TABC Proposes Revised Malt Beverage Labeling Rules

As a result of the Court’s holding in Authentic Beverages Company, Inc. et al v. TABC, the Commissioners have approved publication of a number of rule amendments..  Once these are published in the Texas Register, the public will be given thirty (30) days to provide written comments.  They have not been published to date.  The TABC has also scheduled a public hearing to receive oral comments on the proposed rule changes at its offices here in Austin on Wednesday, May 2nd, at 9:30.

The following are our thoughts on the proposed amendments:

§41.23 Basic General Records Required.

Subsection (b) governing invoices will be amended to require that the following information now be included in all invoices:

  • Price
  • Container size
  • Brand name
  • For malt beverages containing more than 4% alcohol by weight (i.e. ale or malt liquor under current labeling standards), either (a) the alcohol percentage by volume or (b) an approved symbol or statement must be included in the product description

Invoices will no longer be required to be issued in duplicate or kept in a well bound book.

This amendment is consistent with the position advanced by Chip McElroy of Live Oak Brewing at a prior stakeholders’ meeting with the TABC that if the product was “beer” under the current standard, listing ABV would not be required.  ABV (or an approved symbol) would be required to be stated for “ale” or “malt liquor” under the current standard.  However, the TABC has not followed this simple system in its other amendments.

§45.71 Definitions

The definition of “beer” in Subsection (1) is amended to delete the phrase “and shall not be inclusive of any beverage designated by label or otherwise by any other name than beer”.  Therefore, brewers are now allowed to include the style correct identifying the product on their labels, even if the ale or stout contains less than 4% alcohol by weight.

The definition of “malt liquor” in Subsection (9) (actually Subsection (10) in the current rules) now includes the following phrase “In this subchapter, ‘malt liquor’ and ‘ale’ have the same meaning.”  This corrects a definitional oversight since “ale” and “malt liquor” are given the same meaning in TAB Code Sec. 1.04(12). We are not sure why the definition is limited to “this subchapter”, since  “ale” is referred to throughout the rules.

§45.77 Class and Type

Subsection (a) is amended to delete the requirement that a malt beverage be labeled as either a beer or a ale/malt liquor and now reads as follows:

(a)     Every malt beverage label shall bear, in legible and easily viewed writing:

(1)     The word “beer”, if the product contains one-half of one percent or more of alcohol by volume and not more than four percent of alcohol by weight, or the word “ale” or “malt liquor” if the product contains more than four percent of alcohol by weight; and/or

(2)     A truthful statement of the appropriate class or style of the product using terms commonly recognized in the malt beverage industry, accompanied by the alcohol content of the product in percentage of alcohol by volume (expressed to the nearest one-tenth of a percent).

Subsection (c) is amended to delete the prohibition on labeling a “beer” as an “ale” or “malt liquor” or labeling an “ale” or “malt liquor” as a “beer” and now reads as follows:

(c)     Nothing shall prevent a malt beverage labeled pursuant to paragraph (a)(1) of this section from also bearing a class or style designation that is recognized in the brewing industry, such as, but not limited to, “porter,” “stout,” or “lager,” provided such beer, ale, or malt liquor has the characteristics of such class or style.

(NOTE:  The TABC’s draft indicates that the phrase “Nothing shall prevent a” has been added to the former second sentence (now the first).  That phrase already exists in the current rule.)

Together, revised Subsections (a) and (c) would seem to present a manufacturer or brewer (hereinafter, referred to collectively as a “brewer”) with three labeling alternatives:

  1. Simply label its products as beer or ale (or malt liquor) based on alcohol content under the current system;
  2. Label its products based on the correct class or style and include the ABV; or
  3. Label its products based on the correct class or style and include the word “beer” (if the alcohol content is 4% or less by weight) or “ale” (or “malt liquor”) (if the alcohol content is more than 4% by weight) on the label as an alternative for the ABV.

We think that Chip’s suggestion provided a better solution; label the product with the correct class or style based on the recipe and production method and require the ABV to be listed only if it exceeds 5.0%.  Consumers could be readily educated that products without a statement of ABV contain 5.0% or less alcohol (as they supposedly currently understand for “beer”).  This would seem to provide the consumer with more accurate information and be easier to administer.

§45.79 Alcoholic Content

Subsection (c) Tolerances is amended to allow the inclusion of “beer” on products containing greater than 4.0% alcohol by weight and “ale” or “malt liquor” on products containing less than 4.0% alcohol by weight provided that the actual alcohol content is listed.  It is not stated whether this is to be stated as alcohol by weight or by volume.  This seems to diminish the value of the using “beer” and “ale” as descriptive terms for the consumer.

Subsection (f) Advertising of alcoholic content prohibiting the use of alcohol content or any terms suggesting the strength of the product is deleted.

§45.82 Prohibited Practices

Subsection (f) Use of the words “strong”, “full strength” and similar words prohibiting these and similar phrases likely to be considered as statements of alcoholic content is deleted.

§45.90.  Advertisement: Prohibited Statements.

In response to Authentic Beverages’ First Amendment challenges, the TABC proposes to amend Rule §45.90 to remove the requirement that malt beverages containing 4% alcohol by weight be labeled as “beer” and malt beverages containing more than 4% alcohol by weight be labeled as “ale” or “malt liquor” by deleting subsection (c) in its entirety.   The TABC has also proposed the deletion of subsections (a)(6) (regarding statements suggesting that the malt beverage was brewed under governmental authorization) and (a)(7) (regarding statements that the malt beverages produced or bottled under governmental supervision) and the revision of current subsection (e) (regarding common advertising of multiple brands tending to create confusion), which would seem to be of little consequence.

However, with regard to First Amendment rights, the TABC has failed to revisit its pronouncement in Marketing Practices Bulletin MPB0050 that brewers may not pre-announce/advertise promotional activities or purchases (i.e. bar spending) of their products at retail locations, currently prohibited by Rule §45.113(b).  We believe that Authentic Beverages stands for the proposition that the First Amendment protects the pre-arrangement and advertising of legal promotions as commercial free speech, in the same way as these activities are allowed for distilleries, wineries and wholesalers.  We provided this comment to Martin Wilson after the publication of MPB0050 and believe the amendment of Rule §45.113(b) should be addressed in the current rulemaking.  We will provide this as an official comment to the proposed rule once the comment period opens.

§45.110. Inducements

In order to recognize a brewer’s First Amendment right to advertise where its products are available at retail, the prohibition on a manufacturer or wholesaler providing or purchasing advertising that benefits a specific retailer found in Subsection (c)(3) only applies where such “advertising is the result of undue collusion involving financial remuneration, incentive, inducement or compensation between the manufacturing or wholesale tier member and the retail tier member.”  The question here would seem to be what would constitute “undue collusion”, particularly in light of the right to prearrange and preannounce legal promotions that should be enjoyed by brewers.

Please do not hesitate to contact Jack Martin & Associates by email or at 512-473-0300 with any questions about this or other alcoholic beverage matters.

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