Alcohol beverage regulators and social media – is there an app for this?

July 2013 | EXPERT BRIEFING | SECTOR ANALYSIS

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The alcohol beverage industry’s use of social media in connection with the promotion of its branded products has exploded in recent years. With this development has come increased scrutiny from both US federal and state regulators. The general theme of this regulatory scrutiny is that both federal and state regulatory agencies see alcohol beverage industry participation in social network services such as Facebook or MySpace, video sharing sites such as YouTube or Flickr, weblogs or ‘blogs’, and applications (apps) for mobile devices as advertising media – no different than television, radio, or print media. Thus, the extensive body of federal and state regulations that apply to advertising apply equally to social media.

We have not yet seen any new forms of regulations adopted that target social media, but have seen indications from two federal agencies and various state alcohol beverage regulatory agencies that they will be vigorous in their enforcement of the advertising laws and regulations for alcohol beverages.

The federal Alcohol & Tobacco Tax & Trade Bureau (TTB) issued an Industry Circular (No. 2013-01 dated 13 May 2013) specifically addressing use of social media in the advertising of alcohol beverages. The TTB, a bureau of the Treasury Department, is responsible for regulation of alcohol beverage advertising pursuant to the Federal Alcohol Administration Act. In its Circular, TTB first dealt with the underlying issue of how it would treat social media. It cited the definition of ‘advertisement’ under federal regulations, which is the publication or dissemination of any written or verbal statement, illustration, or depiction that is in, or calculated to induce sales in, interstate or foreign commerce. It mentioned that its regulations list specific types of advertising, including “any other media”. After establishing their policy that social media and other forms of social networking services (specifically identified were Facebook, LinkedIn, Friendster, and MySpace) constitutes advertising, TTB’s Circular reiterated that such media requires mandatory statements (industry member name and address and other required information) for industry members and is subject to all the usual prohibited practices otherwise set forth in its advertising regulations. The Circular also indicated that videos about alcohol beverages that are posted to video sharing sites, blogs maintained, Microblogs (e.g., Twitter and Tumblr) posted, and mobile applications created by industry members are considered to be advertisements. For QR code links to a document, such as a drink recipe using an industry member’s product, the recipe will be considered an advertisement.

Another federal US government agency, the Federal Trade Commission (FTC), which usually has a secondary role when it comes to alcohol beverage advertising, has also become more active in reviewing the alcohol beverage industry’s use of social media. Unlike TTB, FTC has never adopted any specific advertising regulations for alcohol beverages. That has not stopped FTC, however, from undertaking four reviews of alcohol beverage industry advertising in the past 12 years. The agency’s current review has focused on how alcohol beverages are marketed on social networks, which were much less dominant in June 2008, when the FTC completed its most recent review.

In April 2012, FTC required 14 major alcoholic beverage advertisers to provide information for the agency’s study on the effectiveness of voluntary industry guidelines for reducing advertising and marketing to underage audiences by beer, wine, and distilled spirits manufacturers. With this study, for the first time, the FTC has requested information on internet and digital marketing and data collection practices. The FTC asked for information on “company-sponsored pages (including brand pages), videos, channels, or feeds on Internet sites such as Facebook, YouTube, Twitter, Four-Square, Tumblr, etc.” and digital advertising such as “microblogging (e.g., tweets, twit-backs on Twitter), tell-a-friend viral messaging, picture messaging, user-generated content (such as messages, photos, or videos) that is posted by the company, bar code print ads that can interact with mobile phones, mobile broadcasts, mobile video, mobile or PC applications and widgets, games, downloads, podcasts, or ‘webisodes’”. As in previous studies, the FTC has also sought advertising expenditure and placement data, and background information, about the advertisers’ business practices.

Recommendations from past reports have resulted in ‘voluntary’ agreements by the Beer Institute, the Wine Institute, and the Distilled Spirits Council of the United States to adopt: an improved voluntary advertising placement standard; buying guidelines for placing ads on radio, in print, on television, and on the internet; a requirement that suppliers conduct periodic internal audits of past placements; and systems for external review of complaints about compliance.

For the latest study, the FTC also sought public comment twice, in March and November 2011. Its study overall looked into the following topics: (i) the companies’ compliance with voluntary advertising placement provisions, sales, and marketing expenditures; (ii) the status of third-party review of complaints regarding compliance with voluntary advertising codes; and (iii) alcohol industry data-collection practices.

A current industry voluntary guideline is that participating companies can advertise only in media outlets where 70 percent or more of the readers or viewers are of drinking age. (In June 2008, the FTC concluded that 97 percent of alcohol ads met that goal.) FTC is now looking to see if this guideline is currently maintained for the advertisers’ social media too.

For the most part, state regulators have not specifically addressed the industry’s participation in social media, although they have utilised social media and network services used by industry members in reviewing their trade and marketing practices and have brought administrative trade practice cases against industry members based on practices appearing on their Facebook pages and Twitter posts. States do have specific regulations and policies relating to trade practices such as retailer locators and promotion of events at retailer accounts which often appear in industry social media.

What industry members have learned from this increased focus by federal and state regulations on their social media activities and participation is that, just like them, the regulators have caught up to all the new technology.

Michael Brill Newman is head of the Alcohol Beverage Practice Team at Holland & Knight. He can be contacted on +1 (415) 743 6989 or by email: michael.newman@hklaw.com.

Michael Brill Newman

Holland & Knight