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90_SB1598ham005
LRB9010086LDmbam02
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, other than an Illinois winery,
16 for resale and a distributor of such products in which the
17 distributor is given the right to sell a designated product
18 or products, in a generally defined geographic area, in
19 exchange for an express or implied promise to market the
20 product or products. A registration under the Illinois
21 Liquor Control Act of 1934 as amended is a distributorship.
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1 "Supplier" means a person who is a grantor of a wine or
2 liquor distributorship in this State other than an Illinois
3 winery.
4 "Distributor" means a person who is a grantee of a wine
5 or liquor distributorship in this State.
6 "Agreement" means any contract, agreement, course of
7 dealing, or arrangement, express or implied, whether oral or
8 written, for a definite or indefinite period between a
9 supplier other than an Illinois winery and a distributor
10 pursuant to which a distributor has been granted a
11 distributorship.
12 "Good cause" means failure by a distributor to comply
13 substantially with essential and reasonable requirements
14 imposed upon the distributor by the supplier. The
15 requirements may not be discriminating either by their terms
16 or in the methods or effects of enforcement as compared with
17 requirements imposed on other similarly situated distributors
18 by the supplier. The requirements may not be inconsistent
19 with this Act or in violation of any law or regulation.
20 "Wine and liquor" means spirituous liquor or wine
21 containing alcohol in excess of 10 percent by weight, but not
22 including beer and other malt beverages.
23 "Person" means a natural person, partnership, joint
24 venture, corporation, or other entity, and includes heirs,
25 assigns, successors, personal representatives, and guardians.
26 "Substantial change in competitive circumstances" means
27 any change made by the supplier (i) that affects the
28 distributor's business, (ii) that is not made as to all
29 distributors alike, and (iii) that adversely impacts the
30 distributor's relationship with the supplier or ability to
31 compete or both. By way of example, and without limitation,
32 this may include changes in assigned territory, pricing,
33 brands or names or line of products, advertising or
34 distribution requirements, supports, discounts, or depletion
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1 from inventory.
2 "Illinois winery" means a winery located in Illinois.
3 Section 10. Legislative declarations; construction;
4 variation by contract.
5 (a) Legislative Declarations. The General Assembly makes
6 the following findings and declarations:
7 (1) Distributorship relationships in the State of
8 Illinois vitally affect the general economy of the State
9 and the public interest and welfare. Some suppliers have
10 threatened or canceled distributorship relationships and
11 have unfairly used their greater power to coerce
12 distributors, to the great prejudice and harm of the
13 citizens of the State of Illinois.
14 (2) The wine and spirits industry has undergone
15 intensive international consolidation, under which large
16 numbers of formerly independently-owned wine and spirits
17 brands have become holdings of larger and even more
18 economically powerful multinational conglomerates,
19 investing such supplier conglomerates with even greater
20 economic power and ability to dominate wholesale
21 distributors who must rely on the continuing right to
22 distribute the products of such suppliers.
23 (3) Pursuant to the 21st Amendment of the
24 Constitution of the United States, the General Assembly
25 has enacted the Liquor Control Act of 1934, which
26 establishes a three-tier system of distribution of wine
27 and spirits to the public.
28 (4) The three-tier system of distribution was
29 established, among other things, to prevent suppliers
30 from controlling pricing and distribution in a manner
31 that harms the interests of citizens of the State of
32 Illinois. Manufacturers have now proposed attacks on the
33 three-tier system as well as on the provision in the
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1 Illinois Vehicle Code setting the limit for intoxication
2 at 0.08.
3 (5) Domestic laws in many foreign jurisdictions in
4 which multinational conglomerate suppliers are organized
5 and do business do not establish three-tier distribution
6 systems similar to those imposed under Illinois law, and
7 some suppliers have publicly announced strategies to
8 undermine the three-tier distribution system prevalent in
9 the United States. Leading officials in some cases have
10 called for home delivery of distilled spirits.
11 (6) The three-tier distribution system can be
12 undermined by contractual provisions imposed by suppliers
13 in their dealings with distributors. Such provisions may
14 create distribution and retailing practices designed to
15 prey on vulnerable consumers.
16 (7) It is vital to promote and maintain a sound,
17 stable and viable three-tier system of distribution of
18 wine and spirits to the public.
19 (8) It is vital to promote the interest of the
20 public in fair business relations between suppliers and
21 distributors and in the continuation of distributorships
22 on a fair basis.
23 (9) Liquor can be a damaging product when misused.
24 The damage can be inflicted both on vulnerable consumers
25 and unrelated third parties. Illinois is determined to
26 bring irresponsible distribution and use of liquor under
27 better regulation and control.
28 (10) Distillers are engaging in advertising
29 practices long thought to be inappropriate in the United
30 States, including the use of hidden persuaders to expand
31 consumption of alcohol.
32 (11) This Act is enacted pursuant to authority of
33 the State of Illinois and under the provisions of the
34 21st Amendment to the United States Constitution to
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1 promote the public's interest in fair, efficient, and
2 competitive distribution of wine and liquor products by
3 regulation and encouragement of suppliers and
4 distributors to conduct their business relations toward
5 these ends by:
6 (i) protecting distributors against unfair
7 treatment by suppliers, who inherently have superior
8 economic power and superior bargaining power in the
9 negotiation of distributorships and distribution
10 practices;
11 (ii) providing distributors with rights and
12 remedies in addition to those existing by contract
13 or common law; and
14 (iii) absolutely insuring that no group of
15 foreign distillers can suborn the independence of
16 distributors and retailers in Illinois.
17 (b) Construction; variation by contract.
18 (1) This Act shall be liberally construed and
19 applied to promote its underlying remedial purposes and
20 policies.
21 (2) The provisions of this Act are of a public
22 order and therefore the rights determined by those
23 provisions cannot be waived or varied by contract or
24 agreement. Any contract or agreement purporting to do so
25 is void and unenforceable to that extent.
26 (3) This Act shall govern all relations between
27 distributors and suppliers to the full extent consistent
28 with the constitutions of this State and of the United
29 States.
30 (4) This Act provides distributors with rights and
31 remedies in addition to those existing by contract or
32 common law and reaffirms rights and remedies provided by
33 contract or common law.
34 (5) In accordance with Section 1.31 of the Statute
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1 on Statutes, if any provision or interpretation of this
2 Act, or the application of such interpretation or
3 provision to any distributorship, is held invalid, the
4 application of the Act to persons or circumstances other
5 than those as to which it is held invalid shall not be
6 affected thereby.
7 Section 15. Cancellation and alteration of
8 distributorships.
9 (a) No supplier other than an Illinois winery, directly
10 or through any officer, agent, employee, or representative
11 may terminate, cancel, fail to renew, or substantially change
12 the competitive circumstances of a distributorship agreement
13 without good cause. The burden of proving good cause is on
14 the supplier.
15 (b) Sections 15 through 40 of this Act shall govern all
16 agreements between a distributor and a supplier other than
17 agreements with an Illinois winery, whether written or oral,
18 express or implied, entered into after the effective date of
19 this Act, including any renewal of an agreement in existence
20 on or before the effective date of this Act, to the full
21 extent consistent with the constitutions of this State and
22 the United States. Renewal of an agreement with a designated
23 term or duration shall mean (i) establishment of a new term,
24 (ii) extension of the agreement on any other basis, or (iii)
25 shipment of wine or spirits to the distributor after the
26 expiration of the designated term or duration. Renewal of an
27 agreement in place on a month to month, year to year, or
28 other periodic basis shall mean (i) continuation of the
29 distributorship into the next month, year, or other period,
30 (ii) extension of the distributorship on any other basis, or
31 (iii) shipment of wine or spirits to a distributor after the
32 expiration of the month or other periodic basis designated as
33 the duration of the distributorship in the agreement.
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1 Renewal of an agreement without a designated term or
2 duration, such as an agreement in place on an "at will"
3 basis, shall mean shipment of wine or spirits to a
4 distributor after the effective date of this Act.
5 Section 20. Notice of termination or change in
6 distributorship. Except as provided in this Section, a
7 supplier, other than an Illinois winery, shall provide a
8 distributor at least 90 days written notice of termination,
9 cancellation, nonrenewal, or substantial change in
10 competitive circumstances. The notice shall state all the
11 reasons for termination, cancellation, nonrenewal, or
12 substantial change in competitive circumstances and shall
13 provide that the distributor has 60 days in which to rectify
14 any claimed deficiency. If the deficiency is rectified
15 within 60 days the notice shall be void. The notice
16 provisions of this Section shall not apply if the reason for
17 termination, cancellation, or nonrenewal is insolvency, the
18 occurrence of an assignment for the benefit of creditors, or
19 bankruptcy. If the reason for termination, cancellation,
20 nonrenewal, or substantial change in competitive
21 circumstances is nonpayment of sums due under the
22 distributorship, the distributor shall be entitled to written
23 notice of default and shall have 30 days in which to remedy
24 the default from the date of delivery or posting of the
25 notice.
26 Section 25. Repurchase of inventories. If a
27 distributorship is terminated by the supplier and the
28 supplier is not an Illinois winery, the supplier shall, at
29 the option of the distributor, repurchase all inventories
30 sold by the supplier to the distributor for resale under the
31 distributorship agreement at the fair wholesale market value.
32 This Section applies only to merchandise with a name,
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1 trademark, label, or other mark on it that identifies the
2 supplier.
3 Section 30. Action for damages and injunctive relief.
4 If a supplier that is not an Illinois winery violates Section
5 15, 20, or 25 of this Act, a distributor may bring an action
6 against that supplier in any court of competent jurisdiction
7 for damages sustained by the distributor as a consequence of
8 the supplier's violation, together with the actual costs of
9 the action, including reasonable, actual attorney fees, and
10 the distributor may also be granted injunctive relief against
11 unlawful termination, cancellation, nonrenewal, or
12 substantial change of competitive circumstances.
13 Notwithstanding the provisions of any agreement between a
14 supplier and a distributor, the provisions of the Code of
15 Civil Procedure and Title 28 of the U.S. Code concerning
16 venue for any such action shall be applicable and this Act
17 shall apply.
18 Section 35. Application to arbitration agreements. An
19 agreement between a supplier that is not an Illinois winery
20 and a distributor providing for binding arbitration of
21 disputes shall be valid and enforceable in accordance with
22 the Federal Arbitration Act. In the event that a dispute
23 concerning the existence of good cause for a termination,
24 cancellation, nonrenewal, or substantial change of
25 competitive circumstances is resolved through arbitration,
26 the definition of good cause and the substantive provisions
27 of this Act shall apply.
28 Section 40. Preliminary injunctions; temporary
29 restraining orders. In any action brought under this Act,
30 for purposes of determining if a preliminary injunction or a
31 temporary restraining order should be issued, (i) any
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1 violation of this Act shall constitute irreparable injury,
2 (ii) the party seeking relief shall be deemed to have no
3 adequate remedy at law, and (iii) enforcement of rights under
4 this Act shall be deemed to be in the public interest and to
5 outweigh any competing interest.
6 Section 45. Procedural provisions; good faith; role of
7 Liquor Control Commission.
8 (a) This Section clarifies existing rights and
9 obligations and establishes remedial procedures applicable to
10 registrations under Section 6-9 of the Liquor Control Act of
11 1934.
12 (b) Under existing Illinois common and statutory law,
13 suppliers other than Illinois wineries who have or should
14 have registered names of distributors under Section 6-9 of
15 the Liquor Control Act, granting or confirming distributors
16 rights to sell at wholesale in this State, have an obligation
17 to act in good faith. Under the existing obligation to act
18 in good faith, no registration or obligation to register
19 under Section 6-9 may be terminated, nor may a supplier that
20 is not an Illinois winery fail to renew or extend a product,
21 name, brand, registration, or an agreement with a distributor
22 as a result of the distributor's exercise of its right to
23 petition the General Assembly, the Congress, or any other
24 unit or form of government for any purpose, to any end, or
25 for or against any proposition, provision, amendment, bill,
26 resolution, judgment, decision, rule, regulation, or
27 interpretation.
28 (c) In order to enforce the existing obligation of good
29 faith with respect to registrations under Section 6-9, the
30 Commission shall have power to:
31 (1) Prohibit or suspend any supplier that is not an
32 Illinois winery or its successors or assigns found to
33 have violated the obligation described in this Section
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1 from selling any product or products governed under the
2 Liquor Control Act of 1934 and the Twenty-First Amendment
3 to the United States Constitution in Illinois.
4 (2) Order the supplier, if the supplier is not an
5 Illinois winery, to continue providing products to a
6 distributor at prices and quantities in effect for the
7 distributorship prior to any termination or failure to
8 renew that becomes the subject of a dispute or
9 administrative proceedings under this Section until the
10 matters in dispute are determined by an order which is
11 final and non-reviewable.
12 Orders of the Liquor Control Commission entered under
13 this Section shall be deemed orders as to which an emergency
14 exists.
15 (d) Any aggrieved party under this Section may apply to
16 the Commission for a finding that another party has violated
17 this Section and request relief.
18 (e) Orders entered by the Commission under this Section
19 shall be reviewable by the Circuit Court under the terms of
20 the Administrative Review Act. In accordance with Section
21 3-110 of the Administrative Review Act, findings and
22 conclusions of the Commission shall be held to be prima facie
23 true and correct.
24 (f) The administrative remedies provided in this Section
25 must be exhausted before resort may be had to judicial or
26 arbitral review by any arbitrator or the Circuit Court or any
27 other court, state or federal, foreign or domestic. No court
28 shall enter a stay, restraining order, injunction, mandamus,
29 or other order that has the effect of suspending, delaying,
30 modifying, or overturning a Commission finding or
31 determination under this Section before a full hearing and
32 final decision on the merits of the Commission ruling,
33 finding, or order.".