Subscription Models and Text Promos Come with Legal Baggage for Alcohol Brands

Corey Day
Attorney, Litigation

Abstract

In this video, Corey Day, Associate in Litigation and Food & Beverage at Stoel Rives, outlines key legal risks facing alcohol brands as they adapt to post-COVID consumer behavior. He highlights the growing use of subscription or club models—common in the wine industry and increasingly adopted by spirits and beer brands—as a tool for customer loyalty and steady revenue. However, these programs come with regulatory obligations at both the state and federal levels, particularly concerning consumer disclosures.

Corey also discusses the legal implications of using text messaging and digital outreach to drive customer traffic, noting the strict requirements of the Telephone Consumer Protection Act (TCPA). Whether companies manage communications in-house or through third-party vendors, compliance failures can trigger substantial liability. He further emphasizes the increasing complexity of data privacy regulations and the importance of safeguarding customer information to avoid exposure from breaches. The message is clear: innovative marketing must be backed by rigorous compliance to manage risk in today’s regulatory environment.

Transcript

Right now, the alcohol industry is in a weird place. Some people are saying we’re still in a hangover from COVID, and while most hangovers don’t last five years, this one may be.

Another thing you might be looking into is whether or not you can get into a club model. It’s common in the wine industry, but it’s not unheard of with spirits and beer brands as well. It’s a simple concept. Your customers, your most loyal customers, pay some annual or monthly fee. In exchange they get access to perks and wine or beer, whatever your spirit is. And it’s a way to reward loyalty, but it’s also a way to ensure recurring payments on a regular basis.

California, other states, and even the federal government have rules and regulations about what you need to say and what you need to disclose when signing customers up on these recurring payment plans. And failure to do so can result in liability. Even when you’re in an administration that may be less inclined to prosecute consumer protection statutes, you still have the issue of plaintiffs being able to bring those claims without government intervention. And so it remains important to comply with the laws to the extent reasonable and practicable to limit that potential exposure and liability. When it comes to your recurring payments, if you fail to comply with the law, you run into another situation of having a class of individuals that may have claims against you.

So if you’re looking to drive additional customers into your tasting room or to your premises, you might be thinking texting them is a good option. Maybe you’ve had a vendor approach you and promise that they can drive additional people through sales and other promotions. Or maybe you’re just thinking that you can do it yourself. And if you’re going to do that, you should consider that there’s additional liabilities.

The Telephone Consumer Protection Act regulates how and when you can contact potential customers. If you’re going to be hiring a vendor, to be communicating with your customers on your behalf, you should ensure that they’re promising to comply with all applicable laws, including the TCPA. Failure to do so can result in substantial liability, whether that’s directly to you or through your vendor.

If you’re going to be communicating with your customers yourself, it’s another situation in which you want to make sure you comply, because failure to comply has substantial penalties.

And it’s not just TCPA compliance you need to be looking out for. It seems like every other week we’re getting some new data privacy law. And you as a company with customers are probably storing that data, and you need to make sure that you’re adequately protecting it. Failure to do so can have consequences, and if you do have a data breach, you do have an obligation under certain circumstances to report it.