1. www.mwe.com Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) ©2009 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. IS Alcohol Different? Marc Sorini NABCA 16 th Annual Symposium on Alcohol Beverage Law & Regulation March 11, 2009

2. www.mwe.com Arguments on both sides  Beer, wine and spirits are different – Different social contexts and consumer attitudes – “Burkean” conservative logic: Beware the unintended consequences of departures from the status quo  Only alcohol matters – Alcohol is the reason for excise taxation and regulation, and therefore should be the touchstone of policy – New categories and technologies have eroded traditional segments to the point of no return

3. www.mwe.com No clear trends emerging  New products like FMBs, wine-based cocktails, and wine and spirits ready-to- drinks, challenge the status quo  Many new federal rules (e.g., allergens, alcohol content rules) favor all-alcohol approach  Stronger beer authorized in a number of states  In fighting FMBs, advocacy groups seem to abandon their historic focus on all- alcohol  Direct shipping laws usually widen the gap between privileges extended to wine versus other alcohol beverages

4. www.mwe.com It is not just an excise tax issue  FAA Act permits for wineries and distilleries versus IRC- only brewer’s notice for breweries  Different state license privileges at every tier  Need to reconcile labeling and advertising (class/type, etc.)  Uneven distribution requirements for different beverages  Differences in trade practice restrictions between beverage categories  Varying levels of wholesaler “franchise” protections between beverage categories

5. www.mwe.com Reconciliation depends on you view of what matters  Alcohol content only? – E.g., tax and regulate solely based on products alcohol by volume number  Alcohol concentration? – E.g., tax and regulate in “bands” based on alcohol content, but also disproportionately favoring lower alcohol by volume products?  Status quo? – E.g., method of production predominates, tempered by alcohol content (like current fed. spirits tax), concentration (like different wine rates) and wealth (like sparkling wine) considerations

6. www.mwe.com Reconciliation (pt. 2)  Method of production only (grain fermentation v. fruit fermentation v. distillation) – E.g., extreme fealty to the historic categories  Taste? – E.g., critics of newer categories often motivated by fear that beverages “taste too good” and therefore attract underage drinkers – How to capture in a rational system?  Something else? – E.g., Consumption patterns (think Seattle alcohol “zones”) or cost (think higher taxes on sparkling wine)

7. www.mwe.com Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) ©2009 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. I look forward to questions Marc Sorini