Permits brewers with a certain annual volume and with a certain percentage of sales to terminate an agreement with a beer wholesaler without having good cause; requires payment of fair market value of the applicable distribution rights lost; allows for the arbitration panel to review the fair market value; sets forth definitions.
Ayes (55): Adams, Addabbo, Alesi, Avella, Ball, Bonacic, Breslin, Carlucci, DeFrancisco, Diaz, Duane, Farley, Flanagan, Fuschillo, Gallivan, Griffo, Grisanti, Hannon, Hassell-Thomps, Johnson, Kennedy, Klein, Krueger, Lanza, Larkin, LaValle, Libous, Little, Marcellino, Martins, Maziarz, McDonald, Montgomery, Nozzolio, O'Mara, Oppenheimer, Parker, Peralta, Perkins, Ranzenhofer, Ritchie, Rivera, Robach, Saland, Savino, Serrano, Seward, Skelos, Smith, Squadron, Stavisky, Stewart-Cousin, Valesky, Young, Zeldin
Nays (5): Dilan, Espaillat, Gianaris, Golden, Sampson
Excused (1): Huntley
TITLE OF BILL: An act to amend the alcoholic beverage control law, in relation to agreements between small brewers and beer wholesalers
PURPOSE OR GENERAL IDEA OF BILL: This bill amends the ABCL to allow small brewers whose annual volume is less than 300,000 barrels of beer and whose sales to a wholesaler are (3%) or less of a multi-brand beer wholesaler's annual business, the right to terminate an agreement providing they pay the wholesaler fair compensation, except when the termination is for "good cause" as provided in Section 55-c of the ABCL.
SUMMARY OF SPECIFIC PROVISIONS: Section one of this bill amends Section 55-c of the ABCL by adding a new subdivision 4-c. The bill defines small brewer in terms of barrelage and share of a wholesaler's business (as above) and provides for ending an agreement with a beer wholesaler subject to certain terms relating to the payment of fair compensation to the beer wholesaler for the transfer of the small brewers' brands. Additionally, the bill gives the beer wholesaler the right to submit to binding arbitration regarding "fair market value" and requires the small brewer to pay all arbitration costs if the "value" is not a "good faith" estimate. The bill provides for a prospective effective date of January 1, 2012, to allow both beer wholesalers and small brewer suppliers a 6 month period to work out any concerns they may have prior to the act's effective date.
JUSTIFICATION: The Beer Franchise Law passed in 1996 and was amended in 2001 with the purpose of protecting beer wholesalers which were smaller local and often family owned businesses from arbitrary termination by large multinational breweries and ensure if they did agree to sell their distribution rights they would receive fair compensation. Over the period this law has been in existence much has changed in the brewing industry. There has been significant consolidation in the beer wholesaler industry as a result of the law by the major multinational breweries. As a result New York wholesalers have diminished in number from 112 in 1996 to less than 60 today and those wholesalers that remain in business have considerable resources and have gotten much bigger. At the same time the number of smaller independent breweries in New York State has grown tremendously from less than 20 in the early 90's to 63 today. Today the opportunity for growth for many small brewers is restricted because of contracts that require them to exclusively do business with a particular wholesaler that is not actively supporting or selling their brand. Yet they are not able to terminate the contract and appoint another wholesaler except through a lengthy and potentially costly legal process that has little assurance of success. Present remedies under the law do not work for small brewers. If the wholesaler does not want to be terminated they threaten expensive legal action knowing that the smaller brewer does not have the resources to afford the legal battle, thus many small
brewers have to live with being "locked in" with relationships that are not working. It was never the intention of the Law to be used by the wholesaler to lock small breweries into a relationship. Thus this bill provides a fair and appropriate amendment to the Beer Franchise Law. It does not disrupt the workforce; jobs will not be lost. On the contrary it will allow small brewers to accelerate the growth they are already achieving and thereby create more good job opportunities in New York. The bill allows the wholesaler, if they believe they have not been fairly compensated, to dispute the "fair market value" paid by the brewer through binding arbitration. By requiring payment of fair market value and arbitration, this bill will promote a competitive and efficient system of distribution of the small brewer's brands, and make such brands more available in New York State, creating jobs and helping a small but growing industry.
PRIOR LEGISLATIVE HISTORY: 2009: A.488-B - Passed Assembly 2008: A.9055-B/S.6101 - Veto Memo 92
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: The first of January next succeeding the date on which it shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 1315 2011-2012 Regular Sessions IN SENATE January 6, 2011 ___________Introduced by Sen. GRIFFO -- read twice and ordered printed, and when printed to be committed to the Committee on Commerce, Economic Devel- opment and Small Business AN ACT to amend the alcoholic beverage control law, in relation to agreements between small brewers and beer wholesalers THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subdivision 4 of section 55-c of the alcoholic beverage control law is amended by adding a new paragraph (c) to read as follows: (C) NOTWITHSTANDING ANY PROVISION OF THIS SUBDIVISION TO THE CONTRARY: (I) ANY BREWER WITH AN ANNUAL VOLUME AS DEFINED IN SUBPARAGRAPH (IV) OF THIS PARAGRAPH OF LESS THAN THREE HUNDRED THOUSAND BARRELS OF BEER AND WHOSE SALES TO AN AFFECTED BEER WHOLESALER ARE THREE PERCENT OR LESS OF THE BEER WHOLESALER'S TOTAL ANNUAL BRAND SALES MEASURED IN CASE EQUIVALENT SALES OF TWENTY-FOUR--TWELVE OUNCE UNITS MAY TERMINATE AN AGREEMENT WITH ANY BEER WHOLESALER WITHOUT HAVING GOOD CAUSE FOR SUCH TERMINATION, AS DEFINED IN PARAGRAPH (E) OF SUBDIVISION TWO OF THIS SECTION, AND SHALL NOT BE SUBJECT TO LIABILITY TO THE BEER WHOLESALER UNDER PARAGRAPH (B) OF SUBDIVISION SEVEN OF THIS SECTION PROVIDED THAT, PRIOR TO THE EFFECTIVE DATE OF THE TERMINATION, THE BREWER PAYS THE BEER WHOLESALER THE FAIR MARKET VALUE OF THE DISTRIBUTION RIGHTS WHICH WILL BE LOST OR DIMINISHED BY REASON OF THE TERMINATION. IF SUCH BREWER AND BEER WHOLESALER CANNOT MUTUALLY AGREE TO THE FAIR MARKET VALUE OF THE APPLICABLE DISTRIBUTION RIGHTS LOST OR DIMINISHED BY REASON OF THE TERMINATION, THEN THE BREWER SHALL PAY THE BEER WHOLESALER A GOOD FAITH ESTIMATE OF THE FAIR MARKET VALUE OF THE APPLICABLE DISTRIBUTION RIGHTS. (II) IF THE BEER WHOLESALER BEING TERMINATED UNDER SUBPARAGRAPH (I) OF THIS PARAGRAPH DISPUTES THAT THE PAYMENT MADE BY THE BREWER WAS LESS THAN THE FAIR MARKET VALUE OF THE DISTRIBUTION RIGHTS, THEN THE BEER WHOLESALER MAY WITHIN FORTY-FIVE DAYS OF TERMINATION SUBMIT THE QUESTION OF FAIR MARKET VALUE OF THE APPLICABLE DISTRIBUTION RIGHTS LOST OREXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD01630-01-1 S. 1315 2
DIMINISHED BY REASON OF THE TERMINATION TO BINDING ARBITRATION BEFORE A PANEL OF THREE NEUTRAL ARBITRATORS APPOINTED IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION, WHICH PANEL SHALL DETERMINE BY MAJORITY DECISION WHETHER THE BREWER'S PAYMENT MEETS THE REQUIREMENTS OF SUBPARAGRAPH (I) OF THIS PARAGRAPH. IF THE ARBITRATION PANEL RULES THAT THE PAYMENT MADE BY THE BREWER TO THE BEER WHOLESALER UPON TERMINATION WAS LESS THAN THE FAIR MARKET VALUE OF DISTRIBUTION RIGHTS LOST OR DIMINISHED BY REASON OF THE TERMINATION, THEN THE BREWER MUST PAY THE BEER WHOLESALER THE DIFFERENCE BETWEEN THE PAYMENT MADE TO THE BEER WHOLESALER AND THE DETERMINED FAIR MARKET VALUE PLUS INTEREST. IF THE ARBITRATION PANEL RULES THAT THE PAYMENT MADE BY THE BREWER TO THE BEER WHOLESALER UPON TERMINATION WAS MORE THAN THE FAIR MARKET VALUE OF DISTRIBUTION RIGHTS LOST OR DIMINISHED BY REASON OF THE TERMINATION, THEN THE BEER WHOLESALER MUST PAY THE BREWER THE DIFFERENCE BETWEEN THE PAYMENT MADE TO THE BEER WHOLESALER AND THE DETERMINED FAIR MARKET VALUE PLUS INTEREST. ALL ARBITRATION FEES AND EXPENSES SHALL BE EQUALLY DIVIDED AMONG THE PARTIES TO THE ARBITRATION EXCEPT IF THE ARBITRATION PANEL DETERMINES THAT THE BREWER'S PAYMENT UPON TERMINATION WAS NOT A GOOD FAITH ESTIMATE OF THE FAIR MARKET VALUE, THEN THE PANEL MAY AWARD UP TO ONE HUNDRED PERCENT OF THE ARBITRATION COSTS TO THE BREWER. (III) NOTWITHSTANDING ANY PROVISION OF THIS SECTION TO THE CONTRARY, FOR PURPOSES OF THIS PARAGRAPH, THE TERM "BREWER" SHALL MEAN ANY PERSON OR ENTITY ENGAGED PRIMARILY IN BUSINESS AS A BREWER OR MANUFACTURER OF BEER. (IV) FOR THE PURPOSE OF THIS PARAGRAPH, THE TERM "ANNUAL VOLUME" SHALL MEAN: (1) THE AGGREGATE NUMBER OF BARRELS OF BEER, UNDER TRADEMARKS OWNED BY THAT BREWERY AND BREWED, DIRECTLY OR INDIRECTLY, BY OR ON BEHALF OF THE BREWER DURING THE MEASURING PERIOD, ON A WORLDWIDE BASIS, PLUS (2) THE AGGREGATE NUMBER OF BARRELS OF BEER BREWED, DURING THE MEASURING PERIOD, DIRECTLY OR INDIRECTLY, BY OR ON BEHALF OF ANY PERSON OR ENTITY WHICH, AT ANY TIME DURING THE MEASURING PERIOD, CONTROLLED, WAS CONTROLLED BY OR WAS UNDER COMMON CONTROL WITH THE BREWER, ON A WORLDWIDE BASIS. ANNUAL VOLUME SHALL NOT INCLUDE BEER BREWED UNDER CONTRACT FOR ANY OTHER BREWER. THERE SHALL BE NO DOUBLE COUNTING OF THE SAME BARRELS OF BEER UNDER CLAUSES ONE AND TWO OF THIS SUBPARAGRAPH. (V) FOR THE PURPOSES OF THIS PARAGRAPH, THE TERM "MEASURING PERIOD" SHALL MEAN THE TWELVE MONTH CALENDAR PERIOD IMMEDIATELY PRECEDING THE DATE NOTICE OF TERMINATION, AS REQUIRED UNDER SUBPARAGRAPH (I) OF THIS PARAGRAPH, WAS GIVEN BY A BREWER TO THE BEER WHOLESALER. S 2. This act shall take effect on the first of January next succeed- ing the date on which it shall have become a law.