HOUSE DOCKET, NO. 2759        FILED ON: 1/21/2011

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 1897

The Commonwealth of Massachusetts

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PRESENTED BY:

Alice Hanlon Peisch

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To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:

The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:

An Act relative to small brewers.

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PETITION OF:

HOUSE DOCKET, NO. 2759        FILED ON: 1/21/2011

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 1897

The Commonwealth of Massachusetts

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In the Year Two Thousand Eleven

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An Act relative to small brewers.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
 

SECTION 1. Chapter 138 of the general laws, as appearing in the 2008 Official Edition, is hereby amended by striking out section 25E as appearing in the 2008 Official Edition, and inserting in place thereof the following section:

Section 25E. Refusal to sell brand name alcoholic beverages to wholesalers as unfair trade practice; exception for good cause; discontinuance notice and procedure.  It shall be an unfair trade practice and therefore unlawful for any manufacturer, winegrower, farmer-brewer, importer or wholesaler of any alcoholic beverages, to refuse to sell, except for good cause shown, any item having a brand name to any licensed wholesaler to whom such manufacturer, winegrower, farmerbrewer, importer or wholesaler has made regular sales of such brand item during a period of six months preceding any refusal to sell. 

Any manufacturer, importer or wholesaler shall forward a notice in writing to the wholesaler, to whom it has sold any brand item, prior to discontinuing sales to such wholesaler of such brand item and shall forward a copy of said notice to the commission.  The notice of discontinuance of sale shall be furnished by the manufacturer, importer or wholesaler to the wholesaler being discontinued at least one hundred and twenty days before the effective date of such discontinuance.  The notice shall state the specific grounds for such discontinuance.  Either party may appeal to the commission for a hearing on the notice of discontinuance and the commission shall make a determination after hearing on the issue of good cause for discontinuance.  Upon application by the wholesaler to the commission, the commission shall order the manufacturer, importer or wholesaler giving notice of refusal to sell to continue to make sales in the regular course to such wholesaler pending determination by the commission on the merits of said appeal.  The commission shall after notice to all parties and hearing, make a determination on the issue of good cause and grant such relief as may be appropriate under the circumstances.  Good cause as used herein shall be limited to the following conduct:

(a) disparagement of the product so as to impair the reputation of the brand owner or the

brand name of any product,

(b) unfair preferment in sales effort for brand items of a competitor,

(c) failure to exercise best efforts in promoting the sale of any brand item,

(d) engaging in improper or proscribed trade practices, or

(e) failure to comply with the terms of sale agreed upon between the supplier and

wholesaler.

The prior two paragraphs of this section 25E shall not apply to a “small brewer relationship,” which may be discontinued as established by contract or through the process described below.  For purposes of this paragraph, a “small brewer relationship” shall mean any relationship between a manufacturer of malt beverages licensed under this Chapter, a farmer-brewer licensed under this Chapter, or a manufacturer of malt beverages located outside of the Commonwealth that holds a certificate of compliance permitting it to sell malt beverages to wholesalers in this state (collectively such manufacturer or farmer-brewer referenced as a “supplier” below) and a wholesaler if: (i) the annual global sales of such supplier does not exceed six million barrels of malt beverages; and (ii) the sales of products to the wholesaler by the supplier do not exceed 20% of the wholesaler’s total sales in the prior calendar year preceding any refusal to sell.  In calculating a supplier’s annual global sales and sales to wholesalers, the sales of a “controlled group,” as such term is defined in 26 U.S.C. § 5051(a)(2)(B) or a successor provision, shall count as the sales of a single entity.  Any dispute concerning whether a supplier-wholesaler relationship is or is not a small brewer relationship within the meaning of this Section 25E shall be determined by final binding arbitration, which either the supplier or the wholesaler in the relationship may request within thirty (30) days of either party claiming rights under a small brewer relationship.  The arbitration shall be conducted in accordance with arbitration process established below.  Nothing in this Section 25E shall be construed to expand or diminish the rights or obligations established by contract in a small brewer relationship provided, however, that a supplier in a small brewer relationship also may elect at any time to refuse to sell to any wholesaler in accordance with the following paragraph.

To initiate a supplier’s non-contractual right to refuse to sell as established under the immediately preceding paragraph, the supplier in a small brewer relationship shall provide the wholesaler with not less than thirty (30) days written notice of the refusal to sell, which written notice shall identify the successor wholesaler(s) who will begin servicing the affected territory (the “successor wholesaler”).  Upon any refusal to sell under this paragraph of Section 25E, the successor wholesaler(s) shall compensate the affected wholesaler in an amount equal to the fair market value of the supplier’s distribution rights granted to the wholesaler in the terminated wholesaler’s territory.  Supplier’s refusal to sell may take effect following the notice period in supplier’s notice, which shall not be less than thirty (30) days, regardless of whether the successor wholesaler has compensated the affected wholesaler. If the successor wholesaler(s) and the affected wholesaler can not agree to the fair market value compensation due to the affected wholesaler within the thirty (30) days following the supplier’s notice of its refusal to sell, either the affected wholesaler or any successor wholesaler may request that the amount of compensation be determined by final binding arbitration conducted in accordance with the arbitration process established below.

Arbitrations under this Section 25E shall be conducted before a single impartial arbitrator selected by the parties or, if they cannot agree to an arbitrator within thirty (30) days, selected by the nearest office of the American Arbitration Association or its successor organization.  The commercial arbitration rules of the American Arbitration Association or its successor organization shall govern the arbitration.  The arbitration proceeding shall conclude not later than ninety (90) days after the date of the notice of intent to arbitrate is transmitted to the other party, unless the parties agree to extend the time by mutual agreement or the arbitrator extends the time for good cause shown.  An arbitrator’s award in any arbitration held pursuant to the immediately preceding  paragraph with regard to fair market value shall be monetary only and shall not enjoin or compel conduct.  Any arbitration held pursuant to this Section 25E shall be in lieu of all other remedies and procedures.  The costs of the arbitrator and any other costs of the arbitration shall be equally divided by the parties engaged in the arbitration.  Each party shall bear all other expenses related to the arbitration, provided that the arbitrator may award the prevailing party in the dispute as to whether a small brewer relationship exists its costs and reasonable attorney’s fees for good cause shown.  The arbitrator shall render a written decision not later than thirty (30) days after the conclusion of the arbitration proceeding, unless the parties agree to extend the time by mutual agreement or the arbitrator extends the time for good cause shown.  The arbitrator’s decision shall be final and binding and may be enforced by commencing a civil action in any court of competent jurisdiction.  Any party duly notified of an arbitration involving its rights that fails to participate in an arbitration proceeding held pursuant to this paragraph waives all rights it would have had in the arbitration and is considered to have consented to the determination of the arbitrator."

SECTION 2.  The legislature intends that this Act apply to all small brewer relationships existing as of its effective date, and all agreements and relationships entered into after its effective date.

SECTION 3.  This Act shall take effect on the date of enactment.