NAD reviews claims by Russian Standard Vodka, following challenge by STOLICHNAYA IMPORTER, Marketer Matter Remanded to NAD by Federal Court; NAD Recommends Russian Standard Modify Certain Claims

New York, NY - Feb. 14, 2008 - The National Advertising Division of the Council of Better Business Bureaus has recommended that Russian Standard, maker of Imperia vodka, discontinue claims that Stolichnaya - a competing vodka - is distilled in Latvia, rather than Russia. NAD has further recommended that Russian Standard modify/qualify claims that suggest Stolichnaya is not "authentically" Russian.

Claims about Stolichnaya made in press releases by Russian Standard and in a newspaper article that appeared on Russian Standard's Website were challenged by Pernod Ricard USA and Allied Domecq USA, which market and import Stolichnaya. Specifically, Pernod maintained that Russian Standard had falsely denigrated the Stolichnaya brand name by communicating that Stolichnaya is "distilled and bottled in Latvia" and is "not authentically Russian." Subsequent to the filing of the challenge, the advertiser filed a declaratory judgment in federal court.

The challenge was initiated at NAD, the advertising industry's self-regulatory forum, in June 2006. In response to NAD's inquiry, Russian Standard asserted that the advertising at issue was not "national advertising" within the scope of NAD's jurisdiction.

NAD determined that the challenged claims appeared in press releases that were distributed nationally and/or published at the Russian Standard Website and were, accordingly, national advertising in character and scope. However, because the same claims challenged at NAD had become the subject of a lawsuit pending in the U.S. District Court for the Southern District of New York, NAD administratively closed its case, with leave to re-open its review should the court decline to rule on the claims at issue.

Subsequently, the federal court stayed the case, pending resolution of the NAD proceeding, and NAD re-opened its review.

"Allowing NAD to complete its decision regarding Stoli's authenticity as a Russian vodka would allow it to set advertising standards for the industry on an important issue. The public and industry would benefit greatly from hearing the NAD's opinion on the issue, especially after so many resources and time have already been poured into the investigation," the court stated.

In the course of the NAD review, the challenger explained that Stolichnaya vodka is produced for Pernod Ricard by Spirits International, N.V. SPI and its affiliates produce Stolichnaya at two distilleries, both of which are located in Russia and all Stolichnaya vodka products are made from Russian wheat, which is distilled with Russian water and Russian yeast. After the vodka has been produced at the Russian distilleries, SPI ships the vodka in bulk to SPI's bottling plant in Riga, Latvia and at the bottling plant, the vodka is filtered to remove any particles that may inadvertently entered the tanks during the shipping process, bottled, labeled and packed in cases for shipment to different markets around the world. The labels, cases and other packing materials for Stolichnaya vodka products are customized as required to comply with the laws and regulations of the specific countries in which the products will be sold. The challenger maintained that in all cases, the vodka within the bottle is unchanged, and thus is genuine, authentic, Russian vodka.

The advertiser argued, however, that the challenger's assertion that Stolichnaya is merely bottled in Latvia was controverted by a totality of the evidence. The advertiser further argued that even if only filtering and bottling took place in Latvia, those processes detract from the "Russian-ness" of Stolichnaya. Based on these arguments, the advertiser maintained that its statements calling into question the "Russian Authenticity" of Stolichnaya vodka were supported.

NAD examined evidence that included the results of a consumer survey undertaken by Russian Standard. Following its review, NAD concluded the advertiser could accurately claim in its advertising the undisputed facts that Stolichnaya vodka is filtered, bottled and labeled in Latvia.

Further, NAD found that the advertiser could question the "Russian authenticity" of Stolichnaya vodka in its advertising, as long as the advertiser clearly and adequately discloses why it believes Stolichnaya vodka is not truly authentic Russian vodka, i.e., that it is filtered, bottled and labeled in Latvia.

NAD, however, found that the evidence was insufficient to support the statements that Stolichnaya vodka is "distilled" and "made" in Latvia or that Stolichnaya should "be proud of its Latvian heritage."

Russian Standard, in its advertiser's statement, said that although the company is "no longer circulating the prior statements that were the subject of the present challenge, it will take NAD's recommendations into consideration in the development of future advertising."

The company stated that it intends to proceed with its claims in the pending federal court action and to obtain discovery concerning, among other things, "those aspects of the evidence that NAD felt had not yet been presented definitively."

NAD's inquiry was conducted under NAD/CARU/NARB Procedures for the Voluntary Self-Regulation of National Advertising. Details of the initial inquiry, NAD's decision, and the advertiser's response will be included in the next NAD/CARU Case Report.