When may a Napa wine be labeled as a Napa wine?

August 20, 2016 | By CALEB TROTTER

The federal Alcohol and Tobacco Tax and Trade Bureau (TTB) regulates the labeling of wines sold in interstate commerce. If a winemaker wants to label their wine using an “appellation of origin” from a recognized viticultural area like Napa, then the wine must meet certain requirements. These requirements include: 85 percent of the grapes used to make the wine must be grown in the named area, and the wine must be “finished” (i.e. fully produced and bottled) in the state where the grapes are grown. However, winemakers are exempt from the labeling regulations if they only sell their wine intrastate. So, if a winemaker in New York purchases grapes from a Napa winery, ships the grapes to its New York facility where it crushes the Napa grapes and bottles the wine, then it can only label its wine as a Napa wine if it restricts sales of the wine to within New York. This is true even if the wine includes a disclaimer that the wine was “produced and bottled in New York with grapes grown in Napa, California.”

TTB recently proposed a rule to remove the exception for intrastate sales. This week, PLF submitted written comments outlining the serious First Amendment concerns with the proposed rule.

The First Amendment protects commercial speech that is not inherently misleading. Since it is not inherently misleading to label a wine made from grapes grown in Napa as a Napa wine, the proposed rule must satisfy the United States Supreme Court’s commercial speech test articulated in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of New York. The most relevant prongs of that test are that the regulation must directly advance a substantial government interest, and be no more extensive than necessary to serve that interest.

Even if we assume the federal government has a substantial interest in regulating the use of appellations of origin in wine labeling sold intrastate, the proposed rule does not satisfy the remainder of the test. If the government’s interest is preventing wine consumers from being duped into buying wine whose labels suggest the wine is something it is not, that interest is not served when truthful labeling and additional disclosure is prohibited. Instead, a label advertising a Napa wine that truthfully states “85% of grapes used to make this wine were grown in Napa County, California,” and “Finished and bottled in New York,” allows winemakers to honestly advertise their product and provides consumers with sufficient information to know what they’re buying.

Because additional disclosure–rather than an outright ban on speech–would more directly advance the government’s interest and avoid unnecessarily regulating winemakers, the proposed rule violates the First Amendment. Hopefully the TTB will take this into account when considering whether to move forward with the rule change.