When you discover that the age statement on the bottle you’re holding doesn’t quite represent what you assumed, you experience a certain kind of consumer surprise. On a back-bar shelf, a bottle of fine rum with the number “18” printed on the label is illuminated by the warm, soft lights that restaurants set aside for the spirits they want patrons to notice. According to the marketing, the liquid has been aged in wood for about twenty years. Many times, the marketing isn’t telling the whole truth. In technical terms, the liquid is a mix.
The blend’s oldest ingredient is denoted by the number 18. The youngest may be far younger. The class action lawyers who have embarked on this type of consumer lawsuit against companies like Flor de Café, Bumbu Rum, and Ron Zacapa aren’t necessarily saying the rum is awful. They contend that the labeling is intended to deceive and that, up until recently, the legal structure surrounding alcohol marketing was lenient enough to allow it.
In some respects, the age statement cases are the most mild of the ongoing alcohol business disputes. The Federal Trade Commission’s recent focus on the rum industry is motivated by a larger structural issue that is more directly economic. Alongside a wider resurgence of Robinson-Patman Act enforcement under the FTC’s revitalized antitrust posture, a price-fixing probe targeting significant Caribbean producers is under underway.
One of those laws that has been in effect for almost 90 years and has been mostly idle for the last 40 years is the Robinson-Patman Act, which is currently being repealed in ways that the spirits business wasn’t entirely prepared for. Anticompetitive pricing practices that favor large customers over small ones are prohibited by the legislation, among other reasons. It is straightforward and challenging to apply to the alcohol distribution system, because large distributors bargain with manufacturers over private pricing agreements.
In all honesty, the Southern Glazer case is the portion of the larger narrative that has rocked the industry more than the rum probe itself. High-level executives at Southern Glazer’s Wine and Spirits, the biggest alcohol distributor in the US, were charged by a federal grand jury in connection with what prosecutors claim was an eight-year scheme involving bribery and falsified records intended to control product placement in major retail chains.
The information that has surfaced from court documents shows how frequently big distributors’ gatekeeping duties have been handled in ways that harm smaller companies and eventually skew what customers see on shelves. The three-tier distribution structure that has overseen alcohol sales in the United States since Prohibition has quietly solidified into something more akin to a controlled market than regulated trade, as independent craft producers have long lamented. The indictment of Southern Glazer offers concrete proof of what many in the industry already believed.
A specific segment of this greater narrative is the Bumbu Rum class action. “Original Craft Rum” is the brand’s marketing slogan, which evokes small-batch manufacture, meticulous sourcing, and a romanticized connection to the spirit’s Caribbean roots. The plaintiffs contend that because the beverage heavily relies on added sugar and flavorings like vanilla and banana, it should be categorized under federal labeling regulations as a liqueur or cordial rather than a rum.
Because it dictates what manufacturers can put on the label, how they can sell the goods, and what consumers can fairly be expected to believe about what they’re purchasing, the legal distinction is important. In essence, the question in this case is whether a product that satisfies a more permissive definition of rum should be permitted to represent itself as a craft interpretation of a genuine Caribbean spirit when the underlying composition is more akin to a flavored liqueur.
Speaking with those who monitor the regulation of the alcohol industry gives the impression that the combination of these different legal forces is creating a turning point that the sector hasn’t quite experienced in a generation. For a number of years, the Alcohol and Tobacco Tax and Trade Bureau, which is in charge of federal labeling and classification, has been indicating that it plans to tighten regulations around age statement marketing and category definitions.
In sectors where antitrust enforcement has lain dormant for decades, the FTC has been indicating that it plans to resurrect it. State alcohol authorities have been indicating that they plan to examine distribution-tier methods more closely. Attorneys representing plaintiffs have been indicating that they view consumer-facing labeling issues as a potential avenue for class action litigation. The rum business is currently going through exactly what happens when all of these signals begin to result in simultaneous enforcement actions and case filings.
The industry might change. In order to lessen their immediate legal exposure, the main producers will probably tighten their labeling procedures, modify their distribution plans, and reevaluate their marketing promises. It might eventually be necessary for Bumbu Rum to either reformulate or relabel. It may eventually be necessary for Ron Zacapa, Flor de Café, and other high-end rum brands to update their descriptions of their maturing processes.
After putting new compliance procedures in place, Southern Glazer’s might eventually be released from its indictment. For an enterprise this size and profitable, all of these issues are doable. The deeper structural question is whether, once regulators have made the decision to examine it closely, the larger pattern of consumer deception, distribution-tier capture, and covert anticompetitive pricing arrangements that has defined the spirits industry for decades will be permitted to continue.
