Illinois Governor Pat Quinn signed the Beer Industry Compensation Act into law Monday. The Act, also known as SB 3399, was the only piece of substantial beverage industry related legislation to pass both the Illinois House and Illinois Senate during a relatively slow spring legislative session.
According to bill’s synopsis it lowers the threshold for compensation under the Illinois Beer Industry Fair Dealing Act when a brewer and distributor break up.
“Amends the Beer Industry Fair Dealing Act. Provides that certain compensation requirements applicable to the termination of an agreement between a brewer and a wholesaler apply if the total annual volume of beer products supplied by the brewer to the wholesaler represents 10% or less (instead of 15% or less), of the wholesaler’s business for all beer products supplied by all brewers.”
The synopsis attached to the bill is a bit tough to follow, so we reached out to an Illinois wholesaler to get an explanation that was easier to digest.
“What it will mean is that if a supplier represents less than 10% of a distributors house volume by sales, a change in distributors can be implemented without showing cause of non-compliance/under performance by the current distributor. The current distributor would of course have to be paid “fair market” value for the transfer of their distribution rights. However, if the suppliers business represents over 10% of the distributors total volume a brand(s) transfer may only be implemented based on cause by the current distributor. If the distributor is meeting expectations, goals, etc. the brand(s) can not be forced to be transferred.”
Essentially, if a brewer’s brands make up less than 10-percent of a distributors “house volume of sales” they can break their agreement with the distributor without cause.
The legislation was pushed by the Associated Beer Distributors of Illinois. The Illinois Craft Brewers Guild, while not crazy about the legislation, was also not on record opposing it.