Category Archives: Licensing & Regulations

One Small Step: Easing Restrictions on Advertising in Social Media

On October 1, Governor Brown signed into law AB 780, which updates Business and Professions Code provisions concerning restrictions on manufacturers’ ability to identify or list on-sale or off-sale retail locations where their products are sold. The new law goes into effect January 1, 2016.

In an earlier post, “Social Media is Advertising: Know the Basics”, I warned that under then-current law, posting where your product is sold generally ran afoul of restrictions on “giving something of value” to retailers, but was allowed in response to a direct consumer inquiry, and so long as you listed more than one unaffiliated retailer.

With the passage of AB 780, wine manufacturers will no longer need to wait for a direct consumer inquiry to post the names and contact information of retailers who sell their product, so long as the listing is made, produced, or paid for exclusively by the manufacturer, includes two or more unaffiliated retailers, and does not contain any mention of retail price.

AB 780 should not be taken as an indication of the demise or weakening of California’s tied-house restrictions. AB 780 explicitly sets forth the Legislature’s finding that tied-house restrictions are both “necessary and proper… to prevent suppliers from dominating local markets through vertical integration, and to prevent excessive sales of alcoholic beverages produced by overly aggressive marketing techniques.” Nevertheless, AB 780 is a small, but important step for manufacturers, who can now feel much more secure posting where their products can be found.


TTB Update: Return of Wine to Bonded Premises

The TTB is catching up on some regulatory house-keeping. Effective October 15, 2015, TTB regulations governing the return of taxpaid wine to bonded premises will be amended to conform to provisions of the Taxpayer Relief Act of 1997, and the Internal Revenue Service Restructuring and Reform Act of 1998.

The Internal Revenue Code provides that if wine is removed from bonded premises, and subsequently returned, any tax paid on the wine returned to bond shall be refunded or credited (without interest) to the proprietor of the bonded premises. If tax has not yet been paid, then any prior tax liability is relieved.

Whereas it used to be that wine returned to bond had to be “unmerchantable,” that is no longer the case under the Taxpayer Relief Act of 1997. The TTB is now amending its regulations to conform to that Act, by removing the word “unmerchantable” from provisions relating to the return of wine to bond.

It also used to be that wine returned to bond had to be produced in the United States. That is no longer the case, under the Internal Revenue Service Restructuring and Reform Act of 1998. Wine returned to bond must only have first been removed from a bonded wine cellar. TTB regulations pertaining to the return of wine to bond will no longer refer to “domestic” wine or wine “produced in the United States.”

Better late than never. We can all appreciate increased clarity and consistency when it comes to the regulation of alcoholic beverages!


2015 Grape Escape – Cancelled After Vendors Refuse to Participate in Event Sponsored by Retailer

We recently posted about how social media is advertising, and the care wine manufacturers need to take to ensure they do not run afoul of state tied-house laws.

The impact of those laws is being felt locally here in Sacramento, where organizers of the “Grape Escape” – an annual showcasing of local food and wines – have canceled this year’s event which was to be held in early June. Articles about the cancellation indicate that only four wineries signed up to participate this year, down from 47 a year ago. The primary reason appears to be fears over potential citations from the ABC. Last year, eight participants were investigated and put on probation (but not fined) for mentioning the event’s retail sponsor, Save Mart, in their social media postings, or directing consumers to the retailer to purchase tickets. Because manufacturers may not give anything of value to a retailer without violating tied-house restrictions, and because advertising constitutes a thing of value, social media mentions of a retailer by a manufacturer (i.e. “advertising”) runs afoul of the law.

Wine and food events such as the Grape Escape have a long and wonderful history. It’s a shame that retail sponsorship of such events can make vendors so nervous they choose not to participate, rather than develop specific guidelines or practices to ensure their promotion of the event does not run afoul of ABC advertising restrictions. Wineries should view the ABC as a resource for ensuring their own compliance with the law, rather than an adversary, and where questions arise, seek out guidance rather than pulling the plug completely.


Going Green: Labeling Organic Wine

Labeling of wine is subject to regulation by the TTB, and requires a certificate of label approval (COLA). Basic information that must be included on all labels include the brand name, class or type of wine, alcohol content, appellation, the bottler’s name and address, contents by volume, a sulfite declaration, and the government health warning. Previously, Uncorked ran a post about font and sizing requirements, accessible here.

If you want include “organic” claims on your label, you must satisfy USDA organic regulations for production and handling of your wine. Those requirements are beyond the scope of this post, but suffice it to say they are extensive. And, the type of “organic” claims you can make on your label are dependent upon a few key factors.

To label your wine “Organic” and to use the USDA Organic seal on your label, your wine-making operations must be overseen by a third-party accredited certifying agent (ACA) to ensure compliance with organic production and handling requirements. The yeast used in your wine, and all agricultural ingredients (i.e., grapes) must be certified organic, with the exception of those ingredients on the National List of Allowed and Prohibited Substances, information about which can be found here. Non-agricultural ingredients must be on the National List, and are limited to a certain percentage of the total product. Finally, only naturally occurring sulfites are allowed in wines with an “Organic” label. If you want to include a statement on the label that your wine contains only naturally occurring sulfites, you will need a lab analysis to back that up.

Wines with added sulfites (up to 100 ppm of sulfur dioxide) may not be labeled “Organic” or use the USDA Organic seal, but they may be labeled as “Made with Organic Grapes.” Only the grapes must be certified organic, the remaining agricultural ingredients need not be.

Labels for both “Organic” and “Made with Organic Grapes” must include the name of the certifier/ACA: “Certified organic by ***.”

If your wine doesn’t meet the criteria for “Organic” or “Made with Organic Grapes” labeling, you may still be able to list certain  ingredients as organic, but will have to submit proof of certification for each ingredient with your COLA application.

Setting your wine apart from the crowd with an organic label is great marketing. Just make sure you are current on USDA and TTB regulations before you send those labels to print!


Best Practices in Winery Tasting Rooms

If you have a tasting room, you know that following the letter of the law is the best way to stay under the radar (and off the naughty list) of the ABC. Violations, including serving minors or obviously intoxicated patrons, can have serious consequences, including jail time, criminal fines, administrative penalties, and civil liability. And you, as the owner, will always be held accountable for the actions of your employees, even if you were not present when a violation occurred. While insurance can cover general business liability, it never covers gross negligence, which is why it is so important to make sure that you and your team are trained in the best practices to avoid violations. In addition to or as a part of your employee training and handbook, here are a few things to keep in mind:

Do all of your employees know where your license is? The ABC requires you not only to be validly licensed, but to have your license posted. Every employee of your tasting room must know where that license is, and be ready to point it out to anyone who asks for it. If your business cannot produce a license, then the person serving alcohol is subject to arrest, and you as the owner are subject to an administrative penalty. In reality, the ABC is not likely to make an arrest until they have sufficient reason to believe that no valid license exists, but, even with a valid license, the posting is required, and the consequences are potentially severe.

Do your employees know where people can and cannot consume alcohol on your premises? All permanent ABC licensees have submitted defined spaces for alcohol consumption to the ABC. Consumption of alcohol outside that defined space is a violation. For this reason, you should make sure that all of your employees know and enforce these limits. If your defined space does not include your parking lot, for example, then it is up to you and your employees to ensure that people are not walking out of the permitted area with a glass of wine. Even a bus stop on a public sidewalk in front of your tasting room may be your responsibility. It is important to remember that consumption outside the allowed boundaries, even if the alcohol was not provided by you, is a violation, and you can be cited. That means no tailgaters.

Do your employees follow a policy of checking identification? Serving alcohol to minors is the most common ABC violation. As a classy tasting room owner, the idea of teenagers trying to crash your business to get a sip of wine might sound absurd, but the truth is that it happens every day. Each employee should be required to check the identification of anyone who appears to be under 35 years old. You may want to take this a step further and require that all customer identification be checked before they can taste. Employees should be trained to look for six items in order to validate an ID: 1) the ID must be issued by the government; 2) name of ID owner; 3) date of birth corresponding to an age of 21; 4) description matching the person presenting the ID; 5) photograph matching the person presenting the ID; and 6) the ID must not be expired.

Do your employees know when to cut someone off? It is an ABC violation to serve alcohol to someone who is obviously intoxicated. For ABC’s purposes, “obviously intoxicated” has nothing to do with a 0.08% blood alcohol level, and has much more to do with common sense. While this description leaves some wiggle room, it is best to have in place policies so that you and your employees never have to worry about infringing. Train your employees to observe your customers. If someone appears to have had one too many, make sure that your employees have a game plan. For example, tell your employees to let another coworker or manager know about the customer so that there is backup. Employees should be courteous to the customer, and explain that the ABC won’t let the employee serve any more drinks. If the customer is rude or belligerent, the employee should be encouraged to contact authorities. The employee should never bargain with the customer or back down. If possible, the employee should provide water and arrange for a ride for the customer. Any incident where a customer is cut off or has their drink taken away should be documented.

Remember, nothing prohibits you from doing more than is required by the ABC. In order to avoid violations and keep the ABC at bay, the best tasting room policies and practices go above and beyond the compulsory conditions.


Certified Farmers’ Market Permits: Wine Tastings Included

California winegrowers holding a Type 02 license have been able to sell their wine at farmers’ markets under a special permit (Certified Farmers’ Market Sales Permit) for some time. For a relatively nominal fee, now $50, a licensed winegrower may sell wine at a certified farmers’ market so long as the wine is (a) “produced entirely from grapes or other agricultural products grown by the winegrower” and (b) bottled by the winegrower. The permit is good for an entire year, but the winegrower may only sell wine one day a week at any given farmers’ market. A separate license is required for each certified farmers’ market at which the winegrower’s product is to be sold, but there is no limit on the number of licenses that may be held.

Annual sales for wine sold under all certified farmers’ market sales permits held by any one winegrower are limited to 5,000 gallons, and are to be reported to the ABC.

As of July 2014, the ABC also allows instructional tasting events to be held at certified farmers’ markets under this license, “subject to the authorization and managerial control” of the particular farmers’ market operator. Restrictions on instructional tasting events are as follows: (1) the event area must be separated from the rest of the market by some type of physical barrier (chain, rope, wall), with only one licensee conducting the event; (2) consumers may not leave the instructional tasting area with an open container; and (3) tastings are limited to 3 ounces per person per day.

Winegrowers undoubtedly welcome this expansion of their rights under this particular license, as it allows them to provide their potential consumers with the full farmers’ market experience of sampling the product prior to purchase.

Interestingly, as of January 1, 2015 licensed beer manufacturers are also allowed to sell their products at certified farmers’ markets, but the ABC restrictions differ from those applicable to licensed winegrowers. Most notably, tastings are not permitted, and the licensee can only sell at farmers’ markets located in the same county or an immediately adjacent county to that in which the beer manufacturer is located.


Social Media is Advertising: Know the Basics

There’s no question that social media is critical to marketing one’s product. For wineries, however, maintaining a social media presence comes with some serious restrictions. That’s because social media is considered advertising, and is subject to both federal and state regulations governing the advertising of alcoholic beverages. This post is intended to give you the basics on regulations governing the use of social media by wineries. It is, however, not exhaustive. If you have questions about whether something you want to post is permitted, it’s best to look into it or seek advice before posting, rather than risk an inquiry by the TTB or ABC.

Federal regulations set forth both mandatory and prohibited content for any advertising. As for mandatory content, regardless of what social media platform you are using (i.e., Facebook, Twitter, YouTube, blogs, etc.), you must post the name and address of the permittee responsible for the advertisement. This information does not need to be repeated in each individual post, but should be readily accessible to anyone visiting the page. The best place to put this information is in the “About” or “Profile” section of the page. If you are posting about a specific product, your post is required to have “a conspicuous statement of the class, type, or distinctive designation to which the product belongs,” corresponding to that which appears on the product label.

Turning to prohibited content, your page cannot contain any of the many prohibited types of statements set forth in 27 CFR 4.64. That means no misleading statements, no “obscene” or “indecent” statements or designs, no statements that are disparaging of a competitor’s product (even if you’re comparing your product to a competitor’s product), no statements relating to alcohol content (with a few limited exceptions), no statements inconsistent with your labeling, and so on. Check the regulation: it’s pretty comprehensive and includes other restrictions on statements relating to the age of your product, its origin, and any health-related claims.

Of course advertising directed at minors is prohibited. Your online platforms should include an age-screening tool, where the user must either confirm they are of legal age, or enter their birth date to proceed to your content.

California law prohibits wine manufacturers from giving anything of value, “directly or indirectly, to… any person engaged in operating, owning, or maintaining any off-sale licensed premises.” In other words, you can’t give anything of value to a retailer. Posting where your products are sold is providing something of value to the retailers that sell your products. Fortunately, there is an exception to be found: in response to a direct consumer inquiry, you may post the names, addresses, and other contact information for two or more unaffiliated off-sale retailers selling your product as long as you satisfy certain conditions. Those conditions are that you cannot post the retail price of your product, your listing is the only mention of the off-sale retailer in your post, you have to refer to more than one retailer and they cannot be affiliated in any way, and you are exclusively responsible for making, producing, and paying for said listing in response to the consumer inquiry.

Remember that all advertising restrictions apply to the permittee. That means if someone else posts something on your page that does not comply with federal or state regulations, you as the permittee will not be held responsible for that third-party content. However, if that third-party content is re-posted or shared by you, you will be held responsible. While not strictly required, it’s probably a good idea to monitor user-generated content on your sites to make sure it doesn’t fall too far outside the scope of permissible content, or your own bounds of good taste.