From lawsuits against major distributors to celebrity breakups, it’s been a year of high profile BevAlc legal disputes. But what are the most important 2023 cases that lawyers are tracking into the next year and how might they impact the industry? Here are the big three.
FTC Investigation into Southern Glazer’s
Five months after regulators from Alcohol and Tobacco Tax and Trade Bureau (TTB) and the Internal Revenue Service (IRS) raided the company’s offices in Union City, California, the Federal Trade Commission (FTC) began an antitrust investigation into Southern Glazer’s Wine and Spirits. The case is reviewing how the nation’s largest alcoholic beverage distributor may have favorably priced wine and liquor that advantaged larger retailers, leading to violations of the Robinson-Patman Act.
Most recently, that investigation put the FTC and national bev-alc retailer Total Wine & More at odds over the chain’s participation in the government agency’s investigation before finalizing a settlement earlier this month.
After a cancellation of a show cause hearing, the parties have 120 days while the terms of the agreement are implemented, but it remains to be seen what those terms mean. Veteran BevAlc lawyer Alison Herman, Of Counsel at Malkin Law (who previously worked for Southern Glazer’s but was not involved in this investigation) will be watching to see how the results conflict with state regulations.
“This is something that the industry is going to follow because the outcome of this entire investigation, if the FTC finds discriminatory pricing practices by any industry member, can run afoul of all the state regulations that allow things like discounts, quantity discounts, and cumulative quantity discounts,” she said.
Diddy vs Diageo
The Diddy vs Diageo saga will continue into 2024, and has been made even more complicated after the spirits company has used the sexual assault lawsuits against the music mogul to bolster its case. After Combs won the first round in the lawsuit against Diageo alleging that his spirits brands —Cîroc Vodka and DeLeon Tequila—received worse treatment because of his race, the spirits group countersued in October.
The original complaint was filed by Combs Wines and Spirits, a company owned by Combs, in New York State Supreme Court in Manhattan against Diageo’s North American business in late May. Among accusations of racial discrimination, the lawsuit also says Diageo has put more resources into the portfolio’s other tequilas, including fellow celebrity George Clooney’s Casamigos, which Diageo acquired in 2017 for up to $1 billion.
In the age of celebrity spirits, the case is an example of why agreements between celebrities and liquor companies should have morality clauses for both sides, said Herman.
The allegations by Combs that the spirits company allegedly typecasted DeLeón as a “Black brand” that should target “urban” consumers, also show that all parties should be on the same page when it comes to marketing.
“Make sure you’re aligned with the celebrity, the manufacturer, and the wholesaler up front on the targeted consumer audience in a market,” she said. “This case is a good reminder to make sure you’re loud and clear about the marketing intentions, because these types of disputes are very costly for both sides.”
Washington DTC Interstate Shipping Battle
Lawyers are also eyeing several state-based cases that may have implications beyond state borders.
One of those disputes is centered on allowing more freedoms for distilled spirits using a similar legal strategy that opened up direct-to-consumer shipping for wineries. In October, the U.S. District Court of the Eastern District of Washington rejected a motion from Washington state to dismiss a lawsuit filed earlier this year challenging the state’s ability to restrict out-of-state distillers from shipping spirits directly to Washington consumers.
The original suit alleges that Washington laws that allow in-state distilleries to ship directly to consumers, but prohibit out-of-state distilleries from doing the same, violate the interstate commerce clause by discriminating against businesses headquartered in other states.
“The court denied the state’s ability to dismiss the case based on the 21st Amendment, which means they’re probably going to have to provide reasons why they can discriminate against other state suppliers,” said Chicago-based liquor lawyer Sean O’Leary.A final verdict could not only open up the market for distillers shipping into Washington, said O’Leary, but call into question other state’s direct-to-consumer shipping laws that apply only to in-state parties (big markets like California are one example).