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The TTB gets it right on Calistoga

On Tuesday, December 8th, the Federal Register published the TTB's approval of a Calistoga AVA that has been held up since 2007 due to a name conflict with two existing wineries.  This approval is a win for wine lovers, for wineries who make wines of place, and for the supporters of truth in labeling.  It also is a promising step forward for the TTB's consideration of the eleven Paso Robles sub-appellations which were submitted two and a half years ago. 

The proposed Calistoga AVA was initially submitted in 2005.  After the end of what appears to have been a routine review of the (significant) evidence in favor of the creation of this AVA, the TTB received letters from two small wineries (Calistoga Cellars and Calistoga Estate) from within the proposed AVA.  These wineries, who did not source their grapes from within the proposed AVA, argued that their businesses would suffer significant harm from its approval.  An AVA name, once it is accepted, can only be used as a brand on wines that satisfy the TTB's requirements for grape sourcing: 85% or more of the grapes in any wine with that brand must come from the AVA in question.  The wineries argued that they should be protected from the AVA's impacts either by being grandfathered in as exceptions to the AVA rules, or by being allowed to put a disclaimer on their labels.  Their precedent was that since 1986 the TTB has had a grandfather policy which exempts brands established before 1986 from having to follow the grape-sourcing provisions on the TTB's books.

In November of 2007, the TTB essentially agreed to the two wineries' requests, and published Notice No. 77, which proposed acceptance of the new AVA.  It published at the same time Notice No. 78, which included a new grandfather clause that would allow the two wineries (and other wineries, in other, future AVA's, who had previously been using the proposed AVA's name as a part of their brands) to continue their brands without conforming to the TTB's own grape sourcing rules.  At this point, the once-uncontroversial proposal exploded onto the public consciousness of the wine community.  The TTB received 1350 comments to its proposed new rule.  I wrote a blog post at that time called "A well-meaning step in the wrong direction" where I argued that the TTB's new policy would perpetuate a system "even more riddled with exceptions, exemptions and disclaimers".  I believe that all the hue and cry took the TTB by surprise, and it suspended its consideration of the Calistoga AVA (and any other AVA that included potential name conflicts) while it re-evaluated its policy.  They have now published a revised approval of the Calistoga petition which incorporates the elements that we (and many, many other California wineries and winery associations) hoped for.

In the TTB's strongly-worded ruling, after summarizing the scientific and name evidence for the Calistoga AVA (which was never in much dispute) they address the roadblock head-on.  Note that § 4.39(i) refers to the TTB's original grandfather clause covering wine brands established before 1986:

The present rulemaking raised the question of what to do about viticultural area petitions that are received long after the issuance in 1986 of § 4.39(i) on the use of geographical brand names of viticultural significance where the petition proposes a name that results in a conflict with a brand name first used on an approved COLA not covered by the grandfather provision in § 4.39(i). Such a circumstance may occur for legitimate reasons because exact terms of viticultural significance are not always universally agreed upon, and relevant facts and issues regarding terms and areas of viticultural significance are not always brought forward until a petition is published for rulemaking.

What the TTB was forced to do in this decision was to decide between the relative merits of preserving two businesses' accumulated brand rights and recognizing an area of viticultural significance in which dozens of wineries currently produce wines.  First, they address the validity of the proposed AVA:

the evidence submitted supports the establishment of the ‘‘Calistoga’’ viticultural area, with the boundaries as the petition describes and as set forth in the proposed regulatory text.

Next, they take up the more controversial issue of what to do to mitigate the impacts of the new AVA on the two Calistoga wineries who objected and best serve the legitimate interests of the wine community.  It was obvious that the TTB took enormous care evaluating the mountain of comments that they received, most on the proposed new grandfather exemption.  Although the numerical majority of the comments were in favor of the objections by the two Calistoga wineries, nearly all of these were in the form of form emails or post cards that were summarized and dismissed as the marketing actions of a business interest rather than the thought-out contributions of a motivated public.  Similarly, the offerings on behalf of their constituents of the handful of US senators and representatives in support of the two wineries, which echoed the phrasing of the form emails, were also recognized but not apparently given overmuch weight.  Instead, the bulk of the summary of the comments is dedicated to the nearly universal opposition to the new grandfather clause from wineries and winery associations from within and outside Calistoga, of which three were by Robert Haas, by the Paso Robles AVA Committee, and by the Paso Robles Wine Country Alliance.  Most of these comments pointed out to the TTB that if their goal is to protect consumers from misleading or confusing labeling, and to protect the integrity of the AVA system, the best option was to require that wineries using the Calistoga name before the establishment of a Calistoga AVA be given a limited period of time to come into compliance.  A disclaimer was dismissed as a viable option.  In the TTB's words:

We believe in this matter that a label with the proposed disclaimer may not provide a consumer with adequate information as to the identity of the product but rather may result in the consumer being misled as to the true origin of the grapes used to produce the wine.

Given the lack of other options (such as a viable alternate name for the AVA) the TTB asserts its right, as many petitioners had been urging it to do, to decide based on the weight of merits of the arguments:

when it cannot be otherwise avoided the government may make a choice between competing commercial interests by requiring existing labels’ compliance with regulations establishing a new AVA.

And sets aside the earlier proposal for a new grandfather provision, at least in the case of Calistoga, as overly problematic.

the use of a grandfather provision would result in the application of multiple standards for the use of one name on wine labels, leading to potential consumer confusion and thus potentially frustrating the consumer protection purpose of the FAA Act labeling provisions. In the present case, we conclude that it is preferable as a matter of consumer protection for ‘‘Calistoga’’ to have only one meaning and association for viticultural area purposes.

The phrase "in the present case" in the above quote is an important one.  The approval of Calistoga, while a promising step forward, does not mean that Notice No. 78 has been invalidated.  But we are hopeful both in light of the agency's obvious care in addressing the concerns of the wine industry and by the logic that they used in declining to establish a grandfather exemption in the case of Calistoga.  While this does not mean that a ruling on the pending Paso Robles petitions is near, it gives us hope that the process is moving forward, and that the TTB's thinking about the advisability of prioritizing brand names over AVA's has evolved since Notice No. 78 was published. 

Will we see a similar conclusion in future TTB decisions?  Stay tuned.