Antitrust Law Daily Wrap Up, ADVERTISING—6th Cir.: Anheuser-Busch dodges alcohol content misrepresentation claims, (Mar 23, 2016)

By Greg Hammond, J.D.

Consumers could not state a claim that malt beverage maker Anheuser-Busch misrepresented the alcohol content on its product labels, the U.S. Court of Appeals in Cincinnati has affirmed. The consumers never alleged that Anheuser-Busch over-reported the alcohol content of its malt beverages by more than 0.3 percent, demonstrating that Anheuser-Busch fully complied with state and federal regulations governing alcoholic beverages and precluding liability under state consumer protection law (In re Anheuser-Busch Beer Labeling Marketing and Sales Practices Litigation, March 22, 2016, Boggs, D.).

A group of consumers alleged that Anheuser-Busch adds extra water to its products to dilute the alcohol content to levels below those represented on product labels, thereby intentionally misrepresenting the quality of its products to consumers and allowing Anheuser-Busch to save money on production costs and gain a competitive advantage over other brewers. The consumers also claimed that they purchased malt beverages in reliance on the alleged misrepresentations, would not have made those purchases had they known the alcohol content was in fact lower than the amount stated on the labels, and ultimately received beer with less value than what Anheuser-Busch promised on its labels.

The district court dismissed the consumer protection and warranty law claims, finding that Anheuser-Busch did not violate 27 C.F.R. § 7.71, which states that for “malt beverages containing 0.5 percent or more alcohol by volume, a tolerance of 0.3 percent will be permitted, either above or below the stated percentage of alcohol.” The statute, according to the lower court, created a safe harbor for any brewer who does not exceed the tolerance.

Intent. On appeal, the consumers argued that the most reasonable construction of § 7.71 is that the “tolerance” language allows an unintentional variance of no more than 0.3 percent from the claimed level, while intentional dishonesty about alcohol level remained prohibited. The court rejected this argument, however, noting that nothing in the language of § 7.71 distinguishes intentional from unintentional variances within the applicable tolerance of 0.3 percent. In particular, the ordinary meaning of the word “tolerance” says nothing about the intentionality of a deviation, the court stated. Moreover, the phrase “a tolerance of 0.3 percent will be permitted” employs mandatory language analogous to “shall,” demonstrating that the court was not at liberty to create exceptions.

Specialized meaning. The consumers also claim that the word “tolerance” does not bear its ordinary meaning in the context of § 7.71, but is a term of art with specialized meaning, in light of the “high-tech manufacturing setting” in which “the alcohol content of beer is controlled using sophisticated equipment and statistical process control methods.” This argument was also rejected, however, because the court found no evidence that the Bureau of Alcohol, Tobacco and Firearms or state legislatures or regulators that adopted the federal regulation meant anything other than “the allowable deviation from a standard” when they used the word “tolerance.”

Safe harbor doctrines. Lastly, the consumers acknowledged that each of the eight states whose law were at issue in this suit have in some way incorporated the requirements of § 7.71 into state law. Nevertheless, they argued that the applicable safe-harbor provisions do not apply to those regulations or preclude the plaintiffs’ consumer protection and warranty claims. However, because the consumers failed to clearly raise this argument in the district court, the appellate court concluded that the argument was forfeited.

The case is No. 14-3653.

Attorneys: Joshua David Boxer (The Mills Law Firm) for Plaintiffs’ Co-Lead Counsel and Plaintiffs’ Liaison Counsel. Albert L. Hogan, III (Skadden, Arps, Slate, Meagher & Flom) for Anheuser-Busch Companies, LLC.

Companies: Anheuser-Busch Companies, LLC

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