[Federal Register Volume 61, Number 217 (Thursday, November 7, 1996)]
[Proposed Rules]
[Pages 57597-57599]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28640]
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DEPARTMENT OF THE TREASURY
Bureau of Alcohol, Tobacco and Firearms
27 CFR Parts 5 and 7
[Notice No. 844]
RIN 1512-AB50
Use of Distilled Spirits Terms in Labeling and Advertising of
Malt Beverages; Use of the Term ``Margarita'' in Labeling Distilled
Spirits
AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of
the Treasury.
ACTION: Notice of petition.
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SUMMARY: Heublein, Inc. (Heublein), a distilled spirits producer, has
petitioned ATF to issue new rules relating to the labeling and
advertising of distilled spirits and malt beverage products. ATF
administers the Federal Alcohol Administration Act (FAA Act), 27 U.S.C.
Secs. 205(e) and (f), which prohibits false and misleading statements
on labels and in advertising of beverage alcohol. Specifically,
Heublein has petitioned ATF to issue new rules to prohibit (1) the use
of terms in the labeling of malt beverages which are the names of
products customarily made with a distilled spirits base, (2) the
labeling and advertising of a malt beverage in such a manner as to
create the impression that it contains or is comparable to a distilled
spirits product, and (3) the use of the term ``Margarita,'' or any
other word commonly associated with tequila and Mexico, as a
designation of any distilled spirits product which does not contain
tequila.
ATF has approved labels for malt-based alcohol beverages that use
cocktail names such as ``Margarita'' provided the label clearly
identifies the product as a malt beverage. The purpose of this notice
is to provide the public with an opportunity to comment on the
additional safeguards that Heublein believes are necessary in order to
prevent consumers from being misled about the composition of these
malt-based alcohol beverage products.
DATES: Written comments must be received by February 5, 1997.
ADDRESSES: Send written comments to: Chief, Wine, Beer, and Spirits
Regulations Branch, Bureau of Alcohol, Tobacco and Firearms, P.O. Box
50221, Washington, DC 20091-0221; Notice No. 844. Comments not
exceeding three pages may be submitted by facsimile transmission to
(202) 927-8602. Copies of written comments to this notice will be
available for public inspection during normal business hours at: ATF
Reading Room, Office of Public Affairs and Disclosure, Room 6300, 650
Massachusetts Avenue, NW, Washington, DC 20226.
FOR FURTHER INFORMATION CONTACT: Charles N. Bacon, Wine, Beer, and
Spirits Regulations Branch, Bureau of Alcohol, Tobacco and Firearms,
650 Massachusetts Avenue, NW, Washington, DC 20226; telephone (202)
927-8230.
SUPPLEMENTARY INFORMATION:
Background
Under existing law, ATF is charged with the enforcement
responsibility of sections 105(e) and 105(f) of the Federal Alcohol
Administration Act (FAA Act), 27 U.S.C. 205(e) and (f), which vest in
ATF the authority to regulate the labeling and advertising of alcohol
beverages, including distilled spirits and malt beverages. These
sections authorize the issuance of regulations that will, among other
things, prohibit deception of the consumer with respect to the product,
and which will provide the consumer with adequate information as to the
identity and quality of the product.
More specifically, section 205 makes it unlawful for any person
engaged in
[[Page 57598]]
business as, in pertinent part, a distiller, brewer, or vintner to sell
or introduce any distilled spirits, malt beverages, or wine in
interstate commerce unless such products are bottled, packaged,
labeled, and advertised in conformity with the FAA Act and regulations
promulgated by ATF pursuant thereto. With respect to alcohol beverage
labels, ATF is specifically tasked with ensuring that consumers are
adequately informed and not misled by such labels.
Under existing regulations, no person may bottle or remove for sale
in interstate commerce distilled spirits or malt beverages until such
person has applied for and received a certificate of label approval
from ATF. As part of the approval process, ATF will advise applicants
to make changes to proposed label applications in order to ensure
compliance with the requirements of the statute and implementing
regulations. ATF has performed this label review and approval function
since the inception of the FAA Act in 1935, in order to ensure that
consumers are not misled by labels of distilled spirits and malt
beverage products.
In recent years there has been an increase in the number of
prepackaged low alcohol products. Many products in this low alcohol
category are malt beverage specialty products that prominently feature
flavors as part of their name such as ``Wild Berries'' or ``Tropical
Punch.'' Another recent trend by producers is to use names
traditionally associated with distilled spirits cocktails as part of
the designation or as a fanciful name for these malt beverage specialty
products. Thus, names such as ``Strawberry Daiquiri Flavored Cooler,''
``Pina Colada Flavored Cooler,'' ``Margarita Flavored Cooler,'' and so
forth, are being used for malt-based specialties.
Pursuant to its mandate to review alcohol beverage labels, and
consistent with the statutory standard of review, ATF has approved malt
beverage labels that contain names such as ``Daiquiri,'' ``Pina
Colada,'' ``Margarita,'' ``Planter's Punch,'' and so forth when they
describe a flavor component. ATF notes that at least some of these
names, such as ``Pina Colada,'' are commonly used as flavor descriptors
in other products such as foods, non-alcoholic drinks, and ice cream.
ATF has required that the malt beverage labels must contain a statement
of composition such as ``Malt Beverage with Natural Flavors'' as part
of the class and type statement. ATF has approved such labels in the
belief that this requirement is sufficient to inform the consumer as to
the alcoholic component of such specialties, and that consumers will
not have the impression that these products contain distilled spirits
or are like distilled spirits.
ATF also allows the use of the term ``Margarita'' as a flavor
descriptor, both for malt-based specialty products and for distilled
spirits products that do not contain tequila. In that regard, ATF notes
there is no standard of identity for a ``Margarita'' in Part 5. ATF
does not, however, approve malt beverage labels which contain terms
such as ``Whiskey,'' ``Tequila,'' and so forth since these are the
names of distilled spirits that are not contained in these malt-based
specialty products.
Petition
Heublein's petition states that beverage producers are marketing
malt-based specialty products with the names of cocktails customarily
made with distilled spirits, despite the fact that these products
contain no distilled spirits. Heublein asserts that the use of these
terms in labeling and advertising malt beverages misleads consumers
into believing that these products contain distilled spirits. Heublein
cites the existing provisions in FAA wine regulations at 27 CFR
4.39(a)(7) and 4.64(a)(8) which prohibit use of distilled spirits terms
in the labeling and advertising of wine, and states these same
prohibitions should be applied to the labeling and advertising of malt
beverages.
Heublein asserts that the current practices result in consumers
being misled into believing that malt beverages so labeled contain
distilled spirits. To support their claim that consumers are being
misled, Heublein submitted two surveys showing consumers' impressions
of the ingredients present in two major brands of malt-based specialty
products. Consumers were asked to indicate what they believed to be the
alcoholic component of malt-based flavored specialty products based on
a physical examination of bottles and packaging materials as they would
appear in the marketplace.
The first survey indicated that 42 percent of all respondents
received some impression that brand ``A'' of a malt-based Margarita
specialty product contains tequila. Sixty-nine percent of respondents
indicated this product contained tequila after having been given a list
of six potential alcoholic ingredients [gin, malt, rum, tequila, vodka,
wine] to assist them. The percentage of persons who had the impression
that this product contained tequila was slightly higher among
respondents who knew that a Margarita is commonly made with tequila.
Twenty percent of respondents identified malt as an ingredient in
this brand of malt-based specialty product. This increased to 44
percent identifying malt as an ingredient when the same list of six
potential ingredients was presented to these respondents.
The second consumer survey yielded similar results for brand ``B''
of a malt-based Margarita specialty product. Thirty percent of
respondents received the impression that it contains tequila; this
increased to 64 percent after respondents were given the same list of
six potential alcoholic ingredients. Similarly, 17 percent of
respondents indicated that this product contains malt. The percentage
of persons who had the impression that this product contained malt
increased to 45 percent after these respondents were shown the list of
six potential ingredients.
Based on these survey results, Heublein asserts that the use of the
name of a customary distilled-spirits based cocktail on a label
misleads consumers into believing that a malt-based specialty product
contains distilled spirits. Heublein claims that this conclusion
applies equally to all malt beverages which are labeled with the name
of any cocktail customarily made with distilled spirits, and not only
to those malt-based specialty products which contain the term
``Margarita'' on which the surveys are based. Heublein maintains this
conclusion regardless of the presence of labeling, advertising or other
material that would dispel any connection that the labeled or
advertised products might have with distilled spirits.
Discussion
It is not clear whether the results of the consumer surveys
submitted by Heublein regarding malt-based specialty products labeled
as ``Margarita Flavored'' can be applied to similar products. For
example, there is no direct evidence presented in the petition that
consumers who view products labeled ``Strawberry Daiquiri Flavored Malt
Beverage'' or ``Pina Colada Flavored Malt Beverage'' assume that such
products contain rum.
With respect to giving the term ``Margarita'' geographic
significance, Heublein asserts that the survey shows that the term
``Margarita'' is so closely associated with tequila that consumers are
likely to be confused unless tequila is present in any product
identified as ``Margarita.'' This action would create a geographic
designation for the term ``Margarita'' and would restrict its use to
distilled spirits products which contain tequila.
[[Page 57599]]
Heublein also asserts that distilled spirits producers are placed
at a competitive disadvantage by misleading malt beverage labels.
However, no direct evidence has been proffered which would substantiate
this claim.
Finally, Heublein asserts that the Department of the Treasury is
losing excise tax revenues as consumers replace distilled spirits
products with lower-taxed malt beverages. While this may or may not be
true, it is not relevant to our labeling authority under the FAA Act.
Congress has chosen to tax the products at a different rate and any
producer may choose to produce and market lower taxed malt-based
products.
Public Participation--Written Comments
ATF requests comments from all interested persons. All comments
received on or before the closing date will be carefully considered.
Comments received after that date will be given the same consideration
if it is practical to do so, but assurance of consideration cannot be
given except as to comments received on or before the closing date.
We would note that ATF already has received several written
comments regarding the issues raised in this petition. These comments
will also receive careful consideration.
ATF will not recognize any material in comments as confidential.
Comments may be disclosed to the public. Any material that a respondent
considers to be confidential or inappropriate for disclosure to the
public should not be included in the comment. The name of any person
submitting a comment is not exempt from disclosure.
Comments may be submitted by facsimile transmission to (202) 927-
8602, provided the comments: (1) Are legible; (2) are 8-\1/2\'' x
11'' in size; (3) contain a written signature; and (4) are three pages
or less in length. Comments sent by FAX in excess of three pages will
not be accepted. Receipt of FAX transmittals will not be acknowledged.
Facsimile transmitted comments will be treated as originals.
Disclosure
Copies of Heublein's full petition and written comments generated
pursuant thereto will be available for public inspection during normal
business hours at: ATF Reading Room, Disclosure Branch, Room 6300, 650
Massachusetts Avenue NW, Washington, DC.
Drafting Information. This notice was written by various personnel
within the Bureau of Alcohol, Tobacco and Firearms.
List of Subjects
27 CFR Part 5
Advertising, Consumer protection, Customs duties and inspection,
Imports, Labeling, Liquors, Packaging and containers, Reporting and
recordkeeping requirements, Trade practices.
27 CFR Part 7
Advertising, Beer, Consumer protection, Customs duties and
inspection, Imports, and Labeling.
Authority. This notice is issued under the authority of 27
U.S.C. 205.
Dated: August 22, 1996.
John W. Magaw,
Director.
Approved: September 5, 1996.
John P. Simpson,
Deputy Assistant Secretary, Regulatory, Tariff and Trade Enforcement.
[FR Doc. 96-28640 Filed 11-6-96; 8:45 am]
BILLING CODE 4810-31-U
