Brewers Beware: When It Comes to Claims of False Advertising, COLA's May Not Be Safe Harbors Thumbnail

Brewers Beware: When It Comes to Claims of False Advertising, COLA's May Not Be Safe Harbors

The Ohio Craft Brewers Association recently announced that it has 115 brewery members, and 17 members who are "breweries in planning." Those brewers have to compete with each other, as well as many of the over 4,000 craft brewers operating in the other 49 States, along with ABInBev, MillerCoors, Heineken and others. To be successful, a brewer must do more than just produce good beer - it must effectively market its products, and that marketing often begins with the design of the label.

A brewer cannot sell any malt beverages across state lines without first obtaining a Certificate of Label Approval (a "COLA") from the Alcohol and Tobacco Tax and Trade Bureau (the "TTB") (keep in mind that not all beers are "malt beverages," so not all beers need a COLA). One purpose for requiring brewers to obtain COLAs is to prevent brewers from including misleading statements on malt beverage labels. 

The Ohio Deceptive Trade Practices Act (the "DTPA"), as well as similar statutes in many other states, also prohibits brewers from including misleading statements on labels (as well as in all advertising). The DTPA contains a "safe harbor" provision that excludes from the DTPA any conduct that is in compliance with the orders or rules of a federal agency. Logically, a brewer might expect that if the TTB is not supposed to approve labels that are misleading, and if the TTB has issued a COLA for a brewer's label, then the brewer can rely on the "safe harbor" provision of the DTPA. Like beer and wine, law and logic do not always mix well together. 

A recent decision from a federal court in New York illustrates this point. In Singleton v. Fifth Generation, Inc., a consumer filed a class action against the maker of Tito's Handmade Vodka alleging that the labels on Tito's vodka bottles were false and deceptive. The labels claim that Tito's vodka is "Handmade" and "Crafted in an Old Fashioned Pot Still by America's Original Microdistillery." In fact, the vodka is produced in "massive buildings containing ten floor-to-ceiling stills and bottling 500 cases an hour using mechanized and/or automated processes, which involve little to no human supervision, assistance, or involvement." Tito's responded that because it had obtained a COLA for its labels, it came within the safe harbor exception under New York's Deceptive Trade Practices Act. The Court, however, disagreed. It ruled that a COLA, standing alone, was insufficient evidence that the TTB had approved the challenged statements on the label.

The Singleton decision is one of the more recent cases that have struggled with whether a COLA, standing alone, is a complete defense to a false advertising claim. A Florida federal court allowed Anheuser-Busch to rely on a COLA to defend against claims that the labels for Bud Light Lime Lime-A-Rita were deceptive. While federal courts in Illinois and Florida have similarly allowed defendants to rely on COLAs as a defense to false advertising claims, different federal courts in Illinois and California have ruled that a COLA, standing alone, is not a defense. A federal court in New York is currently considering whether the TTB's approval of the label for Foster's beer bars the claim that the label creates the misleading impression that it is brewed in Australia.

The best defense, of course, is to avoid any false or misleading statements of fact on your labels. Do not be like the defendant which claimed that its whiskey was "hand bottled in Vermont" when, in fact, it was mass produced in Canada. Another example is the lesson that Anheuser-Busch learned in connection with its marketing of Beck's Beer. Beck's was brewed in Germany from 1873 until 2012, when Anheuser-Busch moved production to its facilities in St. Louis. Although the fact that the beer was brewed in St. Louis was disclosed on the label (albeit in small white print on a silver background), Anheuser-Busch also included the following statements on its labels and packaging: "Originated in Germany" with "German Quality" while "Brewed Under the German Purity Law of 1516." The Court concluded that these statements could deceive a consumer into believing that the beer was still brewed in Germany. 

As further proof that the law in this area is not well settled, a federal court in California recently ruled that consumers would not be misled into thinking that Red Stripe beer was still brewed in Jamaica (as opposed to Latrobe, Pennsylvania) even though the packaging stated: "Jamaican Style Lager" and "The Taste of Jamaica." 

In sum, merely because you have obtained a COLA does not mean you will necessarily be insulated from a false advertising claim for statements you make on your label.

If you would like us to help you evaluate how this developing area of law could affect your business or organization, please contact Frantz Ward attorneys James Niehaus or Angela Lydon.

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