Last week the chief sponsor of legislation designed to strengthen the Illinois Liquor Control Act and Illinois’ 3-tier system, specifically provisions on who can and who cannot hold an ownership interest in an Illinois distributor, amended the bill adding more teeth to the proposed law.
The legislation was drafted in response to a Halloween day ruling by the Illinois Liquor Control Commission allowing Anheuser-Busch InBev, through a wholly owned subsidiary, to hold a minority ownership interest in distributor City Beverage. The Commission’s decision went against its own legal counsel, who cited AB InBev last summer for violating the state’s liquor control act by holding a 30-percent interest in City Beverage.
The wholesaler is made up of four distributors throughout the state: Arlington Heights, Bloomington, Chicago and Markham.
Critics of the decision, including two high-profile distributor groups in the state, claimed a law passed in 2011 allowing small brewers to self-distribute forbid brewers from owning a distributor. But that exact verbiage never made it into the bill, although it was brought up during floor debate on the legislation.
The Associated Beer Distributors of Illinois was one of those critics. ABDI President Bill Olson tells GuysDrinkingBeer the amended bill will reinforce the “Craft Brewer Act” of 2011.
“HB 2606 reaffirms the public policy of SB 754 that vertical integration (common ownership of a brewer and a distributor) will reduce the number of independent distributors which will reduce market access for new brands like craft brewers, regional brewers and new imports,” said Olson.
Now that language is clearly in the bill, as is language (new as of Amendment 1) directing the Commission to follow the Act to a T in the future (emphasis added).
“The General Assembly hereby restates that it is the policy of this State that the primary purpose of this Act is to protect the health, safety, and welfare of this State through the sound and careful control and regulation of the manufacture, distribution, and sale of alcoholic liquor through a 3-tier regulatory system. To ensure and maintain a 3-tier regulatory system, the General Assembly finds that it is the obligation and duty of the State Commission to construe the provisions of this Act in a manner that conforms to State policy and this Act’s primary purpose as articulated in this Section and to exercise its statutory authority in a manner consistent with that purpose whether or not the provisions of this Act are unambiguous or capable of one or more reasonable constructions.”
The legislation goes on to outline that a brewer may not own a distributor and a distributor cannot own a brewer, save for no more than a 5% stake.
The bill also lays out a timeline to force a brewer who does own a distributor do divest its ownership interest.
“The General Assembly further finds that it is necessary to have the State Commission undertake an expedited investigation, in accordance with procedural due process, to determine whether any existing manufacturer of beer described in paragraph (19) of subsection (a) of Section 6-2 or any existing distributor or importing distributor described in paragraph (20) of subsection (a) of Section 6-2 owns a prohibited ownership interest, and an orderly process by which an existing manufacturer of beer, distributor, or importing distributor may divest itself of or sever the prohibited ownership interest by no later than January 1, 2015.”
All roads lead to this legislation forcing AB InBev to divest its ownership interest in City Beverage, barring any sort of court action.
The amendment was filed on HB 2606, which has more than enough sponsors and co-sponsors to ensure passage out of the Illinois House. A similar bill was also filed in the Senate, but has not been amended.
This likely signals that the House bill will be the bill to track moving forward.