This regular publication by DLA Piper lawyers focuses on helping clients navigate the ever-changing business, legal and regulatory landscape.
- High court strikes down Tennessee alcohol statute. On June 26, the US Supreme Court struck down, by a 7-2 vote, a Tennessee law that requires sellers of beer, wine and liquor in that state to have lived in the state for two years before obtaining a permit to sell alcohol. The majority opinion in Tennessee Wine & Spirits Retailers Association v. Thomas, written by Justice Samuel Alito, said the law is invalid because it discriminates against out-of-staters and thus violates the so-called "dormant Commerce Clause" of the US Constitution. Justice Alito wrote, "If a state law discriminates against out-of-state goods or nonresident economic actors, the law can be sustained only on a showing that it is narrowly tailored to "'advance a legitimate local purpose.' The provision at issue here expressly discriminates against nonresidents and has at best a highly attenuated relationship to public health or safety." One practical effect of the ruling may be that more big-box stores will move into Tennessee and possibly other states with similar residency requirements to sell alcohol, creating new competition for local stores and perhaps leading to lower prices and more product choices for consumers.
- CEO of wine wholesalers group emphasizes limited nature of Court ruling. In a June 30 interview in Forbes magazine, Michelle Korsmo, president and CEO of the Wine & Spirits Wholesalers of America, gave her industry segment's response to the US Supreme Court's recent landmark ruling in Tennessee Wine & Spirits. Korsmo emphasized that the decision did not impact the existing three-tier system of alcohol distribution; rather, it related specifically to Tennessee's durational residency requirement for wine sellers. "The immediate impact of the decision will be played out over the next few years, but one thing that is clear from the outcome is that the 21st Amendment grants states latitude with respect to the regulation of alcohol. The Court specifically mentions that states can monitor alcohol stores' operations through onsite inspections; revoking operating licenses; limiting the number of retail licenses; limiting the amount of alcohol that may be sold to an individual; mandating more extensive training for managers and employees; and demanding that licensees demonstrate that they possess adequate knowledge of the local community," Korsmo said.
- Wisconsin liberalizes liquor laws by permitting unlimited sales by liquor stores. On June 24, Wisconsin Governor Tony Evers signed into law a bill that permits a class of liquor stores in that state to sell unlimited quantities of whiskey, gin, brandy and other distilled spirits during a single transaction. That lifts a current restriction that limits Class B license holders from selling more than four liters of alcohol at one time. Class B license holders are usually bars and restaurants, but some liquor stores that hold tastings and similar events also hold a Class B license in Wisconsin. Total Wine, a major retailer, and the Tavern League of Wisconsin supported the bill, and Total Wine lobbied heavily for its passage.
North Carolina moves toward open drinking in malls. North Carolina shoppers would be able to walk around shopping malls with a glass of wine, if a new legislative proposal passes in the state. On July 2, WRAL in Raleigh reported that the bill would allow a shopping mall to apply for an annual "common area permit" from the state Alcoholic Beverage Control Commission that would permit the open consumption of alcoholic beverages in the mall. The issue arose when various malls in the state began holding outdoor festivals featuring beer and food trucks. Although these were permitted, stores in the malls complained that they were not allowed to sell alcohol for consumption in the mall on an equal footing.
TTB proposes liberalizing bottle-size rules for wine and spirits. On July 1, the federal Alcohol and Tobacco Tax and Trade Bureau published a deregulatory proposal that would eliminate all "standards of fill" for containers of wine and distilled spirits, except for a rule that would maintain a minimum container size of 50 milliliters. This proposal is now in a public comment period. The term "standard of fill" refers to the amount of liquid in the container. If the proposal is adopted by the TTB, it would mean that as long as the amount in the bottle is disclosed, manufacturers could produce wine or distilled spirits in various sizes and quantities. Current regulations prescribe specific standards of fill for wine and distilled spirits containers, such as 750, 500, 375, 100 and 50 milliliters. The proposals, the TTB said, are intended to reduce regulation and to give consumers more options.
Delaware and Hawaii move to make healthy drinks the default on kids' menus. On July 7, Delaware HB 79, a bill requiring restaurants to make healthier beverages the default choice on children's menus, headed for the desk of Governor John Carney, and media reports indicated that he would be signing it into law. The bill aims to curb the quantity of sugary beverages consumed by children in the state and thus to reduce childhood obesity and other diseases. On June 25, David Ige, governor of Hawaii, signed the Healthy Beverages for Children law, requiring restaurants in the state that offer set children's meals to list healthier beverages as the default options. Hawaii thus became the second state with such a provision in its laws. California was the first, passing its bill in 2018. While this legislation does not prohibit the sale of sugary drinks to children, it does require parents or other adults to specifically request them.
- Groups request that US government require cancer warning on alcoholic beverages. On June 26, the Center for Science in the Public Interest, the Consumer Federation of America and 12 other nonprofit groups wrote a letter to the US Department of the Treasury, requesting that it impose a requirement that alcohol beverage labels disclose that alcohol consumption is linked to cancer. "The available scientific information shows that consuming 'even one drink per day' of alcohol increases cancer risk. A 'modernize' label for alcoholic beverages should therefore carry a warning that reflects this scientific understanding," the groups wrote. They noted that according to a multitude of studies, "cancer risk increases with the amount of alcohol consumed, but even small amounts of alcohol have been shown to cause cancer." They suggested that current required warnings regarding driving a car under the influence and regarding drinking during pregnancy should be continued and should be rotated on beverage labels with the cancer warning.
- Study indicates beverage taxes have an impact on consumption. Researchers from the University of Otago in Wellington, New Zealand, who have studied taxes on sugary beverages, have concluded that a 10 percent tax can be expected to reduce the purchase of such beverages in a particular locality by about 10 percent. The study, which was published June 19 in the international scientific journal Obesity Reviews, examined taxes in France, Spain, Mexico and Chile and in Philadelphia; Cleveland; Berkeley, California; and Portland, Oregon. The lead author of the study said that the study shows that "taxes on sugary drinks are an effective tool to reduce consumption, and we know from other research that the high consumption of sugary drinks increases the risk of obesity, diabetes and dental caries."
- FDA permits qualified blood pressure claim for omega-3 fatty acids. On June 19, the FDA approved a list of qualified health claims for omega-3 fatty acids and their effect in lowering blood pressure. Omega-3 fatty acids are found in foods such as fish, as well as in flaxseed and fish-oil supplements. The FDA's step came after more than five years of efforts by the food industry. The permitted health claim was based partly on a meta-analysis of 70 studies on these fatty acids and their effect on blood pressure. Like other qualified health claims of this nature, the FDA-permitted statements are highly equivocal in their wording. Each of the five permitted claims includes this standard language: "FDA has concluded that the evidence is inconsistent and inconclusive." The FDA found that the scientific evidence did not meet the standard required for an "authorized health claim" but did meet the "credible evidence" standard for a qualified health claim.
- Food industry groups predict widespread use of "Best if Used By" dating by year end. The Grocery Manufacturers Association and the Food Marketing Institute are predicting that by the end of 2019 as many as 98 percent of food and beverage products sold in the US will bear labels that reflect a standardized version of date labeling – "Best If Used By." This is the type of date labeling recommended by the FDA as the most effective way to inform consumers about the safety of their food. The FDA estimates that 20 percent of consumer food waste stems from confusion about food labeling, and the USDA estimates that 133 billion pounds of food are thrown away by consumers each year.
- Packaged vegetable recall. Growers Express has voluntarily recalled an array of packaged fresh vegetables due to possible contamination with Listeria. The recalled foods, all produced at a facility in Biddeford, Maine, include cauliflower, zucchini, butternut squash and a butternut squash-based veggie bowl, and are sold under the Green Giant Fresh, Growers Express, Signature Farms and Trader Joe's brands. The contamination was discovered in a single sample during a routine Massachusetts Department of Health inspection, and the company self-reported the contamination to the FDA and issued the voluntary recall.
Ground bison meat is source of E. coli outbreak. A seven-state outbreak of E. coli has been linked to ground bison meat likely produced by Northfork Bison Distributions, Inc., of Quebec. The CDC reports that 21 people in Connecticut, Florida, Michigan, Missouri, New Jersey, New York and Pennsylvania have fallen ill with the implicated strains of E. coli. The product – ground bison and bison patties – was sold both to retailers and distributors. A recall was issued for the meat products on July 15.
- Lawsuit against Mississippi meat-labeling law. "Brace yourself: Veggie burgers don't contain meat," says a press release from the free-market advocacy nonprofit Institute for Justice, which on July 2 joined Upton's Naturals, a Chicago-based manufacturer of vegan food products, and the Plant Based Foods Association in a suit against Mississippi's new meat-labeling law. In recent months, several US states have passed similar "truth in labeling" laws (find out more here and here). The Mississippi law, which went into effect July 1, forbids the use of any meat product terms, such as "veggie burger" or "vegan jerky," on food labels. The suit is being brought on First Amendment grounds against Mississippi's governor and its commissioner of agriculture and commerce & nash; who is also a cattle farmer – in the US District Court for the Southern District of Mississippi. "The ban serves only to create consumer confusion where none previously existed," the complaint says. Michele Simon, executive director of the Plant Based Foods Association, said, "The proper arena to address competition is in the marketplace, directly speaking to consumers it's not to go to your friends in the state legislature to do your bidding. Our members are competing fair and square in the marketplace." As part of its National Food Freedom Initiative, the Institute for Justice has already prevailed in food labeling litigation on free speech grounds in Florida and Oregon.
- Meanwhile, in Missouri. Hopes are fading for a settlement in a high-profile lawsuit over Missouri's controversial new law banning the use of terms related to meat for plant-based and cell-cultured meat; talks reached an impasse and the litigation is therefore expected to resume. Plant-based food company Tofurky, the Animal Legal Defense Fund, the ACLU and others are challenging the Missouri law on First Amendment and other grounds. Those mounting the challenge say that the law was motivated by meat producers' fear of competition, not by a desire to protect the consuming public. "We will continue to challenge these unconstitutional laws as long as they are on the books," said a lawyer for the Animal Legal Defense Fund.
- Oat milk producers are told by FDA officials to list their sugars as "added sugar." Oatly and other oat milk brands will change the way they list sugars on their Nutrition Facts panels in the wake of conversations with FDA officials. An Oatly spokesman told Food Navigator magazine on July 9 that although the company doesn't add any sugar or sweeteners to its oat milk, all seven grams of sugar per serving in the product will be listed as "added sugar" to comply with FDA guidance. In the manufacturing process, oat starch is broken into simple sugars such as glucose and maltose. The FDA has taken the position that these sugars qualify as "added sugar" and must be listed as such.