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91_HB1061enr
HB1061 Enrolled LRB9105378WHdv
1 AN ACT concerning soft drink beverage distribution.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 1. Short title. This Act may be cited as the
5 Soft Drink Industry Fair Dealing Act.
6 Section 5. Definitions. As used in this Act:
7 "Distribution agreement" means any contract, appointment,
8 agreement, course of dealing, or arrangement, express or
9 implied, whether oral or written, for a definite or
10 indefinite period, between a supplier and a distributor
11 pursuant to which the distributor has been granted the right
12 to (i) directly or through a cooperative or association of
13 which the distributor is a member, bottle or can one or more
14 soft drink beverages or process soft drink beverage
15 concentrate into beverage syrup, and (ii) sell, distribute,
16 or deliver such soft drink beverages or soft drink beverage
17 syrup under trademarks owned or licensed by the supplier.
18 "Distributor" means a person in this State who (i)
19 directly or through a cooperative or association of which the
20 person is a member, bottles or cans one or more soft drink
21 beverage or processes soft drink beverage concentrate into
22 beverage syrup, and (ii) sells, distributes, or delivers such
23 soft drink beverages or soft drink beverage syrup under
24 trademarks owned or licensed by a supplier.
25 "Distributorship" means a business relationship between a
26 supplier and a distributor established pursuant to a
27 distribution agreement. Except as otherwise expressly
28 provided in this Act, the term "distributorship" does not
29 include a partnership, joint venture, corporation, limited
30 liability company, or other entity owned in whole or in part
31 by a supplier.
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1 "Good cause" means the material failure of a distributor
2 to comply with essential and reasonable requirements imposed
3 upon the distributor by a distribution agreement or bad faith
4 in the performance of a distribution agreement. The
5 requirements may not be discriminatory either by their terms
6 or in the methods or effects of enforcement as compared with
7 requirements imposed upon other similarly situated Illinois
8 distributors. The requirements may not be inconsistent with
9 this Act or in violation of any law or regulation. The
10 failure of a distributor to assent to any amendment,
11 modification, or change in the terms of a distribution
12 agreement that impairs, restricts, or eliminates, in whole or
13 in part, the distribution or delivery rights of a distributor
14 under the distribution agreement shall not constitute good
15 cause.
16 "Good faith" means honesty in fact and the observation of
17 reasonable commercial standards for fair dealing in trade.
18 "Person" means a natural person, partnership, joint
19 venture, corporation, limited liability company, or other
20 entity and includes heirs, assigns, successors, personal
21 representatives, and guardians.
22 "Soft drink" means a non-alcoholic, carbonated beverage
23 made from a concentrate, syrup, or other beverage base.
24 "Soft drink products" means ready-to-use soft drinks,
25 whether in bottles, cans, or other containers and soft drink
26 beverage syrup for use in servicing fountain equipment and
27 cup vending machines dispensing soft drinks.
28 "Supplier" means a person engaged in the manufacture or
29 marketing of soft drink beverage concentrate, syrup, or other
30 soft drink beverage base for use in the preparation of soft
31 drink products sold under trademarks owned or licensed by
32 such person.
33 Section 10. Legislative declarations; construction;
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1 variation by contract.
2 (a) The General Assembly makes the following findings
3 and declarations:
4 (1) Distributors of soft drink products in the
5 State of Illinois have been and are required to make
6 substantial capital investments in plant, property, and
7 equipment in order to fulfill their obligations under
8 distribution agreements. Distributors must rely upon the
9 continuing right to sell and distribute soft drink
10 products to recover their investments and to obtain a
11 reasonable return on those investments.
12 (2) Distributorship relationships in the State of
13 Illinois vitally affect the general economy of the State
14 and the public's interest in the fair, efficient, and
15 competitive distribution of soft drink products.
16 (b) The purposes of this Act are to promote the public's
17 interest in the fair, efficient, and competitive distribution
18 of soft drink products by regulation and by the encouragement
19 of suppliers and distributors of soft drink products to
20 conduct their business relations toward these ends by:
21 (1) protecting distributors against unfair
22 treatment by suppliers in the negotiation, revision,
23 renewal, and cancellation of distributorships and
24 distribution practices;
25 (2) assuring that distributors are free to manage
26 their business enterprises;
27 (3) assuring suppliers and the public of continuing
28 service from distributors able to devote adequate efforts
29 and resources to the processing, bottling, canning,
30 distribution, and delivery of soft drink products as to
31 which they have been granted a distributorship; and
32 (4) providing distributors with rights and remedies
33 in addition to those existing by contract or at common
34 law.
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1 This Act shall be liberally construed and applied to
2 promote its underlying purposes.
3 (c) Any contract or agreement purporting to waive or
4 vary the provisions of this Act, or purporting to preclude
5 the application of this Act to any distributorship subject to
6 this Act is void and unenforceable to that extent.
7 (d) This Act provides distributors with rights and
8 remedies in addition to those existing by contract or common
9 law and reaffirms rights and remedies provided by contract or
10 common law.
11 (e) In accordance with Section 1.31 of the Statute on
12 Statutes, the provisions of this Act are severable. If any
13 provision of this Act, or the application of any provision of
14 this Act to any person or circumstance, is held invalid, such
15 invalidity shall not affect other provisions or applications
16 of this Act which can be given effect without the invalid
17 provision or application, and the application of this Act to
18 persons or circumstances other than those as to which it is
19 held invalid shall not be affected thereby.
20 Section 15. Cancellation and alteration of
21 distributorships.
22 (a) No supplier, directly or through any officer, agent,
23 employee, or representative, shall:
24 (1) cancel, fail to renew, or otherwise terminate a
25 distribution agreement without good cause to do so;
26 (2) unilaterally impose any amendment,
27 modification, or change in the terms of a distribution
28 agreement;
29 (3) fail to exercise good faith in the negotiation
30 of any amendment, modification, or change in the terms of
31 a distribution agreement, engage in retaliatory conduct
32 against a distributor for the exercise of a legal right,
33 or otherwise fail to exercise good faith in its dealings
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1 with a distributor;
2 (4) discriminate in pricing, fees, charges or other
3 terms of the distributorship against any distributor that
4 withholds its assent to any amendment, modification, or
5 change in the terms of a distribution agreement;
6 (5) restrict or inhibit, directly or indirectly,
7 the right of free association among distributors for any
8 lawful purpose;
9 (6) fail, without good cause, to offer a
10 distributor the right, within its geographic territory,
11 to (i) directly or through a cooperative or association
12 of which the distributor is a member, bottle or can any
13 new soft drink beverages introduced by the supplier and
14 process any new soft drink beverage concentrate into
15 beverage syrup, and (ii) sell, distribute, and deliver
16 such soft drink beverages or soft drink beverage syrup
17 under trademarks owned or licensed by the supplier or
18 offer a distributor such right on terms and conditions
19 less favorable than such right is offered to any other
20 distributor of the supplier, including any distributor
21 owned in whole or in part by the supplier.
22 (b) No supplier who, pursuant to a distribution
23 agreement, has granted a person the exclusive right in a
24 generally defined geographic area to (i) directly or through
25 a cooperative or association of which the person is a member,
26 bottle or can one or more soft drink beverages, or process
27 soft drink beverage concentrate into beverage syrup, and (ii)
28 sell, distribute, or deliver such soft drink beverages or
29 soft drink beverage syrup under trademarks owned or licensed
30 by the supplier, shall, directly or through any officer,
31 agent, employee, or representative, enter into an agreement
32 authorizing, permitting, contemplating, or providing for the
33 exercise of any of such rights in the same geographic area by
34 any other person.
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1 Section 20. Notice of cancellation.
2 (a) Except as hereinafter provided in subsection (c), no
3 supplier may cancel, fail to renew, or otherwise terminate a
4 distribution agreement unless the supplier furnishes prior
5 notification to the affected party in accordance with
6 subsection (b).
7 (b) The notification required by subsection (a) of this
8 Section shall contain (i) a statement of the supplier's
9 intention to cancel, fail to renew, or otherwise terminate
10 the distribution agreement, (ii) a complete statement of the
11 reasons therefor, including all data and documentation
12 necessary to fully apprise the distributor of the reasons for
13 the action, and (iii) the date on which the action is
14 intended to take effect. The notification shall be in
15 writing and sent to the affected distributor by certified
16 mail not less than 90 days before the date on which the
17 supplier intends to cancel, fail to renew, or otherwise
18 terminate the distribution agreement, and shall provide the
19 distributor a reasonable period of time, in no event less
20 than 60 days from the date of delivery or posting of the
21 notice, within which to cure any claimed deficiency. If the
22 reason for cancellation, nonrenewal, or other termination is
23 nonpayment of sums due under the distributorship, the
24 notification shall be sent not less than 30 days before the
25 date on which the supplier intends to cancel, fail to renew,
26 or otherwise terminate the distribution agreement, and the
27 distributor shall have 30 days from the date of delivery or
28 posting of the notice within which to cure the default. If
29 the deficiency is cured within the applicable period, the
30 notice shall be void.
31 (c) The notice requirements of this Section shall not
32 apply if the reason for cancellation, failure to renew, or
33 other termination of a distributorship agreement is:
34 (1) an assignment for the benefit of the
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1 distributor's creditors or similar disposition of
2 substantially all of the assets of the distributor's
3 business;
4 (2) the insolvency of the distributor or the
5 institution of proceedings in bankruptcy by or against
6 the distributor; or
7 (3) the dissolution or liquidation of the
8 distributor.
9 Section 25. Transfer of business assets and stock. No
10 supplier, directly or through any officer, agent, employee or
11 representative, shall:
12 (a) unreasonably withhold or delay its consent, if
13 requested by a distributor, to any assignment, sale,
14 transfer, or other disposition of all or any portion of (i) a
15 distributor's business, assets, or stock, or of the
16 beneficial ownership or control of a distributor, or (ii) the
17 stock, beneficial ownership, or control of any other entity
18 owning or controlling a distributor;
19 (b) upon the death of a person owning or controlling a
20 distributor, unreasonably deny approval of a transfer of
21 ownership or control of the distributorship to a surviving
22 spouse or adult child of such person;
23 (c) upon the death of one of the partners of a
24 partnership operating the business of a distributor, deny the
25 surviving partner or partners of such partnership the right
26 to become a successor-in-interest to the distribution
27 agreement between the supplier and such partnership;
28 (d) unreasonably withhold or delay its consent, if
29 requested by a distributor, to any assignment, sale, or
30 transfer to the distributor of all or any portion of the
31 business, assets, or stock of any other person who has been
32 granted the right to (i) directly or through a cooperative or
33 association of which the person is a member, bottle or can
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1 one or more soft drink beverages or process soft drink
2 beverage concentrate into beverage syrup, and (ii) sell,
3 distribute, or deliver soft drink beverages or soft drink
4 beverage syrup under trademarks owned or licensed by the
5 supplier, where the distributor and such other person have
6 freely negotiated such an assignment, sale, or transfer.
7 Section 30. Reasonable compensation.
8 (a) Any supplier that (i) cancels, fails to renew, or
9 otherwise terminates any distribution agreement, or (ii)
10 unlawfully denies approval of or unreasonably withholds
11 consent to any assignment, transfer, or sale of a
12 distributor's business, assets, stock, or other ownership
13 interest in a distributor, shall (i) pay the distributor the
14 fair market value of that portion of the distributor's
15 business that the supplier has cancelled, failed to renew, or
16 otherwise terminated, or (ii) pay the distributor or other
17 aggrieved person the fair market value of that portion of the
18 business, assets, stock, or other ownership interest sought
19 to be assigned, transferred, or sold. Fair market value shall
20 include, but shall not be limited to, the value of the
21 goodwill associated with the business, assets, stock, or
22 other ownership interest valued hereunder, and such fair
23 market value shall be determined without regard to any
24 marketability, minority interest, or other similar discount
25 or reduction.
26 (b) If a supplier and a distributor or other aggrieved
27 person are unable to agree on the reasonable compensation to
28 be paid under subsection (a), any such party may maintain a
29 civil suit as provided in Section 35 of this Act or the
30 matter may, by mutual agreement of the parties, be submitted
31 to arbitration or mediation. Unless the parties otherwise
32 agree, the costs of arbitration shall be shared equally by
33 the parties.
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1 (c) No distributorship agreement may require the
2 distributor to pay more than half the costs of arbitration or
3 mediation or require arbitration or mediation to be conducted
4 outside this State.
5 Section 35. Judicial remedies.
6 (a) It shall be an affirmative defense in an action
7 between the parties to a distributorship agreement that good
8 cause existed for a supplier to cancel, fail to renew, or
9 otherwise terminate the distributorship agreement at issue.
10 (b) If a supplier engages in any of the practices
11 prohibited by Section 15 of this Act or violates any of the
12 provisions of Sections 20, 25, or 30 of this Act, any
13 aggrieved distributor or other aggrieved person may bring an
14 action against the supplier for damages sustained by the
15 distributor as a consequence thereof, together with the
16 actual costs and expenses of the action, including reasonable
17 attorney's fees. The aggrieved distributor or other
18 aggrieved person also may be granted injunctive relief,
19 including injunctive relief against an unlawful termination,
20 cancellation, nonrenewal, or other termination of a
21 distribution agreement. The remedies provided in this
22 subsection (b) are cumulative with all other remedies
23 available to an aggrieved distributor or other aggrieved
24 person, including but not limited to the remedies provided
25 for in subsections (c), (d) and (e) of this Section.
26 (c) Upon proper application to the court, a supplier,
27 distributor, or other aggrieved person may bring an action to
28 determine reasonable compensation under Section 30 of this
29 Act.
30 (d) A supplier, distributor, or other aggrieved person
31 may bring an action for a declaratory judgment to determine
32 any controversy arising under this Act or out of the
33 distributorship relationship.
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1 (e) If, in any action brought pursuant to this Act, a
2 finding is made that a party has not acted in good faith with
3 respect to any other party to a distribution agreement, an
4 appropriate penalty shall be assessed against that party and,
5 in addition, that party shall also be ordered to pay the
6 actual costs and expenses of the action, including reasonable
7 attorney's fees incurred by the other party.
8 (f) Any action brought pursuant to this Act shall be
9 brought in a court of this State or in a federal court in
10 this State vested with jurisdiction over the controversy.
11 Venue in any such action shall be in accordance with the Code
12 of Civil Procedure or Title 28 of the U.S. Code, as the case
13 may be, provided that in any action brought in a court of
14 this State, venue also shall exist in any county in which the
15 distributorship is located.
16 (g) Nothing in this Act shall (i) prohibit the parties
17 to any dispute from agreeing to arbitrate the dispute or to
18 submit the dispute to mediation or (ii) prohibit the
19 enforcement of any arbitration or mediation agreement in
20 accordance with applicable Illinois law. In any such
21 arbitration or mediation, the definitions and substantive
22 provisions of this Act shall apply and the arbitrator or
23 mediator may afford the remedies provided for by this Act.
24 Section 40. Application of this Act. This Act shall
25 govern all relations between suppliers and distributors to
26 the fullest extent consistent with the constitutions of this
27 State and of the United States. All provisions of this Act
28 which are declarative of or clarify existing law, including
29 the provisions of Section 15(a)(3) of this Act, apply to all
30 agreements between a supplier and a distributor whether those
31 agreements were entered into before or after the effective
32 date of this Act. In addition, this Act shall, to the
33 fullest extent permitted by law, apply (i) to conduct
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1 occurring after the effective date of this Act, whether or
2 not such conduct relates to a distribution agreement entered
3 into before the effective date of this Act, and (ii) to
4 distribution agreements entered into or amended after the
5 effective date of this Act, including any renewal of a
6 distribution agreement in existence on or before the
7 effective date of this Act. Renewal of a distribution
8 agreement with a designated term or duration shall mean (i)
9 the establishment of a new term or duration, (ii) an
10 extension of the distribution agreement on any other basis,
11 or (iii) the shipment of soft drink concentrate or syrup to
12 the distributor after the expiration of the designated term
13 or duration. Renewal of a distribution agreement that
14 provides for a month to month, year to year, or other
15 periodic term or duration, shall mean (i) the continuation of
16 the distributorship into the next month, year, or other
17 period commencing after the effective date of this Act, (ii)
18 an extension of the distribution agreement on any other
19 basis, or (iii) the shipment of soft drink concentrate or
20 syrup to a distributor after the expiration of the month,
21 year, or other period of the distribution agreement. Renewal
22 of any distribution agreement that does not have a designated
23 term or duration, or that is terminable at will or upon
24 notice, shall mean the shipment of soft drink concentrate or
25 syrup to a distributor after the effective date of this Act.
26 Section 99. Effective date. This Act takes effect upon
27 becoming law.
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