We recently posted that the Federal Trade Commission (FTC) issued warnings to a large number of companies in various industries about “unfair” or “deceptive” trade practices related to third-party endorsements. Some of the businesses that received those warnings included alcoholic beverage companies. FTC’s warnings raise the broader question of what is acceptable when it comes to advertising in the alcoholic beverage industry, especially given the rise in use of social media and online platforms to promote products. In this post, we provide a high-level overview of the regulations and guidance that govern advertising alcoholic beverages to consumers, along with some overall considerations.
Alcoholic beverages are highly regulated consumer products and, therefore, it is important to understand the regulatory landscape to ensure compliant advertising. At the federal level, three key agencies provide regulations and guidance on advertising alcoholic beverages—the Alcohol and Tobacco Tax and Trade Bureau (TTB), the U.S. Food and Drug Administration (FDA), and the FTC. In addition to federal law and guidance, industry standards and state law also govern this space.
TTB defines “advertisement” to mean “any written or verbal statement, illustration, or depiction, which is in, or calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail…. The definition includes any written, printed, graphic, or other matter accompanying the container; markings on cases, billboards signs, or other outdoor display; and broadcasts made via radio, television, or in any other media. Though not specifically listed, this definition includes websites and other Internet-based advertising such as social media.”
TTB requires that specific information be included in every advertisement and that information varies depending on whether the product is a wine, distilled spirit, or malt beverage. For example, for wine and malt beverages, TTB requires that advertisements include the name and address of the permittee responsible for the advertisement; and the class, type or distinctive designation to which the wine or malt beverage belongs, corresponding with the information shown on the TTB-approved label (e.g., red wine, sparkling wine, champagne, lager, ale, stout, etc.).
For distilled spirits, TTB requires that advertisements include the same information as above, plus the alcohol content shown as percent alcohol by volume (proof may be shown as additional information); and the percentage of neutral spirits and name of commodity, as required for certain distilled spirits.
In addition, TTB regulations specifically summarize types of information that cannot be included in wine, malt beverage, or distilled spirits advertisements. While there are slightly different prohibition for each product type, there are some commonalities. For each product type, TTB generally seeks to prevent false or misleading statements, competitor disparagement, inconsistency with product labeling, and deceptive health-related statements.
Notably, unlike product labels for certain types of alcoholic beverage products, TTB does not require pre-approval for alcoholic beverage advertisements, although it offers industry members voluntary pre-clearance services.
There is necessarily some overlap between TTB and FDA jurisdiction of alcoholic beverages as described in the agencies’ memorandum of understanding on this topic. Some types of alcoholic beverage products, however, fall outside the jurisdiction of TTB regulation because they are not otherwise included in key product definitions. These products may be considered a “food” and, therefore, be subject to FDA regulations. While FDA does not have comprehensive regulations or guidance governing alcohol advertising, it does have extensive requirements for ingredients and other labeling requirements. FDA guidance states, “[i]n general, FDA requires that food products under its jurisdiction be truthfully and informatively labeled in accordance with … regulations.” Thus, any alcoholic beverage business must be aware of how its products are classified under federal law in order to tailor its compliance programs.
FTC has not promulgated binding regulations governing alcohol advertising, although FTC maintains enforcement power for any unfair or deceptive trade practices, including advertising claims. Rather, the agency has taken a self-regulatory approach by encouraging industry members to adopt and comply with industry “standards to reduce the extent to which alcohol advertising targets teens, whether by placement or content.” FTC specifically encourages industry members to comply with codes written by the Distilled Advertising Council of the United States (DISCUS), the Beer Institute, and the Wine Institute. The agency states that it “monitors compliance with these codes formally and informally,” although we are not aware of any significant enforcement action by the FTC on this topic.
Consistent with FTC guidance, there are three main self-regulatory codes that industry members look to for guidance on the parameters of alcoholic beverage advertising. The DISCUS Code of Responsible Practices for Beverage Alcohol Advertising and Marketing contains guidelines for activities such as brand advertising, consumer communications, promotional events, packaging, labels, sponsorships, product placements, and distribution and sales materials.
The Beer Institute Advertising/Marketing Code and Buying Guidelines apply to beer-branded advertising materials created by or under the control of beer manufacturers and importers.
Finally, the Wine Institute’s Code of Advertising Standards includes guidelines for responsible content, placement, and digital marketing.
These codes are generally binding on DISCUS, Beer Institute, or Wine Institute members, but voluntary for non-members.
Most states’ tied-house laws impose advertising restrictions that prohibit a business permitted in one tier of the alcohol regulatory framework (e.g., distributor) from providing things of value to members of another tier (e.g., retailer), with some exceptions. Generally, tied-house laws do not directly address digital advertising, but it is important to review and understand the laws in the specific jurisdiction(s) in which a business is licensed to sell.
Outside of tied-house laws, there are a number of new laws that allow licensees to sell and ship or deliver alcoholic beverages directly to consumers, such as through the Internet. To the extent there are advertising restrictions on these activities, they would be located in the statutory sections allowing a state agency to issue a direct-to-consumer (DTC) permit, in regulations or guidance related to the DTC permit, or in the permit itself.
Finally, state unfair and deceptive trade practice statutes are broad enough to include advertising of alcoholic beverages.
Given the above information, any business that advertises alcoholic beverages should take into account the considerations below.
- Do not assume that the same regulations or guidance applies to each product type. Beer, wine, and liquor are regulated in different ways and, therefore, have different requirements when it comes to advertising.
- Review the industry standards for your particular product type and consider whether your advertising practices are consistent with those standards. Although these standards are not typically binding, the FTC highly encourages self-regulation through compliance with these standards and they serve as a starting point for encouraging good “corporate citizenship.”
- Know your place on the tier. Retailers will be subject to different restrictions than distributors and manufacturers/importers will be subject to different restrictions than retailers or distributors.
- Take a targeted approach to advertising compliance. Ensure you understand the federal and state requirements or guidance for your specific jurisdiction.