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90_SB1598ham004
LRB9010086LDdvam01
1 AMENDMENT TO SENATE BILL 1598
2 AMENDMENT NO. . Amend Senate Bill 1598, AS AMENDED,
3 by replacing the title with the following:
4 "AN ACT to create the Illinois Wine and Spirits Industry
5 Fair Dealing Act."; and
6 by replacing everything after the enacting clause with the
7 following:
8 "Section 1. Short title. This Act may be cited as the
9 Illinois Wine and Spirits Industry Fair Dealing Act.
10 Section 5. Definitions. As used in this Act:
11 "Commission" means the Illinois Liquor Control
12 Commission.
13 "Distributorship" means a business relationship, either
14 express or implied, whether oral or written, between a
15 supplier of wine or spirits for resale and a distributor of
16 such products in which the distributor is given the right to
17 sell a designated product or products, in a generally defined
18 geographic area, in exchange for an express or implied
19 promise to market the product or products. A registration
20 under the Illinois Liquor Control Act of 1934 as amended is a
21 distributorship.
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1 "Supplier" means a person who is a grantor of a wine or
2 liquor distributorship in this State.
3 "Distributor" means a person who is a grantee of a wine
4 or liquor distributorship in this State.
5 "Agreement" means any contract, agreement, course of
6 dealing, or arrangement, express or implied, whether oral or
7 written, for a definite or indefinite period between a
8 supplier and a distributor pursuant to which a distributor
9 has been granted a distributorship.
10 "Good cause" means failure by a distributor to comply
11 substantially with essential and reasonable requirements
12 imposed upon the distributor by the supplier. The
13 requirements may not be discriminating either by their terms
14 or in the methods or effects of enforcement as compared with
15 requirements imposed on other similarly situated distributors
16 by the supplier. The requirements may not be inconsistent
17 with this Act or in violation of any law or regulation.
18 "Wine and liquor" means spirituous liquor or wine
19 containing alcohol in excess of 10 percent by weight, but not
20 including beer and other malt beverages.
21 "Person" means a natural person, partnership, joint
22 venture, corporation, or other entity, and includes heirs,
23 assigns, successors, personal representatives, and guardians.
24 "Substantial change in competitive circumstances" means
25 any change made by the supplier (i) that affects the
26 distributor's business, (ii) that is not made as to all
27 distributors alike, and (iii) that adversely impacts the
28 distributor's relationship with the supplier or ability to
29 compete or both. By way of example, and without limitation,
30 this may include changes in assigned territory, pricing,
31 brands or names or line of products, advertising or
32 distribution requirements, supports, discounts, or depletion
33 from inventory.
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1 Section 10. Legislative declarations; construction;
2 variation by contract.
3 (a) Legislative Declarations. The General Assembly makes
4 the following findings and declarations:
5 (1) Distributorship relationships in the State of
6 Illinois vitally affect the general economy of the State
7 and the public interest and welfare. Some suppliers have
8 threatened or canceled distributorship relationships and
9 have unfairly used their greater power to coerce
10 distributors, to the great prejudice and harm of the
11 citizens of the State of Illinois.
12 (2) The wine and spirits industry has undergone
13 intensive international consolidation, under which large
14 numbers of formerly independently-owned wine and spirits
15 brands have become holdings of larger and even more
16 economically powerful multinational conglomerates,
17 investing such supplier conglomerates with even greater
18 economic power and ability to dominate wholesale
19 distributors who must rely on the continuing right to
20 distribute the products of such suppliers.
21 (3) Pursuant to the 21st Amendment of the
22 Constitution of the United States, the General Assembly
23 has enacted the Liquor Control Act of 1934, which
24 establishes a three-tier system of distribution of wine
25 and spirits to the public.
26 (4) The three-tier system of distribution was
27 established, among other things, to prevent suppliers
28 from controlling pricing and distribution in a manner
29 that harms the interests of citizens of the State of
30 Illinois. Manufacturers have now proposed attacks on the
31 three-tier system as well as on the provision in the
32 Illinois Vehicle Code setting the limit for intoxication
33 at 0.08.
34 (5) Domestic laws in many foreign jurisdictions in
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1 which multinational conglomerate suppliers are organized
2 and do business do not establish three-tier distribution
3 systems similar to those imposed under Illinois law, and
4 some suppliers have publicly announced strategies to
5 undermine the three-tier distribution system prevalent in
6 the United States. Leading officials in some cases have
7 called for home delivery of distilled spirits.
8 (6) The three-tier distribution system can be
9 undermined by contractual provisions imposed by suppliers
10 in their dealings with distributors. Such provisions may
11 create distribution and retailing practices designed to
12 prey on vulnerable consumers.
13 (7) It is vital to promote and maintain a sound,
14 stable and viable three-tier system of distribution of
15 wine and spirits to the public.
16 (8) It is vital to promote the interest of the
17 public in fair business relations between suppliers and
18 distributors and in the continuation of distributorships
19 on a fair basis.
20 (9) Liquor can be a damaging product when misused.
21 The damage can be inflicted both on vulnerable consumers
22 and unrelated third parties. Illinois is determined to
23 bring irresponsible distribution and use of liquor under
24 better regulation and control.
25 (10) Distillers are engaging in advertising
26 practices long thought to be inappropriate in the United
27 States, including the use of hidden persuaders to expand
28 consumption of alcohol.
29 (11) This Act is enacted pursuant to authority of
30 the State of Illinois and under the provisions of the
31 21st Amendment to the United States Constitution to
32 promote the public's interest in fair, efficient, and
33 competitive distribution of wine and liquor products by
34 regulation and encouragement of suppliers and
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1 distributors to conduct their business relations toward
2 these ends by:
3 (i) protecting distributors against unfair
4 treatment by suppliers, who inherently have superior
5 economic power and superior bargaining power in the
6 negotiation of distributorships and distribution
7 practices;
8 (ii) providing distributors with rights and
9 remedies in addition to those existing by contract
10 or common law; and
11 (iii) absolutely insuring that no group of
12 foreign distillers can suborn the independence of
13 distributors and retailers in Illinois.
14 (b) Construction; Variation by contract.
15 (1) This Act shall be liberally construed and
16 applied to promote its underlying remedial purposes and
17 policies.
18 (2) The provisions of this Act are of a public
19 order and therefore the rights determined by those
20 provisions cannot be waived or varied by contract or
21 agreement. Any contract or agreement purporting to do so
22 is void and unenforceable to that extent.
23 (3) This Act shall govern all relations between
24 distributors and suppliers to the full extent consistent
25 with the constitutions of this State and of the United
26 States.
27 (4) This Act provides distributors with rights and
28 remedies in addition to those existing by contract or
29 common law and reaffirms rights and remedies provided by
30 contract or common law.
31 (5) In accordance with Section 1.31 of the Statute
32 on Statutes, if any provision or interpretation of this
33 Act, or the application of such interpretation or
34 provision to any distributorship, is held invalid, the
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1 application of the Act to persons or circumstances other
2 than those as to which it is held invalid shall not be
3 affected thereby.
4 Section 15. Cancellation and alteration of
5 distributorships.
6 (a) No supplier, directly or through any officer, agent,
7 employee, or representative may terminate, cancel, fail to
8 renew, or substantially change the competitive circumstances
9 of a distributorship agreement without good cause. The
10 burden of proving good cause is on the supplier.
11 (b) Sections 15 through 40 of this Act shall govern all
12 agreements between a distributor and a supplier, whether
13 written or oral, express or implied, entered into after the
14 effective date of this Act, including any renewal of an
15 agreement in existence on or before the effective date of
16 this Act, to the full extent consistent with the
17 constitutions of this State and the United States. Renewal
18 of an agreement with a designated term or duration shall mean
19 (i) establishment of a new term, (ii) extension of the
20 agreement on any other basis, or (iii) shipment of wine or
21 spirits to the distributor after the expiration of the
22 designated term or duration. Renewal of an agreement in
23 place on a month to month, year to year, or other periodic
24 basis shall mean (i) continuation of the distributorship into
25 the next month, year, or other period, (ii) extension of the
26 distributorship on any other basis, or (iii) shipment of wine
27 or spirits to a distributor after the expiration of the month
28 or other periodic basis designated as the duration of the
29 distributorship in the agreement. Renewal of an agreement
30 without a designated term or duration, such as an agreement
31 in place on an "at will" basis, shall mean shipment of wine
32 or spirits to a distributor after the effective date of this
33 Act.
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1 Section 20. Notice of termination or change in
2 distributorship. Except as provided in this Section, a
3 supplier shall provide a distributor at least 90 days written
4 notice of termination, cancellation, nonrenewal, or
5 substantial change in competitive circumstances. The notice
6 shall state all the reasons for termination, cancellation,
7 nonrenewal, or substantial change in competitive
8 circumstances and shall provide that the distributor has 60
9 days in which to rectify any claimed deficiency. If the
10 deficiency is rectified within 60 days the notice shall be
11 void. The notice provisions of this Section shall not apply
12 if the reason for termination, cancellation, or nonrenewal is
13 insolvency, the occurrence of an assignment for the benefit
14 of creditors, or bankruptcy. If the reason for termination,
15 cancellation, nonrenewal, or substantial change in
16 competitive circumstances is nonpayment of sums due under the
17 distributorship, the distributor shall be entitled to written
18 notice of default and shall have 30 days in which to remedy
19 the default from the date of delivery or posting of the
20 notice.
21 Section 25. Repurchase of inventories. If a
22 distributorship is terminated by the supplier, the supplier
23 shall, at the option of the distributor, repurchase all
24 inventories sold by the supplier to the distributor for
25 resale under the distributorship agreement at the fair
26 wholesale market value. This Section applies only to
27 merchandise with a name, trademark, label, or other mark on
28 it that identifies the supplier.
29 Section 30. Action for damages and injunctive relief.
30 If a supplier violates Section 15, 20, or 25 of this Act, a
31 distributor may bring an action against that supplier in any
32 court of competent jurisdiction for damages sustained by the
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1 distributor as a consequence of the supplier's violation,
2 together with the actual costs of the action, including
3 reasonable, actual attorney fees, and the distributor may
4 also be granted injunctive relief against unlawful
5 termination, cancellation, nonrenewal, or substantial change
6 of competitive circumstances. Notwithstanding the provisions
7 of any agreement between a supplier and a distributor, the
8 provisions of the Code of Civil Procedure and Title 28 of the
9 U.S. Code concerning venue for any such action shall be
10 applicable and this Act shall apply.
11 Section 35. Application to arbitration agreements. An
12 agreement between a supplier and a distributor providing for
13 binding arbitration of disputes shall be valid and
14 enforceable in accordance with the Federal Arbitration Act.
15 In the event that a dispute concerning the existence of good
16 cause for a termination, cancellation, nonrenewal, or
17 substantial change of competitive circumstances is resolved
18 through arbitration, the definition of good cause and the
19 substantive provisions of this Act shall apply.
20 Section 40. Preliminary injunctions; temporary
21 restraining orders. In any action brought under this Act,
22 for purposes of determining if a preliminary injunction or a
23 temporary restraining order should be issued, (i) any
24 violation of this Act shall constitute irreparable injury,
25 (ii) the party seeking relief shall be deemed to have no
26 adequate remedy at law, and (iii) enforcement of rights under
27 this Act shall be deemed to be in the public interest and to
28 outweigh any competing interest.
29 Section 45. Procedural provisions; good faith; role of
30 Liquor Control Commission.
31 (a) This Section clarifies existing rights and
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1 obligations and establishes remedial procedures applicable to
2 registrations under Section 6-9 of the Liquor Control Act of
3 1934.
4 (b) Under existing Illinois common and statutory law,
5 suppliers who have or should have registered names of
6 distributors under Section 6-9 of the Liquor Control Act,
7 granting or confirming distributors rights to sell at
8 wholesale in this State, have an obligation to act in good
9 faith. Under the existing obligation to act in good faith,
10 no registration or obligation to register under Section 6-9
11 may be terminated, nor may a supplier fail to renew or extend
12 a product, name, brand, registration, or an agreement with a
13 distributor as a result of the distributor's exercise of its
14 right to petition the General Assembly, the Congress, or any
15 other unit or form of government for any purpose, to any end,
16 or for or against any proposition, provision, amendment,
17 bill, resolution, judgment, decision, rule, regulation, or
18 interpretation.
19 (c) In order to enforce the existing obligation of good
20 faith with respect to registrations under Section 6-9, the
21 Commission shall have power to:
22 (1) Prohibit or suspend any supplier or its
23 successors or assigns found to have violated the
24 obligation described in this Section from selling any
25 product or products governed under the Liquor Control Act
26 of 1934 and the Twenty-First Amendment to the United
27 States Constitution in Illinois.
28 (2) Order the supplier to continue providing
29 products to a distributor at prices and quantities in
30 effect for the distributorship prior to any termination
31 or failure to renew that becomes the subject of a dispute
32 or administrative proceedings under this Section until
33 the matters in dispute are determined by an order which
34 is final and non-reviewable.
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1 Orders of the Liquor Control Commission entered under
2 this Section shall be deemed orders as to which an emergency
3 exists.
4 (d) Any aggrieved party under this Section may apply to
5 the Commission for a finding that another party has violated
6 this Section and request relief.
7 (e) Orders entered by the Commission under this Section
8 shall be reviewable by the Circuit Court under the terms of
9 the Administrative Review Act. In accordance with Section
10 3-110 of the Administrative Review Act, findings and
11 conclusions of the Commission shall be held to be prima facie
12 true and correct.
13 (f) The administrative remedies provided in this Section
14 must be exhausted before resort may be had to judicial or
15 arbitral review by any arbitrator or the Circuit Court or any
16 other court, state or federal, foreign or domestic. No court
17 shall enter a stay, restraining order, injunction, mandamus,
18 or other order that has the effect of suspending, delaying,
19 modifying, or overturning a Commission finding or
20 determination under this Section before a full hearing and
21 final decision on the merits of the Commission ruling,
22 finding, or order.".