see the various anti-oxidant labels that had so stubbornly evaded my past inquisitions.
Instead, AJ trotted out Lotus “Vitamin Infused” Vodka. It sounds dramatic, with all the talk of vitamins and vodka.
[T]he first fortified – or “enhanced” – vodka was introduced in 2007. Lotus White is infused with vitamins B3, B6, B9, and B12. According to the company’s CEO, the vitamins are meant to curb or eradicate hangovers. In an interview, he said the vodka “could actually be good for you.” … Despite the dubious nature of [the] health claims, the marketing techniques seem to be working. Lotus vodka’s sales increased 50 percent in 2009…
AJ fails to note that it never mentioned vitamins on the label, and so far as I know, it hasn’t been sold in many years. It never sold more than a few thousand bottles per year, worldwide. The fading Lotus website shows a total of five web retailers; none of them carry this anymore or have it in stock.
If this is the best AJ can do, with thousands of new alcohol beverage products every year, and over 130,000 label approvals per year, it is tough to imagine a more ringing endorsement for the status quo.
AJ next rails against the pernicious use of the term “natural” on various alcohol beverages.
In 2008, three of the five top-selling vodka companies in the U.S. had ad campaigns with fruit and positioned their products as fresh or all natural: Absolut (2nd), Skyy (4th), and Stoli (5th). At least one other spirit, Finlandia vodka, also took advantage of the all-natural designation. … Skyy’s website, however, confirms that no actual fruit is used in the process. Because [TTB] has not defined the words “infusion” or “all-natural,” the company uses them freely.
I am having trouble comprehending whether AJ would be more happy if the same products were loaded up with artificial flavors instead. As Herman Cain might say, AJ is “incorrect” in saying TTB does not define terms like natural and all-natural. TTB has rigorous standards for terms such as these. TTB tests all flavors in all alcohol beverages — whether made within or without the US — to verify that they are natural. It is far from a rubber stamp regime. TTB maintains a laboratory staffed with more than a few specialized beverage and non-beverage chemists, to verify the assertions of the many specialized and sophisticated flavor companies that seek flavor approvals. In many instances, far from being a marketing gimmick, the law requires the use of natural flavors only (prime examples would be liqueurs and the flavored vodkas mentioned by AJ). To avoid the use of natural flavors in products like the flavored vodkas above would be in direct and flagrant conflict with federal laws in place since about the 1930s. This being the case, does AJ really think it’s a good idea to suppress this information? And on what grounds? AJ also suggests that the term “organic” should not be used on products that meet the rigorous standards to qualify as organic. AJ is long on casting aspersions and short on constructive suggestions in saying “marketers should not use the term ‘organic’ to imply an alcoholic beverage is healthful. Additional oversight by federal regulators is needed here, as well.”
See Part 2 of 2 in about a week
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TTB Down
At the moment, I am not having a pleasant or a magnificent week (despite the above exhortation). I can’t get any work done. Because all or almost all of TTB’s various online systems have been altogether unavailable for the past several days.
TTB provided plenty of advance notice, such as the above, explaining that all such systems will be down for maintenance during all or part of five consecutive days, from November 10th to November 14th. But still, this is an awfully long time for a critical system to be unavailable. I can not even imagine Amazon, Facebook, craigslist, or Gmail going down for a few hours, let alone a few days — without a firestorm. Is TTB’s system really a whole lot less crucial to the affected industries? Should the maintenance really take so long or happen so often? Can’t the government find a way to do maintenance in the background, without blocking thousands of regular users?
On a happier note, the systems do not seem to go down unexpectedly, or crash, very often at all, in our experience. This may be due in large part to careful and robust maintenance. But the scheduled maintenance occurs fairly often and for large blocks of time. I think it was just a few weeks ago that the system was down during the course of another multi-day period. Likewise, on a positive note, the systems are very good and provide a huge benefit, when they are up and running.
COLAs Online is down. I can’t search or look at COLAs. I can’t upload applications. I can’t receive approvals. I can’t see or respond to Needs Correction notices, in order to get approval or avoid a timeout. Dozens of urgent labels and scores of other labels need to sit idly, day after day, rather than begin their long march to approval.
Formulas Online is down. Permits Online is down. The Public COLA Registry is down (as touched upon above). These sites are not mere conveniences, luxuries or frivolities at this point. They are indispensable; federal law more or less requires thousands of alcohol beverage companies to use these systems massively and continuously. There is no realistic option to switch back to paper in the interim.
In related news about TTB Online, it is regrettable that, several weeks ago, TTB removed the ability to search permits and brewer’s notices from within the Public COLA Registry. There was a button to allow a search of, for example, all DSPs in Idaho — but the lookup is disappeared. This feature was enormously useful, and a set of old data (via the electronic reading room or FOIA) is not a good alternative. In recent weeks, many people have said TTB should fix any issues as may be necessary, but restore this functionality as soon as possible.
We encourage all readers to write in with their views. Perhaps Robert is just being a baby and should step away from the computer and go enjoy a long walk in the woods. Perhaps we should celebrate the 355-odd updays per year rather than curse the downtime. Or, perhaps the inconvenience is even more detrimental than what is described here.
Since all of the above issues have conspired to block me from doing any meaningful work, or seeking approval on the various beer labels stacking up in my inbox, I suppose I will go drink one beer, rather than seeking approval on another.
November 14, 2011, 9:15 am ET Update: The systems seem to be back up and running, as promised. Good! Sadly, this is still missing.
November 16, 2011, 9 pm ET Update: The system will go down again, over the coming weekend, as explained here. But at least it’s for a good reason, again with plenty of notice. Last weekend’s maintenance involved moving the servers to a lower cost environment, and next weekend’s maintenance will add flavor approvals alongside beverage formula approvals.
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Personalized Labels
TTB has recently liberalized the treatment of personalized labels, such as a wine label with “Happy Birthday Bob.” No longer will it be necessary to burden your company, or the government, with paperwork to cover “Happy Birthday Steve” or Judy, Tom, etc.
TTB announced this change on September 21, 2011 in TTB Guidance 2011-5. The document supersedes a policy from about a year and a half earlier; the 2010 policy required a new approval for just about every variation (such as each wedding, retirement, Bar Mitzvah, graduation, anniversary, etc.). In liberalizing the policy, TTB said:
Our 2010-1 guidance did not allow certificate holders to change the artwork or graphics on personalized labels without resubmission of the labels for approval. We have reconsidered this requirement and now permit certificate holders to make changes to the graphics or artwork on a previously approved personalized label without having to apply for a new certificate of label approval.
The above label, from Llano Estacado Winery, is an early approval under the new policy. The new policy seems due at least in part to pressure from Sen. Schumer. He mounted a vigorous campaign, on this topic, over the past summer. His August 9, 2011 press release, noting the progress, said:
In the case of … personalized labels the TTB agreed with Schumer’s request to streamline the process saying, “Effective immediately, TTB will not require resubmission of labels due to changes in graphics or artwork.” In the past, TTB permitted wineries to simply apply once for approval of a custom label template to ensure it contained the required regulatory and safety warnings, after which the winery could customize and personalize the artwork … to suit the specific event. TTB then changed course to require individual approval of labels when changes were made to graphics and label components apart of the regulatory and safety warnings. By working with industry stakeholders to find ways to streamline approval of these custom labels TTB could, in turn, help ease the current backlog of COLA applications.
The press release also noted:
New York wineries have recently reported that it can take at least one month to receive approval of an electronically-filed COLA application and two to three months for a paper application. Often, when wineries finally do receive feedback, it is with a rejected label and the necessary corrections, and at that point labels must be resubmitted and the COLA process must begin again. The TTB told Schumer itself that they have noticed a significant increase in the typical amount of time it takes for them to respond to requests for label approvals.
So far, it does not seem that the current personalization policy would extend all the way to other masses of labels, such as Molson and Twisted Tea (large numbers of labels with other sorts of small variations).
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