Bill Text: MS SB2709 | 2011 | Regular Session | Introduced

Mississippi Senate Bill 2709 (Prior Session Legislation)

Introduced

Bill Title: Beer Industry Fair Dealing Act; provide rules regarding reintroduction of brands of beer or light wine.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Failed) 2011-02-01 - Died In Committee [SB2709 Detail]

Download: Mississippi-2011-SB2709-Introduced.html

MISSISSIPPI LEGISLATURE

2011 Regular Session

To: Finance

By: Senator(s) Brown

Senate Bill 2709

AN ACT TO AMEND SECTION 67-7-5, MISSISSIPPI CODE OF 1972, TO REVISE THE DEFINITION OF THE TERM "AGREEMENT" AND TO DEFINE THE TERMS "BRAND" AND "BRAND EXTENSION" UNDER THE BEER INDUSTRY FAIR DEALING ACT; TO AMEND SECTION 67-7-7, MISSISSIPPI CODE OF 1972, TO REQUIRE BEER SUPPLIERS TO ASSIGN A BRAND EXTENSION TO THE WHOLESALER TO WHOM THE SUPPLIER GRANTED THE EXCLUSIVE SALES TERRITORY TO THE BRAND FROM WHICH THE BRAND EXTENSION RESULTED; TO PROHIBIT BEER SUPPLIERS FROM DISCONTINUING THE DISTRIBUTION OF ANY PARTICULAR BRAND OR PACKAGE OF LIGHT WINE OR BEER UPON NOT LESS THAN 30 DAYS' NOTICE TO THE WHOLESALER; TO AMEND SECTION 67-7-11, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT IN THE EVENT THAT A SUPPLIER RESUMES PRODUCTION OF A DISCONTINUED BRAND OR REINTRODUCES FOR DISTRIBUTION IN THIS STATE ANY BRAND THAT HAS BEEN DISCONTINUED WITHIN FIVE YEARS AFTER TERMINATION OF AN AGREEMENT WITH A WHOLESALER, THE SUPPLIER MUST ENTER INTO A NEW AGREEMENT WITH THE WHOLESALER WHO PREVIOUSLY DISTRIBUTED THE BRANDS ON THE SAME TERMS AND CONDITIONS AS THE OLD AGREEMENT WITH THE WHOLESALER; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 67-7-5, Mississippi Code of 1972, is amended as follows:

67-7-5. As used in this chapter, the following words or phrases, or the plural thereof, whenever they appear in this chapter, unless the context clearly requires otherwise, shall have the meaning ascribed to them in this section.

(a) "Agreement" means one or more of the following:

(i) Any agreement between a wholesaler and a supplier, whether oral or written, whereby a wholesaler is granted the right to purchase and sell a brand or brands of light wine or beer sold by a supplier.

(ii) A commercial relationship between a beer wholesaler and a supplier of a definite or indefinite duration, which is not required to be evidenced in writing;

(iii) A commercial relationship whereby the beer wholesaler is granted the right to offer and sell a brand or brands of beer or light wine offered by a supplier;

(iv) A relationship whereby the beer wholesaler, as an independent business, constitutes a component of a supplier's distribution system;

(v) A relationship whereby the beer wholesaler's business is substantially associated with a supplier's brand or brands, designating the supplier;

(vi) A relationship whereby the beer wholesaler's business is substantially reliant on a supplier for the continued supply of beer and light wine;

(vii) A written or oral arrangement for a definite or indefinite period whereby a supplier grants to a beer wholesaler a license to use a brand, trade name, trademark, or service mark, and in which there is a community of interest in the marketing of goods or services at wholesale or retail.

(b) "Ancillary business" means a business owned by the wholesaler, by a substantial stockholder of a wholesaler, or by a substantial partner of a wholesaler, the primary business of which is directly related to the transporting, storing or marketing of the brand or brands of light wine or beer of a supplier with whom the wholesaler has an agreement; or a business owned by a wholesaler, a substantial stockholder of a wholesaler.

(c) "Brand" means any word, name, group of letters, symbol, or combination thereof, that is adopted and used by a supplier to identify a specific product, and to distinguish that product from another product.

(d) "Brand extension" means any brand that:

(i) Incorporates all or a substantial part of the unique features of a preexisting brand of the same supplier; and

(ii) Which relies to a significant extent on the goodwill associated with that preexisting brand.

(e) "Commission" or "department" means the Department of Revenue of the State of Mississippi.

(f) "Commissioner" means the Commissioner of Revenue of the Department of Revenue.

(g) "Designated member" means the spouse, child, grandchild, parent, brother or sister of a deceased individual who owned an interest, including a controlling interest, in a wholesaler, or any person who inherits under the deceased individual's will, or under the laws of intestate succession of this state; or any person who or entity which has otherwise, through a valid testamentary device by the deceased individual, succeeded the deceased individual in the wholesaler's business, or has succeeded to the deceased individual's ownership interest in the wholesaler pursuant to a written contract or instrument which has been previously approved by the supplier; "designated member" includes the appointed and qualified personal representative and the testamentary trustee of a deceased individual owning an ownership interest in a wholesaler, and it includes the person appointed by a court as the guardian or conservator of the property of an incapacitated individual owning an ownership interest in a wholesaler.

(h) "Establish" means to adjust or regulate, to provide for and uphold.

(i) "Good faith" means honesty in fact and observance of reasonable commercial standards of fair dealing in the trade, as defined in and interpreted under the Uniform Commercial Code.

(j) "Reasonable qualifications" means the standard of the reasonable criteria established and consistently used by the respective supplier for similarly situated wholesalers that entered into, continued or renewed an agreement with the supplier during a period of twenty-four (24) months before the proposed transfer of the wholesaler's business, or for similarly situated wholesalers who have changed managers or designated managers, under the agreement, during a period of twenty-four (24) months before the proposed change in the manager or successor manager of the wholesaler's business.

(k) "Retaliatory action" means the refusal to continue an agreement, or a material reduction in the quality of service or quantity of products available to a wholesaler under an agreement, which refusal or reduction is not made in good faith.

(l) "Sales territory" means a primary area of sales responsibility for the brand or brands of light wine or beer sold by a supplier as designated by an agreement.

(m) "Substantial stockholder or substantial partner" means a stockholder of or partner in the wholesaler who owns an interest of ten percent (10%) or more of the partnership or of the capital stock of a corporate wholesaler.

(n) "Successor" means a person who replaces a supplier with regard to the right to manufacture, sell, distribute or import a brand or brands of light wine or beer.

(o) "Supplier" means a manufacturer or importer of light wine or beer as regulated by the department under Sections 67-3-1 through 67-3-73.

(p) "Transfer of wholesaler's business" means the voluntary sale, assignment or other transfer of ten percent (10%) or more of control of the business or all or substantially all of the assets of the wholesaler, or ten percent (10%) or more of control of the capital stocks of the wholesaler, including without limitation the sale or other transfer of capital stock or assets by merger, consolidation or dissolution, or of the capital stock of the parent corporation, or of the capital stock or beneficial ownership of any other entity owning or controlling the wholesaler.

(q) "Wholesaler" means a wholesaler of light wine or beer as regulated by the department under Sections 67-3-1 through 67-3-73.

(r) "Similarly situated wholesalers" means wholesalers of a supplier that are of a generally comparable size and operate in markets in Mississippi and adjoining states with similar demographic characteristics, including population size, density, distribution and vital statistics, as well as reasonably similar economic and geographic conditions.

(s) "Light wine and/or beer" has the meaning ascribed to such terms in Section 67-3-5.

SECTION 2. Section 67-7-7, Mississippi Code of 1972, is amended as follows:

67-7-7. (1) A supplier shall not do the following:

(a) 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 sales territory. Any agreement which is in existence on April 7, 1995, shall be renewed consistent with this chapter, provided that this chapter may be incorporated by reference in the agreement. Nothing contained herein shall prevent a supplier from appointing, one (1) time for a period not to exceed ninety (90) days, a wholesaler to service temporarily 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 67-7-11 and 67-7-15.

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

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

(d) Require any wholesaler to accept delivery of any light wine or beer or other commodity which has not been ordered by the wholesaler, except that 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 who have an agreement with the supplier.

(e) Require any wholesaler to accept delivery of any light wine or beer or other commodity ordered by a wholesaler if the order was properly cancelled by the wholesaler in accordance with the supplier's procedure.

(f) Require 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.

(g) Require a wholesaler to assent to any condition, stipulation or provision limiting the wholesaler's right to sell the brand or brands of light wine or beer of any other supplier unless the acquisition of the brand or brands 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, except that in any action challenging a supplier's position, the supplier shall have the burden of providing that such acquisition of such other brand or brands would have such effect.

(h) Require a wholesaler to purchase one or more brands of light wine or beer products in order for the wholesaler to purchase another brand or brands of light wine or beer for any reason, except that a wholesaler that has agreed to distribute a brand or brands before April 7, 1995, shall continue to distribute the brand or brands in conformance with this chapter.

(i) Require a wholesaler to submit audited profit and loss statements, balance sheets or financial records as a condition of renewal or continuation of an agreement, except that a supplier may require reasonable proof of a wholesaler's financial condition prior to extending credit terms to a wholesaler.

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

(k) 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.

(l) Take any retaliatory action against a wholesaler that files a complaint in good faith regarding an alleged violation by the supplier of federal, state or local law or an administrative rule as a result of that complaint.

(m) Require or prohibit any change in the manager or successor manager of any wholesaler who has been approved by the supplier as of or after April 7, 1995, unless the supplier acts in good faith. 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 consistently applied to similarly situated wholesalers by the supplier, except that, in any action challenging a supplier's decision, the supplier shall have the burden of proving that such person fails to meet such standards and qualifications.

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

(o) 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 thirty (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 similarly situated wholesalers.

(p) Restrict or inhibit the right of free association among wholesalers for any lawful purpose.

(q) Threaten to cancel or withhold credit, or to reduce the time period normally given the wholesaler to make payment on a delivery from the supplier as a means of compelling the wholesaler to meet certain standards of performance in any area of business not directly related to credit.

(r) Fail to assign a brand extension to the wholesaler to whom the supplier granted the exclusive sales territory to the brand from which the brand extension resulted. This requirement does not apply to assignments of brand extensions to wholesalers that were made by a supplier before January 1, 2011. In the event that prior to January 1, 2011, a supplier had assigned a brand extension to a wholesaler who was not the appointed wholesaler for the brand from which the brand extension was made, then any brand extension must be assigned to the wholesaler who first had the brand.

(s) Discontinue the distribution of any particular brand of light wine or beer upon not less than thirty (30) days notice to the wholesaler. If distribution of a particular brand is discontinued pursuant to this paragraph, the agreement between the supplier and the wholesaler regarding that brand shall remain in force and subject to the provisions of Section 67-7-11.

SECTION 3. Section 67-7-11, Mississippi Code of 1972, is amended as follows:

67-7-11. (1) Except as otherwise provided for in this chapter, a supplier shall not amend or modify an agreement; cause a wholesaler to resign from an agreement; or cancel, terminate, fail to renew or refuse to continue under an agreement, unless the supplier has complied with all of the following:

(a) Has satisfied the applicable notice requirements of this section.

(b) Has acted in good faith.

(c) Has good cause for the amendment, modification, cancellation, termination, nonrenewal, discontinuance or forced resignation.

(2) In any action challenging such amendment, modification, termination, cancellation, nonrenewal or discontinuance, the supplier shall have the burden of proving that it has acted in good faith, that the notice requirements under this section have been complied with, and that there was good cause for the amendment, modification, termination, cancellation, nonrenewal or discontinuance.

(3) Except as otherwise provided in this section, and in addition to the time limits set forth in subsection (4)(d) of this section, the supplier shall furnish written notice of the amendment, modification, termination, cancellation, nonrenewal or discontinuance of an agreement to the wholesaler not less than thirty (30) days before the effective date of the amendment, modification, termination, cancellation, nonrenewal or discontinuance. The notice shall be by certified mail and shall contain all of the following:

(a) A statement of intention to amend, modify, terminate, cancel, nonrenew or discontinue the agreement.

(b) A statement of the reason for the amendment, modification, termination, cancellation, nonrenewal or discontinuance.

(4) Good cause shall exist for the purposes of a termination, cancellation, nonrenewal or discontinuance under subsection (1)(c) of this section when all of the following occur:

(a) There is a failure by the wholesaler to comply with a provision of the agreement which is both reasonable and of material significance to the business relationship between the wholesaler and the supplier.

(b) The supplier first acquired knowledge of the failure described in subparagraph (a) not more than twenty-four (24) months before the date notification was given pursuant to subsection (3) of this section.

(d) The wholesaler has been afforded thirty (30) days in which to submit a plan of corrective action to comply with the agreement and an additional ninety (90) days to cure such noncompliance in accordance with the plan.

(5) Notwithstanding subsections (1) and (3) of this section, a supplier may terminate, cancel, fail to renew or discontinue an agreement immediately upon written notice given in the manner and containing the information required by subsection (3)(a), (b) and (c) of this section if any of the following occur:

(a) Insolvency of the wholesaler, the filing of any petition by or against the wholesaler under any bankruptcy or receivership law or the assignment for the benefit of creditors or dissolution or liquidation of the wholesaler which materially affects the wholesaler's ability to remain in business.

(b) Revocation or suspension of the wholesaler's state or federal license by the appropriate regulatory agency whereby the wholesaler cannot service the wholesaler's sales territory for more than thirty-one (31) days.

(c) The wholesaler, or a partner or an individual who owns ten percent (10%) or more of the partnership or stock of a corporate wholesaler, has been convicted of a felony under the United States Code or the laws of any state which reasonably may adversely affect the good will or interest of the wholesaler or supplier. However, an existing stockholder or stockholders, or partner or partners, or a designated member or members, shall have, subject to the provisions of this chapter, the right to purchase the partnership interest or the stock of the offending partner or stockholder prior to the conviction of the offending partner or stockholder, and if the sale is completed prior to conviction the provisions of this subparagraph shall not apply.

(d) There was fraudulent conduct relating to a material matter on the part of the wholesaler in dealings with the supplier or its product, except that the supplier shall have the burden of proving fraudulent conduct relating to a material matter on the part of the wholesaler in any legal action challenging such termination.

(e) The wholesaler failed to confine to the designated sales territory its sales of a brand or brands to retailers except that this subsection does not apply if there is a dispute between two (2) or more wholesalers as to the boundaries of the assigned territory, and the boundaries cannot be determined by a reading of the description contained in the agreements between the supplier and the wholesalers.

(f) A wholesaler has failed to pay for light wine or beer ordered and delivered in accordance with established terms and the wholesaler fails to make full payment within five (5) business days after receipt of written notice of the delinquency and demand for immediate payment from the supplier.

(g) A wholesaler intentionally has made a transfer of wholesaler's business, other than a transfer to a designated member without prior written notice to the supplier.

(h) A wholesaler intentionally has made a transfer of wholesaler's business, other than a transfer to a designated member, although the wholesaler has prior to said transfer received from supplier a timely notice of disapproval of said transfer in accordance with this chapter.

(i) The wholesaler intentionally ceases to carry on business with respect to any of supplier's brand or brands previously serviced by wholesaler in its territory designated by the supplier, unless such cessation is due to force majeure or to labor dispute and the wholesaler has made good faith efforts to overcome such events. Provided, however, this shall affect only that brand or brands with respect to which the wholesaler ceased to carry on business.

(6) Notwithstanding subsections (1), (3) and (5) of this section, a supplier may terminate, cancel, not renew or discontinue an agreement upon not less than thirty (30) days prior written notice if the supplier discontinues production or discontinues distribution in this state of all the brands sold by the supplier to the wholesaler, except that nothing in this section shall prohibit a supplier from: (a) upon not less than thirty (30) days notice, discontinuing the distribution of any particular brand or package of light wine or beer; or (b) conducting test marketing of a new brand of light wine or beer which is not currently being sold in this state, except that the supplier has notified the Department of Revenue in writing of its plans to test market, which notice shall describe the market area in which the test shall be conducted; the name or names of the wholesaler or wholesalers who will be selling the light wine or beer; the name or names of the brand of light wine or beer being tested; and the period of time, not to exceed eighteen (18) months, during which the testing will take place. In the event that the supplier resumes production or reintroduces any of the brands for sale into this state within five (5) years after termination of the agreement, the supplier must enter into a new agreement on the same terms and conditions as the old agreement with the wholesalers who previously distributed the brands.

SECTION 4. This act shall take effect and be in force from and after its passage.