Monday, October 13, 2014

To Sue or Not to Sue: A Whiskey Conundrum

It's been a tough year for non-distiller producers (aka NDPs), companies that sell whiskey they purchase from elsewhere.  Ever since this summer's Daily Beast article about sourcing whiskey went viral, there has been a lot of attention on who buys whiskey from whom.

It didn't take long for lawyers to pick up the scent and now Templeton Rye faces three lawsuits claiming it deceived customers. Tito's Vodka faces another one claiming that its product is not actually "handmade."

After being mentioned in the Daily Beast piece, I received several emails from law firms asking if they could "pick my brain" about the issue.  I ignored all of them.  I have mixed feelings about these type of consumer lawsuits which don't involve any physical injury.  They tend to end with large attorneys fees awards and a minor discount or coupon for consumers. In addition, many of the targets of such lawsuits are small companies, and I don't have the desire to see anyone go out of business over these issues; that would mean less whiskey for all of us.

On the other hand, those of us in the whiskey community have been yelling about this issue for years without much in the way of results. It was two years ago that I raised the problems of the TTB's enforcement of the state of distillation rule, which should have required that companies sourcing from MGP list the state of Indiana on the label.  Chuck Cowdery has written extensively about sourcing, and citizen-crusader Wade Woodard has been making complaints to the TTB about potential violations.

But despite all of our yelling, it wasn't until lawsuits were filed that we started seeing results. Suddenly, after years of doing nothing, Templeton is adding "Distilled in Indiana" to its label and has disclosed that it uses flavoring additives in its whiskey.  Last week, they've even released a video to try and explain their position to consumers.  I'm sure other companies are taking note as well and thinking pretty hard about whether they are being as transparent as they need to be.  So maybe lawsuits, despite their downsides, are the best way to get companies to do the right thing.

To sue or not to sue, what say you readers?


Anonymous said...

I don't have a desire to see anyone go out of business either, but I also don't give a damn if it happens to liars that resisted corrective action until they're drowning in bad press and class actions.

Anonymous said...

Sue, Sue, Sue. Who cares if the lawyers get rich. These lawsuits change behavior like no other type of intervention. Consumer complaints do nothing. The Government does nothing. Blogging about it does nothing. These NDPs respond to the almighty dollar and a flurry of lawsuits will strike the fear of god into those sued and those not sued and who engage in the same dishonest and illegal behavior. We'll see a lot of compliance in short amount of time. Just look at Templeton - honest as can be now that they're in the courtroom.

steve said...

I'm all for honesty, but I think lawyers like the ones that contacted you are the scum of the earth. What's next? Are they going after vodka companies who don't use real marshmallows in their flavorings?

Justin Victor said...

These lawsuits are frivolous. Let the industry regulate itself and the reporters will keep those who stray in line.

One thing I do want to see changed is the fact that bottlers who choose to not to call their whiskey straight can add flavoring and don't have to disclose that. I want to know when a product has had any flavoring added that is not the product of the grain, yeast, water or the barrel.

In my mind, this is more deceptive to a whiskey enthusiast than not listing the true state of distillation and its perfectly legal. Change that now!

Anonymous said...

I think this is generally the "life cycle" of a new and growing industry. And while Bourbon isn't a new industry, it has certainly reinvented itself, and so is newly created over the last 10 years.

The industry clearly can't regulate itself, or it wouldn't have been plagued by the problem of dishonest NDPs in the first place. And the average consumer doesn't have the time or knowledge to understand that there are distiller producers and NDPS. And liquor store owners don't have an incentive to inform customers. I've been to Schneiders on Capitol Hill (a highly regarded liquor store in D.C.) many times, and they are always pawning off some NDP as being "the best new bourbon on the market."

so without the threat of legal action, there wasn't much that was going to force bottlers to be more honest.

And i think it is important to say this - I don't care that there are NDPs out there. They should just be HONEST and state on the label how/where they source. An analogue is France's wine industry, where one can understand there is a difference between grower-producers and negociants. While the same is true of cognac, there is much less transparency there.

In the end, what is important is honesty and transparency, and then let the consumer - with full information - decide.

Todd said...

I basically agree with SKU's take: consumer class action plaintiffs' lawyers live up to most of the negative stereotypes about our profession, but their lawsuits seem to provide the only mechanism that is actually forcing honesty and transparency in the industry. Regarding Templeton being sued in particular, I shed no tears; their marketing materials about their Iowa origins and special prohibition era recipe were extremely deceptive.

Letting "the industry regulate itself" is a terrible solution, and hasn't worked so far. The logic of self regulation means that we should ditch all of the TTB spirits categories and labeling requirements, and let the market do its thing. Of course this libertarian utopia existed in the nineteenth century, during which fraudulent, adulterated, and even dangerous whiskey abounded. The Bottled-in-Bond Act of 1897 was passed because the self-regulated whiskey market was so disastrous.

My Annoying Opinions said...

On the one hand there seems to a clear and easy way to avoid being sued: be honest and clear.

On the other, like Sku, I'm not in favour of small producers being potentially put out of business--especially as their products themselves may be good. No one's really hurt by silly marketing stories. Not to mention large producers who may have honesty problems of their own would be more likely to be immune thanks to armies of lawyers of their own.

The simplest solution seems to be for the TTB to actually read labels and enforce existing rules.

Anonymous said...

"I'm from the government and I'm here to help." Please... Without getting into a political discussion, the feds are incompetent. Consumer lawsuits are a legitimate way to tackle the NDP bottlers that do not comply with labeling rules.

TylerP said...

If people like Templeton Rye and purchase it because it taste good- let them enjoy their sip. People buy what they like. If collectors are over spending because they didnt do their research- shame on them. I have a bottle. I paid maybe $30 for it. I like it now and then. So a good investment.

Bear Toe said...

I briefly discussed this over at Oliver's site a few weeks ago, and it seems those crafty lawyers already had the wheels turning.

I go 'round and 'round, and I'm still not sure how I feel about this. I agree that this is the one thing that will actually get charlatans in line, but as someone who makes a living defending frivolous lawsuits (of a different nature) I fear that it won't just be the bad actors who are targeted. The Templetons of the world will be the low-hanging fruit, but once a new area of consumer litigation opens, the firms specialist lawsuit mills generally just do a find-and-replace and re-file essentially identical lawsuits against every player in the field, with little regard to facts. The last thing I want to see is John Little closing up shop because he can't afford to pay someone on my side $500,000 just to get a case dismissed.

JR said...

If the mainstream media did a better job, maybe there'd be more transparency. In the course of researching "American Spirit: An Exploration of the Craft Distilling Revolution" I came across numerous newspaper articles talking about new "craft" spirits producers selling aged products older than their companies. You don't have to be an expert on distillation to understand that a year-old company can't possibly have made a six-year-old whiskey. Where are the editors? Too much cheerleading, not enough journalism. I argue in my book that the biggest advantage the little guys have is the ability to be transparent. Nothing that's happened since the book came out last month has changed my opinion.

sku said...

Thanks to all for a great discussion with thoughtful posts on both sides of the issue. Keep 'em coming!

Anonymous said...

These lawsuits are not frivolous. The law allows consumers to sue to protect their rights when corporations are not being honest and essentially committing a fraud on the public.

And it's not the fault of the consumer for not doing his or her research prior to making a purchase. When I buy a bottle of Aspirin, I don't want it cut with a laxative or other chemical not listed on the label. Just as I trust the bottle of Aspirin does not have any undisclosed substance because the label complies with the applicable law, I also expect a bottle of bourbon to have a label that complies with the law and lists the state of distillation.

Consumer protection lawsuits are part of the checks and balances that protect us all from overreaching corporate conglomerates and even small companies such as NDPs.

It seems odd that a lot of comments blame the NDP's non-compliance on mainstream media, the consumer, lack of enforcement or the old myth that it's not really hurting anyone so who cares. Why not blame the NDP who fails and refuses to comply with the law? If they get sued, its their own fault and if they go out business than they can blame themselves, no one else.

Compliance is the safest way for NDPs to avoid alienating customers, protect their business and avoid lawsuits.

Josh said...

I'm a bit torn honestly. I like that there is action being taken against them, but I don't like who's really going to benefit, but it could possibly lead to all of us benefiting in the long run if a domino effect occurs we suddenly see everyone getting in line to "clear the air".

I feel like they have made their bed and now they need to lie in it and accept what's coming within the bounds of the legal system we have in place. I also don't think they should be run out of business, just made accountable and then be an example to everyone else about what could happen.

I guess really it's that I don't feel bad for them because they brought this on themselves (and they still continue to be misleading about certain things). My dissatisfaction is with aspects of our current legal system in cases like this and the people who feel cheated or wronged won't get what they deserve which is an apology and a refund. I also just went on a huge rant about this so I'm also feeling rather relaxed about it. Ask me tomorrow and I might feel a bit different ;)

Austin, TX said...

Sue their ******. For nearly ten years Templeton has hoodwinked us all. Left alone, to self regulate, they would carried on as usual for another ten years.

Alex said...

I agree with Anon #2 and Todd above. Consumers are who are going to benefit by these suits. The system is meant to punish companies who skirt the law and to reward attorneys who invest time and money with the risk of losing their case. It's the judge's job to ensure any judgment or settlement is fair and doesn't over-compensate the lawyers. Besides, the cost to Templeton will dissuade others who may be considering attempting to hoodwink consumers in the same way, regardless of who the money is going to.

The big brands are not buying their way out of the system--for the most part, they are the first to follow the regulations because they are experienced and have the most to lose. Fancy marketing stories are not at issue here, but outright lying about the provenance of a product. Flavored vodka is clearly labeled as flavored.

Templeton is huge and has been making lots of money. We don't need to fear the smallest producers going out of business just because of such a suit because they aren't big enough to attract lawyers.

Sure there are frivolous lawsuits, but everyone is subject to them--unfortunately they've become the cost of doing business. That doesn't mean we shouldn't try to eliminate them, but plenty of businesses survive despite them.

I am less confident about the Tito's lawsuits--it's unclear to me whether "handmade" is a meaningful term consumers are relying on or whether it is just marketing-speak, just like the "homemade" cookies you buy aren't made in anyone's home and "world's best" or "world famous" whatever doesn't have to be proven to be better than any other product or known in a majority of the world's countries.

Well-Dressed Mongrel said...

Lawsuits are HOW the industry regulates itself, like many others - the alternatives are extensive (and expensive) active government regulation, or a wild west scenario where only morals and reputation bind a corporation's hands (protip: corporations have no morals and reputation is cheap).

A company like Templeton, which built its extremely profitable brand on a campaign of absolute bull that lied not only about where the juice came from but concealed the use of additives, rightly deserves to have the sharks circling.

Anonymous said...

Terms like "world famous," "world's best," etc are what's called puffing which is an exaggeration about a product or a business in advertising. The law assumes that consumers can recognize puffery and a certain amount is allowed so long as it is not an outright lie or in violation of other laws, like labeling laws at issue here. Puffery cannot be used as a basis for a lawsuit or claims of fraud. Arguably, Tito's claim may fall into this category (but who knows), however, Templeton's false claim about where its distillate comes from is not because that claim is specifically regulated.

R Perrelet said...

The old saying, “Nobody likes a lawyer until they need one” applies here. Whether the company is big or small is not an issue for me. If you are selling a product through deception, you deserve what you get. It's time for the NDP's to clean up their act.