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Diageo Sues Oregon Commission Over "Malternatives" Policy

PORTLAND -- Diageo-Guinness USA Inc., the maker of Oregon's best-selling flavored malt beverage, Smirnoff Ice, is taking issue with the state Liquor Control Commission's plan to enforce a law banning the sale of "malternative," or flavored malt beverages from convenience store and supermarket shelves, reported the Associated Press.

A new lawsuit filed by Diageo is just the latest shot fired in the long-running battle over the trendy drinks and where consumers can buy them. State regulators say drinks with more than one-half of 1 percent distilled alcohol can only be sold legally in state liquor stores.

The 2003 Legislature passed a law permitting sales of the drinks to continue in grocery stores until Dec. 31 of this year to allow manufacturers time to reformulate the drinks. Many of the country's largest beverage companies are complying, including Miller Brewing Co., Anheuser-Busch Cos. and Mike's Hard Lemonade.

"These companies have put their money not into litigation but into retooling their product to meet state law," said Teresa Kaiser, executive director of the Oregon Liquor Control Commission.

But Stamford, Conn.-based Diageo is fighting the mandate, contending in a lawsuit filed Oct. 15 that the commission did not comply with rule-making requirements under state law.

"They went through this without any public comment or public process, period," said Gary Galanis, Diageo spokesman. "This is no different than a tax increase on consumers to get the same exact beverage."

Kaiser said she has asked her state Justice Department lawyer to seek dismissal of the lawsuit on grounds that it is frivolous. "They're alleging we violated a rule-making statute, when what we're doing is enforcing a state law. I don't need a rule to enforce the law," Kaiser said.

Galanis argued that the state of Oregon should have waited for the federal Tax and Trade Bureau, which formerly was the Alcohol, Tobacco and Firearms Bureau, to come to a decision on proposed regulations for the "malternative" beverages.
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