If you can believe it, the time is fast approaching to begin planning for CBC 2020!
Below is a recap of what we learned from this year’s CBC’s Government Affairs session. Whether you attended or not, find out some of the most important updates throughout this past year and everything you need to know for your own brewery.
Almost everyone in and out of the brewing industry is familiar with the “three tier system” regulating alcoholic beverages. The original purpose of a clear separation between manufacturers, distributors and retailers was to balance the power in a time when the manufacturers (i.e. brewers) had all the power after Prohibition was lifted. Today, that dynamic does not exist anymore, and we are seeing exciting reform to franchise laws across several states. Recent examples include:
- Florida law allows brewers comprising less than 10% of a distributors business portfolio to terminate their contract with a distributor without cause
- Maryland law exempts brewers from the requirement to utilize a distributor if they are producing less than 20,000 barrels per year.
- Massachusetts law is in the works exempting brewers from the requirement to utilize a distributor if they are producing less than 3,000,000 barrels per year
Trade Practice Enforcement
In 2019, the Alcohol and Tobacco Tax and Trade Bureau was allocating $5MM to enforce trade practice regulations. It appears the TTB has decided to utilize those funds to crack down on tied-house violations and commercial bribery. Commercial bribery has become a very hot button issue in the last few years. At this time, we are seeing the following coming from TTB:
- ANYTHING of value exchanged for retail space will cause an issue for TTB
- TTB is considering any act “willful” regarding commercial bribery situations leaning on the argument that the party should have known that their conduct was wrongful because they operate in a regulated industry
We are also seeing the TTB stepping up their efforts at putting pending applications or amendments on hold as well as asserting the invalidity of existing permits. Why are they doing this? Because they can.
“Modernizing” Labelling and Advertising
Notice 176 was issued in 2019 regarding labeling and advertising requirements.
The Good: Notice 176 makes those rules and regulations more organized and understandable and has codified long-standing positions on the subject.
The Bad: The modernization is timid at best. Late action has been taking on labelling rules such as light/lite and low carb, mandatory allergen labeling and serving facts disclosure. Frustratingly, references to “strong” are still prohibited. The following were left unaddressed: natural, GMO-free, small batch, gluten free, and most notably, any direction on social media advertising
Craft Beverage Modernization and Tax Reduction Act Extension
This is a huge win for the craft beer industry: As of June 20, 2019 the House Committee is expected to extend CBMTR!
For those that are unaware of the impact of this extension, as it currently stands domestic brewers producing within certain amounts of barrels/year have enjoyed their excise tax being halved or significantly reduced. CMBTR was set to expire at the end of 2019 and CBC make a strong call to action for everyone to press their local representatives to vote to extend it. It appears those efforts are paying off!
BONUS: Cannabis Legalization Update
While obviously not craft beer related, cannabis – being a regulated substance – is a close cousin to craft beer legally.
Cannabis is still federally illegal; the feds are still classifying it as a Class 1 drug. As of the date of this article, 33 states allow for the sale of medical marijuana and the District of Columbia and 11 other states allow for recreational use. And that number is projected to grow!
Craft Brewers Conference 2020
Will you be at Craft Brewers Conference 2020? Get in touch with our attorneys today! We’ve attended the past two years of the conference and have worked with the beer and alcohol industry for more than eight years. Contact us for more information about the legal expertise we can provide to your brewery.