TTB Publishes Final Rule Addressing Labeling and Advertising Regulations
Yesterday, TTB published a final rule that will implement Phase 2 of its rulemaking on modernization of the labeling and advertising regulations for alcohol beverages.
In 2018, TTB proposed labeling and advertising amendments in Notice No. 176, Modernization of the Labeling and Advertising Regulations for Wine, Distilled Spirits, and Malt Beverages. On April 2, 2020, TTB implemented “Phase 1” of the rulemaking, publishing a final rule, which adopted certain proposals from Notice No. 176. On February 9, 2022, the TTB published the “Phase 2” final rule, which amends the labeling and advertising regulations for distilled spirits and malt beverages. The final rule is effective 30 days from date of publication in the Federal Register, March 11, 2022.
The changes in this final rule will not require industry members to make changes to labels or advertisements but will instead provide additional flexibility in the labeling and advertising of distilled spirits and malt beverages. TTB is currently working on “Phase 3” of the rulemaking, which will reorganize the wine labeling regulations, address the remaining labeling issues related to wine, and reorganize and finalize the regulations related to the advertising of wine, distilled spirits, and malt beverages.
The “Phase 2” final rule finalizes, among other things, the following liberalizing changes to the distilled spirits regulations that were proposed in Notice No. 176:
- Brand Labels: The TTB has eliminated the requirement that certain mandatory information appear on the “brand label”.
- Previously, the term “brand label” was defined in current § 5.11 as the principal display panel that is most likely to be displayed, presented, shown, or examined under normal retail display conditions. Further, the definition stated that “[t]he principal display panel appearing on a cylindrical surface is that 40 percent of the circumference which is most likely to be displayed, presented, shown, or examined under normal and customary conditions of display for retail sale.”
- TTB proposed, in proposed § 5.63(a), to allow this mandatory information to appear anywhere on the labels, as long as it is within the same field of vision, which means a single side of a container (which for a cylindrical container is 40 percent of the circumference), where all pieces of information can be viewed simultaneously without the need to turn the container. TTB explained that requiring that this information appear in the same field of vision, rather than on the display panel “most likely to be displayed, presented, shown, or examined” at retail, is a more objective and understandable standard, particularly as applied to cylindrical bottles.
- As finalized, § 5.63 does not include the term “brand label,” and thus the definition of the term is also removed from the regulations. This amendment is a liberalizing change that will not require any changes to labels but will allow further flexibility in the placement of labeling information on distilled spirits containers.
- Definition of Distilled Spirits: As explained in that final rule, TTB adopted the proposed definition of “distilled spirits” to codify its longstanding position that products containing less than 0.5 percent alcohol by volume are not regulated as “distilled spirits” under the FAA Act.
- Definition of Grain: TTB is adopting the proposed definition of “grain.” TTB believes this definition will expand options for distillers by clarifying that they may use the seeds of amaranth, buckwheat, and quinoa to distill spirits (such as “grain spirits” or “whisky”) that are required to be distilled from grain. TTB is not adopting the DISCUS suggestion to specifically list each type of cereal grain in the definition because such specificity is unnecessary. The definition includes all cereal grains; as such, TTB does not need to specifically list those grains. Furthermore, TTB sees no reason to implement specific labeling disclosure requirements for the seeds of the pseudocereals amaranth, buckwheat, and quinoa, beyond the labeling requirements that currently apply to grains. For example, if a commodity statement is required for a spirit distilled from buckwheat, the statement could be worded as either “Distilled from Grain” or “Distilled from Buckwheat.” This maintains labeling flexibility for the bottler or importer.
- Disparaging Statements: Current regulations mirror the language in the FAA Act, 27 U.S.C. 205(e), which simply prohibits labeling and advertising statements that “are disparaging of a competitor’s products In proposed §§ 4.124, 5.124, and 7.124, TTB sought to clarify longstanding ATF and TTB policy that a competitor’s product is disparaged within the meaning of the statutory prohibition only when statements or claims about the product, or relating to the product, are false or would tend to mislead the consumer. TTB’s intention was to clarify the prohibition in a manner that conformed to current case law about protections afforded to truthful and non-misleading commercial speech. Accordingly, the final rule will prohibit only false or misleading statements that explicitly or implicitly disparage a competitor’s product and does not prohibit statements of opinion or truthful and non-misleading comparisons between products. This language is entirely consistent with current case law under the First Amendment.
- Alcohol Content Statement: In Notice No. 176, TTB proposed to clarify the existing requirement that, if the alcohol content is stated as degrees of proof, that statement must appear in direct conjunction with the mandatory alcohol content statement. Proposed § 5.65 provided that the statement of proof must appear immediately adjacent to the mandatory alcohol content statement.
- It is TTB’s view that, if an optional proof statement appears on the label, it should be in the same field of vision as the required alcohol content statement to avoid confusing consumers. The proof of a distilled spirit is defined as being twice the ethyl alcohol content as a percentage of alcohol by volume, at 60 degrees Fahrenheit. Consumers who are used to seeing the alcohol content labeled as a percentage of alcohol by volume, however, may be confused if the only alcohol content statement on the label is, for example, “80 proof.” In contrast, if the “80 proof” statement appears in the same field of vision as the mandatory alcohol content statement (“40 percent alcohol by volume”), consumers will understand the relationship between proof and alcohol content as a percentage of alcohol by volume.
- Accordingly, as finalized by this document, § 5.65 provides that, if a single optional proof statement appears on the label, it must be in the same field of vision as the required alcohol content statement, expressed as a percentage of alcohol by volume. This change liberalizes the placement requirements in the current regulations, which provide that there may be no intervening material between the mandatory alcohol content statement and the optional proof statement. The final rule also provides that additional statements of proof may appear on the label in different locations, without an accompanying alcohol by volume statement.
This final rule also reorganizes parts 5 (distilled spirits) and 7 (malt beverages) of the regulations. For additional questions on the final rule, feel free to contact Ryan Malkin at [email protected] or Ashley Hanke at [email protected].