A drinks attorney dishes the dirt on less-than-obvious legal infractions wineries face on the internet.
By Liza B. Zimmerman
June 15, 2018
The online social media market is rife with potentially illegal faux pas for producers. Did you know as a producer that you couldn’t recommend a specific retailer or list the price of a specific wine? Both incidents violate the so-called “Tied House Laws” that were instituted after Prohibition, in order to maintain the legal flow of wine sales without favoring any one client or sales channels.
John Trinidad, senior consul in the Napa-based office of law firm Dickenson, Peatman & Fogarty, shared copious insight as to how to navigate the legally challenging social media field at conference held by the Sonoma Bar Association in May.
He noted that the primary legal concerns when building a social media campaign for a producer, importer, wholesaler or brewer, are twofold: those that legislate advertising regulations, and another set that make sure media posts are in line with the Tied House Laws. The three main regulatory agencies that monitor these rules are the Washington, DC-based Alcohol and Tobacco Tax and Trade Bureau (TTB) and Federal Trade Commission (FTC); and, in California, the Sacramento-based California Department of Alcoholic Beverage Control (ABC). The ABC board in each state regulates its own state’s wine sales and social media functions.
All the details
The legislation currently enforced by the three agencies ensures that social media statements and ads “promote transparency and accountability”, according to Trinidad. According to these laws, false or misleading statements, comments disparaging competitor’s products, and statements inconsistent with the product’s label are also prohibited.
Part of the more recent FTC guidelines – which were formed in tandem with the San Francisco-based Wine Institute to help the wine industry to self-regulate itself – adds that social media posts can only be placed in “media where at least 71.6 percent of the audience is of drinking age [based on reliable audience data]”. This odd percentage is based on Nielsen data.
So you already have four easy ways to break the law via misleading comments, negative comments about other products, inconsistent statements – and don’t forget how much trouble you will be in if your math skills are weak and you accidentally post on a social media site where only 71 percent of those online are deemed to be of drinking age. However this is just the tip of the iceberg and the legal risks continue.
Favoritism will land you in the clink
With the institution of the Tied House Laws, producers, distillers, importers – and all sales-side drinks industry entities – were asked to not ever show undue flavor to a single store or restaurant as it is not considered a fair sales practice.
According to Trinidad, anything “of value that drives business to a single retailer through social media can be construed as a violation of Tied House Laws”. This means that wine sales-side entities cannot congratulate individual retailers for awards or nominations of any kind. Should the TTB decide that a wine industry supplier “is driving business to a single retailer they can open an investigation”, he adds.
So “providing anything of value to a single retailer” is your fifth go-to-jail-free card in stack of the wine social, media game. Number six would be a situation in which an industry member pays for an advertisement placed by a retailer. This is an infraction that has undoubtedly been made many times over as wholesalers have long tried to curry favor with retailers by paying them back for product that doesn’t sell – in an illegal move defined as “consignment” – and often contributing those funds to other occasions such as dinners out or marketing needs.
For a producer to show favor to a single retailer, no matter how lovely they may be, is not permitted. According to Trinidad, a “winegrower cannot give a thing of value to a bottle shop or a bar or restaurant”, as advertising is considered a “thing of value”. So links to at least two retailers need to be provided in any social media post that may touch on where a wine may be purchased.
There are a handful of exceptions to this law, as always, such as the exception that has been made for certain winemaker events, for which there is a dispensation for people from the producer’s company to pour wine. However these same producers cannot including pricing or “laudatory statements about the retailer or restaurants”, or images or any “depictions” or picture of the store.
New legislation passed in California in recent years has also allowed for suppliers and retailers to sponsor and participate in some non-profit, sponsored events, according to Trinidad. With these new laws, suppliers can communicate to their followers that they are taking part in the event along with other sponsors, but can’t mention pricing or complement their retail partners in any way. They also then need to keep track of all written documents related to the event for three years afterwards.
The seventh – and last – deadly infraction has to do with potentially promoting an individual retailer as a sales source for a product or listing a single price for such product as sold by said retailer. At least two retailers need to be listed as potential buying sources for any product, unless the social media post is in a control state where one government entity does all the buying.
The long-term prognosis
Many of these laws may seem antiquated and they most certainly are. The United States is one the largest and most vibrant drinks markets in the world and it is a shame that sales, promotions and education about wine via social media need to be carried out in such restricted channels.
Another drinks-specialized attorney in California, who opted not be identified, said that “these laws are not rational in today’s market”. He added that he really did not see any genuine threat of “social ills” being created by because of existing ties between suppliers and retailers and how their relationships might be portrayed in social media. He adds that these legislations still are supported by much of the drinks industry. He notes that it is not just the wholesale faction of the business that has shown its continued firm support for these rules, but also “beer wholesalers that are afraid of Anheuser-Busch taking over their market share”.
Trinidad says that some executives in the wine industry believe that the Tied House Laws were created to level the playing field, however he doesn’t see the long-term value in their trying to monitor every single interaction between suppliers and retailers in the wine business.
“We have got to decide what the goals of our alcoholic-beverage regulations are,” he continues. He adds that while the industry needs to insure that underage drinking is not encouraged, it also needs to consider if other laws should be passed “to allow for a broader social media usage for producers”.
New exceptions to entrenched rules, such as allowing winemakers to publicize non-profit dinners, are a plus-plus for all involved. “They are exceptions created to allow wine and food to be served and promoted together.” He adds that the legislators decided that the benefits of such dinners outweighed the negatives.
We all will heave a big sign of relief knowing we won’t be arrested over that benefit dinner.