Are Breweries Your Firm's Next Frontier?

September 7 is National Beer Lover’s Day, and in addition to enjoying a few brews, we thought we’d take this opportunity to explore a unique legal practice area.

The number of breweries in the US reached a new high last year with over 7,000 breweries operating across the country. And craft brewing’s share of that number continues to grow, taking up close to 25% of the overall $111 billion industry.

For those looking to take on clients in this area, here are a few important developments to know about:

The Craft Beverage Modernization and Tax Reform Act (CBMTRA)

Enacted in December 2017, this comprehensive excise tax reform measure impacted the entire alcohol industry. The CBMTRA lays out a tiered tax structure based on the number of barrels a brewer puts out. For example, the first six million barrels produced – regardless of the size of the brewery – are taxed at $16 per barrel. However, domestic brewers producing less than two million barrels per year only pay $3.50 per barrel.

Circuits Split on Interaction Between 21^st Amendment and Commerce Clause

A landmark 2018 decision from the Sixth Circuit highlighted the struggle of reconciling states’ power to regulate alcohol under the 21^st Amendment and scrutiny under the Commerce Clause. The case addressed a Tennessee law that required retailers to be residents of the state for two years before they could acquire a liquor license. The Sixth Circuit found that the law constituted economic protectionism, and the 21^st Amendment did not prevent scrutiny under the Commerce Clause. The law was struck down by the Supreme Court in 2019. Many other states have similar laws, which in light of this development will likely have to change.

Litigation Over False Advertising

Several lawsuits over the last few years have put common descriptions under a microscope, including:

• “Natural”
• “No additives”
• “No artificial ingredients”

Breweries have also encountered legal troubles for geographic references outside of where their beer is brewed. So, along with trademarks and other branding concerns, those advising brewing businesses should keep in mind that consumers are becoming more and more attentive to packaging claims.

Related Resources:

• 10^th Circuit Denies Insurance Claim for Undelivered Wine (FindLaw’s Tenth Circuit)
• Small Biz Wins: Virginia Bars Can Advertise Happy Hour Specials (FindLaw’s Free Enterprise)
• Court: Tennessee Liquor Law Violates Commerce Clause (FindLaw’s Supreme Court)