670 F.2d 296 | D.C. Cir. | 1981
Opinion PER CURIAM.
These appeals question the validity of four regulations promulgated by the Treasury Department’s Bureau of Alcohol, Tobacco and Firearms in an effort to set standards for labeling and advertising grape wine. Intensive study of these rules satisfies us that one is well buttressed by the record, and accordingly we uphold it. The other three, we find, are bereft of support either in evidence or logic, and these we remand to the agency for further consideration.
I. BACKGROUND
A. The Regulatory Framework
At the close of the Prohibition Era, Congress set out to regulate the resurgent industry in alcoholic beverages. In 1935, Congress passed the Federal Alcohol Administration Act
labeled in conformity with such regulations, to be prescribed by the Secretary of the Treasury ... as will prohibit deception of the consumer . . . and as will prohibit, irrespective of falsity, such*140 statements ... as the Secretary of the Treasury finds to be likely to mislead the consumer; ... as will provide the consumer with adequate information as to the identity and quality of the products .. . [and] as will prohibit statements on the label that are ... false [or] misleading ----2
The Act also outlaws wine advertisements that are inconsistent with the labeling standards.
In 1978, the Bureau, acting for the Secretary,
The second group of pertinent regulations are what might be called geographical rules. They allow a wine to be represented as the product of a given area — such as “Napa Valley” or “Sonoma County” — when in fact the percentage of its grapes raised in the locality indicated may be as low as 75,
The regulations further permit a winery to state on a wine’s label that it “produced” the wine when it may have fermented and clarified only 75 percent of the bottle’s contents.
B. The Rulemaking Proceedings
The regulations under attack are identical or substantially similar to forerunners
The Bureau first undertook revision of the labeling requirements in 1975.
In 1977, the Bureau recommended even more sweeping revisions of the regulations. One would be an increase in the required percentage of varietal grapes from the current 51 to 75, and mandatory disclosure on the label of the proportion of such grapes.
The Bureau issued its regulations in final form in 1978, with major revisions, however, of the proposals. The 75 percent varietal minimum was retained, though the mandatory varietal percentage statement was dropped.
Three sophisticated wine consumers
The District Court, after reviewing the administrative record, agreed in part. Deeming the statutory language regarding false and misleading statements “clear and direct,” the court was disposed to “rely to the extent possible on the ordinary meaning of the words used, as it is the understanding of the ordinary consumer which must control.”
There is thus no basis, in law or in fact, for permitting the use of a varietal name on wine labels without disclosing that the identified grape variety does not represent 100 percent of the content.. . .
[T]he percentage of the labeled variety must be truthfully communicated. The same rationale requires that wine labels making representations as to geographic origin or the nature of specific winemaking operations should couple such representations with a more precise indication of what minimum percentages or other meanings attach to the claims made.
Congress has directed that wine labeling terminology be understandable to the ordinary consumer. In the Court’s view, this at least requires wine labels to carry concise explanations of any terminology used where principal grape types, chief geographic origins, and the identity of a producer or maker is represented to the consumer. The explanations must at least specify applicable minimum percentage standards, and are to be suitably featured in the context of the label as a whole.33
On the other hand, the District Court refused to grant a request for an order mandating a more elaborate labeling statement, notwithstanding the statutory call for regulations requiring labels providing consumers with “adequate information as to the identity and quality of the products.”
[ujnlike the absolute prohibition against false or misleading statements, the separate and different obligation to ensure that disclosure is adequate squarely implicates discretionary judgment on the part of the Secretary .... [Tjhe statute itself offers no guidance as to what constitutes “adequacy,” nor is such a determination feasible by reference to the ordinary meaning of the words used. The question of whether a label, otherwise not misleading, provides adequate informa*143 tion is not therefore a matter of statutory construction.35
The Bureau’s assessment on what information need be furnished consumers, the court found, was rational and supported by record evidence.
II. ANALYSIS
When reviewing agency action under the “arbitrary and capricious” standard,
A. Varietal Labeling
We sustain the Bureau’s varietal labeling rule.
would add little by way of useful information to the consumer. Comments and testimony indicated that percentage requirements might mislead the consumer to believe that the higher the varietal percentage, the better the wine. Additionally requiring a percentage statement for this item would logically result in percentage and definitional statements being required for all other labeling designations. This would produce an extremely cluttered label, cause cost problems, and be of uncertain assistance to consumers. The Bureau believes that there has been an insufficient showing of a misleading, effect on the public to justify requiring all these percentages and definitions to appear on the label.52
Instead, a public information program planned by the agency seemed adequate for the time being.
In the end, then, the Bureau settled on 75 percent minimum varietal content as the best of the available alternatives.
Varietal labeling provides a more informative labeling designation than des*145 ignations such as Chablis, Burgundy, or simply red table wine. Requiring 100 percent varietal content for these wines would discourage the use of these designations and not necessarily improve the product. Some varieties grown under certain soil and climatic conditions and with certain viticultural practices may make excellent wines at the 100-percent varietal requirement. However, more often some blending with other varieties is necessary to arrive at the best product. The amount of blending will vary among different varieties and different harvests. Because of these factors we believe a certain amount of flexibility is necessary.
We have determined, however, that the 51-percent requirement is too low for most varieties, and permits so much blending that the finished product may bear little or no resemblance to the grape variety used to designate the wine. Based upon all available evidence we have concluded that the 75-percent requirement allows sufficient opportunity for blending while maintaining the identity of the grape.56
We thus perceive the Bureau’s varietal labeling regulation as the product of a reasoned and amply elucidated process. That a different result may also be plausible does not make the administrative outcome arbitrary or irrational. We could uphold the District Court’s decision to set the regulation aside only were we to substitute our assessment for the agency’s judgment. That we are not at liberty to do.
B. Geographical Terms
The situation presented by regulations governing use of terms of geographical significance in wine labeling
The regulation involving brand names incorporating geographical language underscores the problem. At one point in the rulemaking process, the Bureau declared that “[pjatently, the use on labels of geographical names which bear no relationship to the origin of the grapes used to make the wine can be confusing to the consumer.”
C. Winemaking Terms
At one time, the Bureau proposed revisions “designed to remedy the possibl[y] misleading aspects of the” regulations
These regulations cannot be upheld, at least at present. The Bureau has brought to our attention no record material to justify its action. The agency’s statutorily-required “concise general statement” of reason
III. DISPOSITION
“In wine there is truth,” goes the proverb, and the Federal Alcohol Administration Act requires wine labeling and advertising to be truthful as well. While it certainly is the Bureau’s role to determine in the first instance what makes labels deceptive or not, it has not endeavored to explain — either by reference to the records or by a reasoned statement — just how three sets of the challenged rules will curb misleading representations by wineries. Thus, while we cannot endorse the District Court’s view that the Act itself mandates particularly-formulated statements on wine labels, the regulations addressing geographical and winemaking terms must be sent back to the Bureau to afford it an opportunity to show that they meaningfully control misleading labeling and advertising. If that cannot be done, these regulations will have to be rewritten in such fashion that the agency can demonstrate compliance with the statutory mandates.
Accordingly, the order in Nos. 80-1086 and 80-1133 is reversed insofar as it relates to varietal labeling and affirmed in all other respects. The order in No. 80-1244 is vacated and the appeal therefrom is dismissed. The litigation is remanded to the District Court with the direction that it remand to the Bureau the regulations pertaining to geographical and winemaking terminology for reconsideration in light of this opinion.
So ordered.
. 27 U.S.C. §§ 201 et seq. (1976). For the early history of governmental regulation in this area, see National Distributing Co. v. United States Treasury Dep't, 200 U.S.App.D.C. 133, 139-142, 626 F.2d 997, 1004-1006 (1980).
. 27 U.S.C. § 205(e) (1976).
. Id. § 205(f) (1976). For this reason, our analyses and conclusions, though focused primarily on the labeling rules, are equally applicable to regulations correspondingly governing wine advertising.
. The Secretary has delegated to the Bureau plenary authority to administer the Act. See 37 Fed.Reg. 11696 (1972).
. The District Court spoke of “three specific aspects of the final regulations” in controversy. Wawszkiewicz v. Department of Treasury, 480 F.Supp. 739, 742 (D.D.C.1979). As we understand the record, however, four species came under attack there, see Wawszkiewicz v. Department of Treasury, 480 F.Supp. 739 (D.D.C. 1979), Complaint at 5-11, Joint Appendix (J.App.) 8-14, and certainly four are challenged on appeal.
. 27 C.F.R. § 4.23 (1980). The percentage of varietal grapes required will rise to 75% in 1983. Id. § 4.23a(b).
. Or, from 1983 onward, 75%. See note 6 supra.
. 27 C.F.R. §§ 4.25(a), 4.25a(b) (1980).
. Id. § 4.25a(e)(3)(ii). Viticultural areas, which are to be delimited in future rulemaking proceedings, are “grape growing region[s] distinguishable by geographical features.” Id. § 4.25a(e)(l)(i).
. Id. § 4.33(b).
. Id.
. Id. § 4.35(a)(1).
. Id. § 4.35(a)(2). In the rather cryptic language of the regulation, a winery may say that it “made” a wine if it “made or treated the wine, otherwise than as described in paragraph (a)(1) of this section ....” The paragraph referred to is § 4.35(a)(1), which defines a “producer” as one who ferments and clarifies at least 75% of the wine labeled.
. See Wawszkiewicz v. Department of Treasury, supra note 5, 480 F.Supp. at 741-742.
. See 40 Fed.Reg. 30117 (1975).
. 41 Fed.Reg. 50004, 50005 (1976).
. Id.
. Id. at 50004.
. 42 Fed.Reg. 30517 (1977).
. Id.
. Id.
. Id. at 30518.
. 43 Fed.Reg. 37672 (1978).
. Id. at 37674.
. Id. at 37673.
. Id. at 37674. As originally suggested, the regulation would have permitted geographical brand names only if qualified by the word “brand” in type as “conspicuous as the brand name,” and trade and corporate names with geographical significance only if approved prior to the date of the proposal. 41 Fed.Reg. 50004, 50007 (1976). That was later modified to allow the word “brand” to appear in type smaller than the brand name. 42 Fed.Reg. 30518, 30521-30522 (1977). In final form, the regulations require use of the word “brand” only in conjunction with brand names found to be misleading, and the grandfather provision for trade and corporate names was eliminated entirely. 43 Fed.Reg. 37672, 37674 (1978) (“[t]he new regulations will not affect the use of corporate or trade names”).
. Throughout this opinion, we refer to these parties simply as consumers.
. Wawszkiewicz v. Department of the Treasury, supra note 5. See note 5 supra.
. See Wawskiewicz v. Department of the Treasury, supra note 5, 480 F.Supp. at 742.
.Id.
. Id. at 743 (citations omitted).
. Id. at 743-744.
. Id. at 745 (footnote omitted).
. See text supra at note 2.
. Wawszkiewicz v. Department of Treasury, supra note 5, 480 F.Supp. at 745-746.
. Id. at 746-747.
. Id. at 747.
. Id.
. The principal appeals, No. 80-1086, Department of Treasury v. Wawszkiewicz and No. 80-1133, Wawszkiewicz v. Department of Treasury, have been consolidated, id. (D.C.Cir. Mar. 11, 1980) (order), and with them a third-appeal, No. 80-1244, Wine Inst. v. Wawszkiewicz. The latter protests an order of the District Court denying a post-judgment motion by the Wine Institute, an industry group, to intervene. The Institute argues that the court effectively “prescrib[ed] the content of new rules” by directing that definitions and minimum percentages be listed on wine labels, thus “eliminat[ing] Wine Institute’s ability to participate in the formulation of those rules.” Reply Brief of Appellant Wine Institute at 2. The Institute concedes, however, that “[i]f the District Court had remanded the case to Treasury with instructions to reconsider the need for different rules ... Wine Institute could have participated in the rulemaking ...,” id. at 1, and thus in effect that intervention would then have been unnecessary. In light of our conclusion that the Bureau, in the first instance, must reconsider the rules we find infirm, Parts 11(B)— (C) infra, we perceive no useful purpose to be served by the Institute’s intervention at this point. We vacate the order in No. 80-1244, however, to eliminate any possible embarrassment to any effort by the Institute toward intervention in the future.
. See 5 U.S.C. § 706(2)(A) (1976).
. We find nothing in the Federal Alcohol Administration Act requiring a “hearing on the record,” see 5 U.S.C. §§ 553(c), 554(c)(2) (1976), which in turn would have called for a different standard of judicial review.
. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823-824 28 L.Ed.2d 136, 153 (1971).
. Almay, Inc. v. Califano, 187 U.S.App.D.C. 19, 26, 569 F.2d 674, 681 (1977).
. Home Box Office, Inc. v. FCC, 185 U.S.App. D.C. 142, 168, 567 F.2d 9, 35, cert. denied, 434 U.S. 829, 98 S.Ct. 111, 54 L.Ed.2d 89 (1977) (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207, 216 (1962)). Accord, United States Lines, Inc. v. FMC, 189 U.S.App.D.C. 361, 368, 584 F.2d 519, 526 (1978).
. Ethyl Corp. v. EPA, 176 U.S.App.D.C. 373, 406-107 n.74, 541 F.2d 1, 34-35 n.74, cert. denied, 426 U.S. 941, 96 S.Ct. 2663, 49 L.Ed.2d 394 (1976).
. See text supra at notes 6-7.
. See text supra at notes 34-36.
. See, e.g., Atlantic Ref. Co. v. FTC, 381 U.S. 357, 367, 85 S.Ct. 1498, 1505, 14 L.Ed.2d 443, 451-452 (1965).
. See, e.g., Houston v. St. Louis Independent Packing Co., 249 U.S. 479, 484, 39 S.Ct. 332, 334, 63 L.Ed. 717, 720 (1919).
. The District Court held, and the consumers argue, that consumer-protection language in a labeling statute should be accorded its ordinary meaning. Wawszkiewicz v. Department of Treasury, supra note 5, 480 F.Supp. at 743 & n. 10, quoted in part in text supra at note 29; Brief for Consumers at 40-43. Certainly there are cases in which courts have read language in such legislation conformably with its common usage. See, e.g., 62 Cases of Jam v. United States, 340 U.S. 593, 599-600, 71 S.Ct. 515, 520, 95 L.Ed. 566, 571-572 (1951); United States v. 95 Barrels of Vinegar, 265 U.S. 438, 443, 44 S.Ct. 529, 531, 68 L.Ed. 1094, 1097 (1924); Armour & Co. v. Freeman, 113 U.S.App.D.C. 37, 39, 304 F.2d 404, 406, cert. denied, 370 U.S. 920, 82 S.Ct. 1559, 8 L.Ed.2d 500 (1962). In none of those cases, however, had an agency charged with enforcement of the statute offered a factually-supported rationale for a contrary interpretation. When agencies have done so, they have been upheld. See, e.g., Houston v. St. Louis Packing Co., supra note 49, 249 U.S. at 484, 39 S.Ct. at 334, 63 L.Ed. at 720; American Public Health Ass’n v. Butz, 167 U.S. App.D.C. 93, 97, 511 F.2d 331, 335 (1974) (term “false and misleading,” as used in 21 U.S.C. §§ 453(h)(12), 601(n)(12) (1976), “give[s] the Secretary discretion to determine what labeling, if any, will be required in addition to the official inspection stamp”). In Federation of Homemakers v. Butz, 151 U.S.App.D.C. 291, 466 F.2d 462 (1972), which involved a statute prohibiting “false or misleading” labeling, 21 U.S.C. § 607(d) (1976), we declined to uphold an administrative interpretation glossing statutory language, but only because “we [found] no basis in the record for the Secretary’s conclusion that [the language involved], in a label intended for the ordinary consumer, convey[s] the kind of technical and esoteric message that the Secretary finds in [it].” Id. at 465-466.
. See text supra at notes 32-33.
. 43 Fed.Reg. 37672 (1978). For the proposition that minimum percentage statements might mislead the consumer,' see, e.g., J.App. 375, 379, 383, 384, 386, 389, 392, 393, 396, 399-400, 407, 410, 420, 421-122, 437, 439, 445, 458. For the proposition that wine labels with minimum varietal percentages are not misleading, see, e.g., J.App'. 364, 365, 376, 381, 444.
. 43 Fed.Reg. 37672 (1978).
. 27 U.S.C. § 205(e)(1) (1976) (emphasis added), partially quoted in text supra note 2. See H.R.Rep.No. 1542, 74th Cong., 1st Sess. 12 (1935). , '
. 43 Fed.Reg. 37672 (1978).
. Id.
. See text supra at notes 8-9.
. 43 Fed.Reg. 37672 (1978).
. The Bureau’s explanation for its final rules on geographical labeling does not even mention the possibility of consumer deception. See id. at 37673-37674.
. 41 Fed.Reg. 50005 (1976). See text supra at note 17.
. See text supra at notes 10-11. Indeed, the Bureau withdrew, without explanation, its tentative plan to bar the use of geographically-suggestive corporate and trade names unless they had been approved prior to announcement of the proposed regulation that would have done so. See note 26 supra.
. 42 Fed.Reg. 30517 (1977).
. See, e.g., J.App. 83-85, 94.
. See text supra at note 12.
. See text supra at note 13.
. 5 U.S.C. § 553(c) (1976).
. 43 Fed.Reg. 37672, 37674 (1978).