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Palcohol is Back

bn

Palcohol is back.

After approval from out of nowhere about a year ago, and cancellation of the same approvals a few days later, it is back. I have it on good authority that TTB has ironed out the kinks and approved the labels this week. Sen. Schumer will not be pleased (aka, he may be very pleased to have this whipping boy back within striking distance). Many states have already banned it. But this gives new life to this new category. Hats off to Mark Phillips for weathering the storm and persevering.

Below is the approved label as of 2014 alongside the label as approved on March 10, 2015. There are small, technical changes, mostly relating to how to measure the taxable commodity. Boxes 20 and 23 reconfirm that it took Mark almost a year to get this approval. The back label makes it look like an awful lot of work and controversy for a small amount of alcohol (when prepared, it only has half the liquid of a beer, and 1/4 the abv compared to vodka?!?).

both

In an email on the day of re-approval, Mark, the force behind Palcohol, explained:

Yes, Palcohol is back. It’s been quite a journey, over four years to get Palcohol approved by the TTB. I do want people to know that the TTB has been great to work with. Very fair and professional. And I’m not just saying that to kiss up to them as they have now approved Palcohol and it’s done.

The next challenge is trying to stop the states from banning it based on misinformation and ignorant speculation. It is a mistake for a state to ban Palcohol because…

(more…)

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ARTAL: The Movie

First there was ARTAL the list. Then there was ARTAL the blog post. And now, there is ARTAL:  The Movie. In which Oli tries to help you remember the power and pitfalls of the big list of Allowable Revisions to Approved Labels. In brief, this should help you remember that you don’t need a new COLA every time you make a change to your already-approved label. There are dozens of small and not so small changes that are ok to make, without any need of a new COLA — or the wait, frustration, and expense.

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Oak Aged Vodka

oak

TTB does not allow Aged Vodka, or Aged Gin. But this would seem to show it’s pretty easy to work around these arcane, antiquated restrictions. Note how the word “aged” is nowhere but everywhere on this label, and Absolut does not mind throwing in a reference to “craft” for good measure.

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Tito Responds

tfp

Over the years many have suggested that Tito’s vodka is not really made in small batches or by hand. I tried to keep an open mind, as the brand grew, and even in the face of the lawsuits summarized here.

So I have been particularly looking forward to a response, on the merits, at long last, from the source. Tito finally responded, on November 17, 2014, in the form of a motion to dismiss the Florida case. (The defendants also filed a similar motion, a month later, in the California case. The California motion is 28 pages and substantially similar to the one filed in Florida, right down to mangling the name of the agency that issued the so-crucial approvals. It does add a dash of spice here:  “Plaintiff himself knows nothing, and he filed a lawsuit that ignores what the Tito’s label actually says and instead bases his claim on hearsay statements in a magazine article, hoping he can later commit discovery to get the facts he admittedly lacks.”)

With the aid of more than one big law firm, and a superior command of the facts, I was eager to sit back and see how deftly Tito could shut down its many detractors. The motion weighs in at 20 or so pages and it does not seem an exaggeration to say that the entire brand, the company, and just about everything on the front label hang in the balance. Also, Tito had the immense benefit that he knew or certainly should have known this day would come around sooner or later. This should have been clear since the first references to “handmade.” This should have been further clear upon the various inquiries about the term over the years, as described in the motion.

The motion starts pretty strong, asserting that plaintiff’s complaint is so vague:  “We do not know how many bottles they bought or how much they paid, because they do not tell us those facts. They do not claim there was anything wrong with the vodka they allegedly purchased, or that they did not like it for some reason. They do not claim they complained about it, tried to return it, or even notified anyone of their dissatisfaction … .” Then, “With so many details missing, Fifth Generation is not in a position to make a meaningful response to the Complaint (other than simply to deny the allegations). Nor is the Court in any position to assess whether all or any of the claims pass the plausibility standard. … Measured by those standards, the Complaint is woefully deficient and must be dismissed.”

This may be a good start, but by page 3, the motion seems to go off the rails. It tries to say that the plaintiffs could not have been deceived, because a 2013 Forbes article had already suggested Tito was playing fast and loose with the truth. Tito’s motion says:

In light of what Plaintiffs have pled – and in particular their reliance upon a widely-circulated 2013 Forbes magazine article – it is hard to see how they could plausibly claim they were misled by the label on Tito’s Handmade Vodka for any purchases made after the article was published. Similarly, the number of times they purchased may raise plausibility concerns: If they enjoyed the taste of the product and thought it was a good value, did the label truly influence any but their first purchase? And, if the first time they ever tasted Tito’s Handmade Vodka was at a party, at a restaurant, or in some other setting in which they decided they liked the taste before they ever saw the label, could the label plausibly be said to have influenced even their first purchase? Plaintiffs’ skeletal allegations raise all of these questions and more, but answer none of them.

The defendants seem impressed with this point, breaking out the bolded italics.

Maybe I am missing something fundamental, but this seems absurd as any kind of defense, let alone a cornerstone of a defense. Does it really make sense to assume the plaintiffs would, should, or did get key information about the product from a magazine article — instead of the big, federally mandated, reviewed and approved label plastered on the front of the bottle? The Forbes article is interesting, relevant, and important — but is it really so epochal that everyone interested in vodka should be intimately familiar with it, from the moment of its publication? On the very same page, the motion makes clear in any event that “Plaintiffs never claim that they saw or read the article.” The motion seems to be saying that even though the article is wrong, and low-quality, every yahoo from Texas to California to Florida should know all about it, from the moment of its publication. Perhaps Tito seeks to argue that the lead plaintiffs knew about the article before the purchases at issue, and that this should have caused them not to buy the vodka, or, at the very least, that it would make them not good representatives for the class.

Next, the motion veers over into shaking the pompoms, declaring Tito’s to be “great tasting” and with a value proposition “true to its Austin, Texas roots.” By page five, the motion tees it up beautifully, saying “Plaintiffs contend that Tito’s Handmade Vodka cannot be ‘handmade’ because it is ‘made from commercially manufactured neutral grain spirit that is trucked and pumped into Defendants’ industrial facility.'” This would seem to be the heart of the matter. And so I move to the edge of my seat, waiting for Tito to hit this duly teed-up softball out of the park. And then I wait some more, as the softball seems to sit on the tee, without the benefit of even a swing or a miss, let alone a base hit. Immediately after raising this tantalizing question, the motion changes the subject toward an unilluminating primer on how vodka is normally made.

The defense is a bit too romantic when it explains how the “secret,” “pre-Civil War” pot still methods somehow make the product handmade. And it moves in the other direction when it describes how Tito grasped a pen with his own hands to design the label:  “The label on Tito’s Handmade Vodka is also ‘handmade’ in its origins. The graphic of the old fashioned pot still was drawn by Tito Beveridge himself. He chose the fonts, the colors and the other elements of the label that communicate the consumers the essence of the brand.”

Tito makes a stronger point by explaining that TTB inspected Tito’s labels, plant and methods on many occasions, and still allowed the “handmade” claim. The defendants make quite a few other technical arguments and on some of those it’s hard to know who is right. And yet I find myself still waiting for the defendants to simply assert, at long last, that they do not bring in tankers of commodity spirits mass produced with continuous stills, far from Texas or the hands of anyone in Austin. Looks like we will need to keep waiting.

Finally, for all those who wrote in and said the label claims don’t matter and are only for nerds, please take another look at the label and web page depicted above. This is a screenshot of www.titosvodka.com as of January 4, 2015. I did not add any words or images but I did add a yellow tag near each of the most relevant spots; I emphasized the relevant portions and discarded a lot of the less relevant matter.

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Maker’s Mark Bourbon Got Tito’d

mm3

I have focused on beverage labeling law since 1988. During that time it has been very rare for a private party to bring any action against a beer, wine or spirit supplier’s labeling or advertising — unless the basis was trademark.

Instead, most people assumed the states, TTB, and FDA would take care of this, pretty much to the exclusion of anyone else. Pom began to unravel this in a big way over the past couple of years, and this trend seems to be gaining momentum.

A San Diego law firm filed a class action lawsuit, on December 8, 2014, in federal court in California. The case is called Nowrouzi et. al. v. Maker’s Mark Distillery, Inc. A few pages of the complaint are here. If you want a copy of the whole complaint, or updates, they are available upon request and without obligation.

The complaint goes right for Beam’s jugular (Jim Beam owns Maker’s Mark). It essentially says Maker’s Mark is lying about whether the product is “handmade.” The first count is for false advertising. The second is for unfair competition and fraud. Next is negligent misrepresentation and then intentional misrepresentation. The lawsuit asks for a jury trial, punitive damages, an injunction, reimbursement to consumers, interest, and lawyer’s fees.

An example of the labeling at issue is above, and here is a recent TTB approval therefore. Maker’s Mark is way out there, on a limb. Very similar to the Tito’s vodka controversy (as regards “Handcrafted”) the whisky label has “Handmade” right out there, front and center. Maker’s Mark, though, doubles down and declares it is “America’s only handmade bourbon. …” That may be too extravagant to be maintained, and is certainly a big, provocative statement. Not least, it has indeed provoked a few lawyers in San Diego.

Here are highlights from the 33 page complaint (replete with photos and stirring allegations):

  1. “Defendant’s whisky is manufactured using mechanized and/or automated processes, which involves little to no human supervision, assistance or involvement, as demonstrated by photos and video footage of Defendant’s manufacturing process.”
  2. “[T]he matter in controversy, exclusive of interest and costs, exceeds the sum or value of $5,000,000.”
  3. “Defendant has shipped approximately 1.4 million cases of whisky in 2013.”
  4. “’Handmade’ and ‘handcrafted’ are terms that consumers have long associated with higher quality manufacturing and high-end products. This association and public perception is evident in the marketplace where manufacturers charge a premium for ‘handcrafted’ or ‘handmade’ goods.”
  5. “Defendant’s website also states that, ‘[w]hile most distilleries use a modern hammer mill to break up their grains, Maker’s Mark uses an old antique roller mill, which is less efficient, but reduces the chance of scorching the grain and creating a bitter taste.’ This is done in an apparent attempt to market the whisky as being of higher quality by virtue of it being made by hand. As a result, Defendant induces consumers.”
  6. “[C]ontrary to Defendant’s misleading labeling, its whisky is predominately or entirely made by mechanized and automated processes.”
  7. “Defendant has faced continual production shortages and has attempted to remedy those shortfalls by expanding and mechanizing its facility. Defendant’s supply shortages have been so severe that Defendant even proposed ‘watering down’ its whisky’s alcohol content to meet production demands.”
  8. “Defendant’s mill is neither old nor antique. Defendant’s mill is a modern mechanized and/or automated machine that requires little to no human supervision, assistance or involvement to grind and prepare the grain, which is the primary ingredient in Defendant’s whisky. … [T]here is virtually no human involvement in this system, other than perhaps the pressing of a button.”
  9. “Defendant is guilty of malice, oppression, and fraud, and each Plaintiff is therefore entitled to recover exemplary or punitive damages.”

For the most part, the complaint strikes me as careful, serious and well-written. But this part seems to go a bit too far toward the land of make believe:

Producing consumer goods by means of mechanized or automated process has long [been] touted as a cheaper way to “mass produce” consumer goods. By utilizing machines to produce goods, manufacturers are able to make more goods in a shorter period of time at a lower cost. Mechanization of course sacrifices quality, as machines cannot exercise the skill and care of a human craftsman. Every consumer would undoubtedly prefer a higher quality product, however many are not able or willing to pay for such quality. The demand for higher quality products has always existed amongst consumers and thus manufacturers market their products to those seeking higher quality goods and demand a premium price for that quality.

As a great distiller once explained to me, “artisanal” is not always a compliment. When it comes to cars, or computer chips, for example, I am pretty sure I would rather have one made by a modern robot than a genial old man.

I don’t really have a dog in this fight as of this writing. I do think this has reached a critical mass such that TTB should step in and seek to define terms of this nature, lest TTB be relegated to a role as a mere spectator in the gladiation of others. I do also think the term at issue is not quite puffery (such as “premium”) but not quite a factual statement, either (such as “aged 5 years”). The law probably needs to wake up and stop dealing with the easy cases, at one extreme or the other, only.

As one would expect:  “A spokesman for Beam/Suntory, the parent company of Maker’s Mark, called the claim ‘without merit’ . … ‘We will defend this case vigorously and we are confident that we will prevail’ ….”

As mentioned above, this case has a lot in common with the Tito’s vodka case. As to that case, it probably sounds like I have lined up on the other side from Tito in recent weeks. Not really. I started out with an open mind, recognizing the plaintiff’s may be mistaken, or Tito may be a wily coot who saw this coming and planned accordingly. But it has really been the hapless responses of the Tito’s supporters, in the weeks after the lawsuits flew, that colored my view. They made laughably inane arguments like, who cares about the labeling, or TTB said it’s fine. More recently, Tito’s lawyers filed a response, and it seems good, and much more persuasive than anything said on Tito’s behalf in the interim (as should probably be expected). I look forward to assessing the responses, in both cases, soon.

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alcohol beverages generally, whisky


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