United States: Winds Of Change Blowing For Craft Brewers

Last Updated: June 12 2019
Article by Marc E. Sorini and Arthur J. DeCelle

For those who follow developments in the law and craft brewing with equal passion, every year has its share of substantial issues. This year has been no exception, with a pending Supreme Court case; a substantial upswing in federal trade practice enforcement activity; a massive rewrite of U.S. Tax and Trade Bureau (TTB) labeling and advertising regulations; and prospects for extending the biggest cuts in the excise tax on beer since the repeal of Prohibition.


As The New Brewer readers know (see the article in this space in the March/April 2019 issue), last fall the U.S. Supreme Court decided to hear a case that could substantially impact the way alcohol beverages are distributed in the U.S. Tennessee Wine & Spirits Retailers Association v. Blair involves the legality of Tennessee's "durational residency" requirements for off-premise retail licensees. Under current law, an applicant for such a license must have been a resident of Tennessee for at least two years, and certain renewal requests must show residency for at least 10 years. Every shareholder of a corporate licensee must meet those requirements. Challenged by an arm of retail giant Total Wine & More along with another retailer, a district court in Tennessee, and then the U.S. Court of Appeals for the Sixth Circuit, both held the residency requirements unconstitutional under the "Dormant" Commerce Clause. The Tennessee Wine & Spirits Retailers Association ("Association") appealed to the Supreme Court, supported by dozens of states

The case raises the question of whether the non-discrimination principles applied to winery direct-shipping laws in the 2005 Granholm v. Heald decision also apply to state laws regulating wholesalers and/or retailers. Since the March/ April article was written, the Supreme Court held oral argument on the case, with tantalizing hints of which way the Court may be leaning.

Attorneys representing the Association and the states (the Illinois attorney general) pressed hard for their "big win"—that state laws regulating wholesalers and retailers are immune from any Commerce Clause scrutiny. Should this position prevail, even an obviously protectionist or irrational law will face no federal court scrutiny under the Commerce Clause. The Justices' questions suggested strong skepticism of the proposition that state laws regulating wholesalers and retailers are immune from Commerce Clause scrutiny. Multiple Justices were critical of the notion that the 21st Amendment shielded protectionist laws from scrutiny. Perhaps most directly, Obama-appointed Justice Sonia Sotomayor, in a discussion with the Association's counsel, seemed to reject the idea that Granholm limited its non-discrimination principle to producers and products. Following oral argument, supporters of the Association and the states could not feel good about the chances of the Court embracing their argument for virtually unfettered states' rights to regulate alcohol beverages.

Predicting Supreme Court decisions is always a risky endeavor. Nevertheless, based on the oral argument, it seems likely that the Court will reject the notion that state laws regulating wholesalers and retailers are completely immune from Dormant Commerce Clause scrutiny. But the Court also seems likely to craft a test for lower courts to evaluate whether state alcohol laws are discriminatory in future cases. That leaves for another day the issues beyond residency that go to the heart of current state regulations of alcohol distribution: those related to direct-to-consumer shipping, physical presence requirements, and the three-tier system.

A final decision from the Supreme Court is expected by the end of June.


The TTB has substantially ramped up enforcement of its trade practice (exclusive outlet, tied house, commercial bribery, and consignment sale) regulations. The provision of additional funding from Congress and a more focused TTB suggest that brewers now face a substantially altered federal enforcement environment. In addition, the TTB continues to announce cases under its excise tax and related authority over producer operations, with a steady stream of "offers-in-compromise" (OIC), usually settlements that include a description of alleged violations and a monetary payment to the government.

While craft brewers may hope that their companies are small enough to fly under the radar, even a casual review of the OICs announced in the past year demonstrate that no industry member is immune to TTB attention. Small wineries, beer wholesalers, small distilleries, and a small beer importer have all entered into OICs in the past year. On the trade practice front, these settlement payments have included:

  • $900,000 in April 2018 paid by small beer importer Warsteiner Importers.
  • $325,000 in November 2018 by Illinois beer wholesaler Elgin Beverage.
  • $1.5 million in December 2018 by Florida beer wholesaler Eagle Brands.

In addition, an investigation of small California winery and wine importer sales to a single New York wholesaler resulted in no fewer than 11 wineries and importers agreeing to a one-day suspension of their TTB basic permits (the federal "license" held by wineries, distillers, and wholesalers). While this may not seem significant, under federal law the TTB can only permanently revoke a permit after it has first been suspended. In essence, these companies now have one strike against them in a twostrike system. All actions stemmed from alleged violations of the TTB's consignment sale regulations, with the TTB alleging that by shipping to their wholesaler without an expectation of payment until the wholesaler sold the wine, the wineries and importers engaged in prohibited consignment sales. According to public statements by the attorneys representing the wholesaler in question, the companies agreed to suspensions of their permits because they are small "mom-and-pop" operations without the means to stand up to the TTB.

These developments require a renewed focus on compliance and a greater understanding of a brewer's obligations and rights. Under the new normal, even infractions considered minor by the TTB's regulatory personnel (e.g., failure to update information on a permit or brewer's notice) can be leveraged in settlement discussions. Similarly, the industry norm of relying on oral assurances from "friendly" regulators— federal and state—may provide little legal protection in an enforcement action.

The TTB will likely continue its renewed focus on enforcement unless restrained by some outside force. Not only has the agency received additional funds for enforcement, the Trump administration has proposed giving the TTB independent criminal enforcement authority and additional duties that are currently the responsibility of the Bureau of Alcohol, Tobacco, Firearms and Explosives. Thus, brewers face a greater likelihood of criminal prosecution for trade practice and other Federal Alcohol Administration (FAA) Act regulations. Brewers do not need a "basic permit," only a brewer's notice, and are therefore less exposed to the TTB's enforcement threat of permit suspension.

Craft brewers should be vigilant about compliance with TTB regulations. Extra attention is required if a brewery owner also holds winery or distillery permits to engage in other manufacturing activities; wholesaler permits to distribute beer or other alcohol beverages; or importer permits to engage in importation activities.

To view the full article click here

Winds Of Change Blowing For Craft Brewers

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions