UPDATED WITH COMMENT FROM AB INBEV BELOW
As we first told you last week, the Illinois Liquor Control Commission has drafted a citation to send to distributor City Beverage, which is partially owned by a wholly owned subsidiary of Anheuser-Busch InBev.
Late Friday, that citation was released.
It calls for City Beverage’s licenses to be revoked and for AB InBev, and it’s wholly owned subsidiary WEDCO, to divest itself of its minority stake in City Beverage.
You can read the full citation below, but here is the meat and potatoes (link added):
“4) That based upon 1) Declaration A of a March 10, 2010 decision of the Illinois Liquor Control Commission (ILCC); 2) Illinois Public Act 97-0005 commonly known as the Craft Brewer’s Act; and 3) Commission finding (F) from “Findings from the 12/7/2011 Meeting Regarding the Anheuser Busch Ownership Interest in City Beverage, LLC” dated May 9, 2012, an Illinois licenses Non-Resident Dealer and Illinois licensed Manufacturer of alcoholic liquors shall not posses an ownership interest in or management control of an Illinois licensed Distributor of alcohol liquors.
5) Based on the law and facts alleged in this notice, the Legal Division of the Illinois Liquor Control Commission recommends that the City Beverage, LLC licenses be revoked and that the revocation be stayed pending the divestiture of ownership interests of Anheuser Busch, LLC and its affiliates from City Beverage, LLC.”
A hearing is set for June 20th in Chicago to allow AB InBev to make its case to retain its 30-percent stake in City Beverage.
This citation brings AB InBev’s quest to own a distributor in Illinois full circle, but not in the direction the brewing giant was hoping.
Two years ago AB InBev and WEDCO tried to buy up the remaining stake in City Beverage. The move was blocked by the Illinois Liquor Control Commission. AB InBev then sued in federal court citing discrimination because in-state brewers are allowed to self-distribute their beer but an out-of-state distributor is not. A judge agreed, but instead of opening up self-distribution to everyone he said no one should be able self-distribute. The judge stayed his ruling to allow the Illinois legislature to try and work out a compromise, which they did in SB 754. That bill was signed in to law last summer and spells out barrel limits for brewers who want to self-distribute.
The new law left one question unanswered though; is AB InBev’s minority stake in City Beverage akin to self-distribution? And, if so, is AB InBev breaking the law? It looks like the ILCC has answered those questions.
Late in the day Monday we received a statement from A-B’s General Counsel Gary Rutledge, who has a week-and-a-half to prepare a rebuttal to the ILCC citation and to make a case for the brewery to retain its minority stake in City Beverage.
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“Friday we learned of the citation received by City Beverage from the Illinois Liquor Control Commission. We are reviewing the content of the citation and will be working with City Beverage on a response.
Anheuser-Busch has made significant long-term business decisions and investments in Illinois based on the law and the ILCC’s long-standing practice of permitting brewers to own or maintain interests in licensed distributors. In fact, in the past three decades, the ILCC issued Anheuser-Busch and its affiliates distributor licenses for nine different locations and issued more than 50 annual renewals of those distributor licenses.
As a licensed distributor, we are a welcome neighbor who invests in our business and our communities through our involvement in local organizations and charities and our efforts to promote alcohol responsibility, while providing good-paying jobs. We also bring added competition to the marketplace, which benefits consumers.”