HB 391

Under existing law, a beer supplier is required to sell its beer to a beer wholesaler through an exclusive franchise contract. Existing law establishes parameters for these franchise contracts, including provisions that prohibit certain actions by suppliers and wholesalers against the other party

This bill would revise the list of prohibited acts that a supplier may take against a wholesaler

This bill would also establish when possession of the beer is transferred from a supplier to a wholesaler

Relating to beer suppliers and wholesalers; to amend Section 28-9-4, Code of Alabama 1975, and to add Section 28-9-5.1, Code of Alabama 1975; to prohibit a beer supplier from taking certain actions against the wholesaler with whom a supplier contracts to distribute its beer; and to establish when possession and risk of loss is transferred from a beer supplier to a beer wholesaler.

Section 1

Section 28-9-4, Code of Alabama 1975, is amended to read as follows:

§28-9-4.

A supplier is prohibited from doing the following:

(1) Fail to provide each wholesaler of the supplier's brand or brands with a written agreement which contains in total the supplier's agreement with each wholesaler, and designates a specific exclusive sales territory. Any agreement which is in existence on March 3, 1988, shall be renewed consistent with this chapter; provided, that this chapter may be incorporated by reference in the agreement. Provided, however, nothing contained herein shall prevent a supplier from appointing, one time for a period not to exceed 90 days, a wholesaler to temporarily service a sales territory not designated to another wholesaler, until such time as a wholesaler is appointed by the supplier; and such wholesaler who is designated to service the sales territory during this period of temporary service shall not be in violation of the chapter, and, with respect to the temporary service territory, shall not have any of the rights provided under Sections 28-9-6 and 28-9-8.

(2) Fix, maintain, or establish the price at which a wholesaler shall sell any beer.

(3) Adjust the price at which the supplier sells beer to a wholesaler or the discount reimbursement based on the price at which a wholesaler resells beer to a retailer. Notwithstanding the foregoing, a supplier may set its own price so long as any price adjustment is based on factors other than a wholesaler's increase in the price it charges to a retailer, and the price adjustment is not intended to otherwise coerce illegal behavior under this section.

(4) Fix, maintain, establish, or dictate the hours of operation for a wholesaler, or fine or otherwise penalize a wholesaler based on the wholesaler's chosen hours of operation.

(3)(5) Enter into an additional agreement with any other wholesaler for, or to sell to any other wholesaler, the same brand or brands of beer in the same territory or any portion thereof, or to sell directly to any retailer in this state.

(4)(6) Coerce, or attempt to coerce, Require any wholesaler to accept delivery of any beer, or other commodity which has not been ordered by the wholesaler. Provided, however, a supplier may impose reasonable inventory requirements upon a wholesaler if the requirements are made in good faith and are generally applied to other similarly situated wholesalers having an agreement with the supplier. For purposes of this subdivision, wholesaler sales forecasts do not constitute orders but may be used by suppliers for demand planning and to create suggested orders, which may only be shipped if agreed upon by the wholesaler. Each individual shipment must be agreed upon by the wholesaler prior to shipment.

(5)(7) Coerce, or attempt to coerce, Require any wholesaler to accept delivery of any beer, or other commodity ordered by a wholesaler if the order was canceled by the wholesaler.

(6)(8) Coerce, or attempt to coerce, any wholesaler to do any illegal act or to violate any law or regulation by threatening to amend, modify, cancel, terminate, or refuse to renew any agreement existing between the supplier and wholesaler.

(7)(9) Require a wholesaler to assent to any condition, stipulation, or provision limiting the wholesaler's right to sell the brand or brands of beer or other products of any other supplier unless the acquisition of the brand or brands or products of another supplier would materially impair or adversely affect the wholesaler's quality of service, sales or ability to compete effectively in representing the brand or brands of the supplier presently being sold by the wholesaler; provided the supplier shall have the burden of proving that such acquisition of such other brand or brands or products would have such effect.

(8)(10) Require a wholesaler to purchase one or more brands of beer or other products in order for the wholesaler to purchase another brand or brands of beer for any reason. Provided, however, a wholesaler that has agreed to distribute a brand or brands before March 3, 1988, shall continue to distribute the brand or brands in conformance with this chapter.

(9)(11) Request a wholesaler to submit audited profit and loss statements, balance sheets, or financial records as a condition of renewal or continuation of an agreement.

(10)(12) Withhold delivery of beer ordered by a wholesaler, or change a wholesaler's quota of a brand or brands if the withholding or change is not made in good faith.

(11)(13) Require a wholesaler by any means directly to participate in or contribute to any local or national advertising fund controlled directly or indirectly by a supplier.

(14) Require a wholesaler to construct, expand, or remodel a wholesaler's warehouse or office space.

(12)(15) Take any retaliatory action against a wholesaler that files a complaint regarding an alleged violation by the supplier of federal, state or local law or an administrative rule.

(13)(16) Require or prohibit, without just and reasonable cause, any change in the manager or successor manager of any wholesaler who has been approved by the supplier as of or subsequent to March 3, 1988. Should a wholesaler change an approved manager or successor manager, a supplier shall not require or prohibit the change unless the person selected by the wholesaler fails to meet the nondiscriminatory, material and reasonable standards and qualifications for managers of Alabama wholesalers of the supplier which standards and qualifications previously have been consistently applied to Alabama wholesalers by the supplier. Provided, however, the supplier shall have the burden of proving that such person fails to meet such standards and qualifications which are nondiscriminatory, material and reasonable and have been consistently applied to Alabama wholesalers.

(14)(17) Upon written notice of intent to transfer the wholesaler's business, interfere with, prevent, or unreasonably delay (not to exceed 30 days) the transfer of the wholesaler's business if the proposed transferee is a designated member.

(15)(18) Upon written notice of intent to transfer the wholesaler's business other than to a designated member, withhold consent to or approval of, or unreasonably delay (not to exceed 30 days after receipt of all material information reasonably requested) a response to a request by the wholesaler for, any transfer of a wholesaler's business if the proposed transferee meets the nondiscriminatory, material and reasonable qualifications and standards required by the supplier for Alabama wholesalers. Provided, however, the supplier shall have the burden of proving that the proposed transferee does not meet such standards and qualifications which are nondiscriminatory, material and reasonable and have been consistently applied to Alabama wholesalers.

(16)(19) Restrict or inhibit, directly or indirectly, the right of free association among wholesalers for any lawful purpose."

Section 2

Section 28-9-5.1 is added to the Code of Alabama 1975, to read as follows: §28-9-5.1. For purposes of this chapter, possession of beer occurs when the wholesaler receives the beer at the wholesaler's place of business during the hours of operation established by the wholesaler. Risk of loss from destruction or casualty to the beer is shifted from the supplier to the wholesaler when the wholesaler receives the beer; however, a wholesaler shall be deemed to have received beer if the wholesaler takes possession at the place of business of the supplier.

Section 3

This act shall become effective on the first day of the third month following its passage and approval by the Governor, or its otherwise becoming law.