Category archives for “Wholesalers”

New California ABC Advisory on Merchandising Services by Suppliers

January 07, 2015

In December 2014, the California ABC posted a new Industry Advisory about merchandising services. Free services provided by suppliers to retail licensees, such as stocking shelves, pricing inventory, rotating stock, etc., are prohibited things-of-value under California Business & Professions Code sections 25500 and 25502. However, a number of permitted exceptions are separately provided for in Section 25503.2. The Advisory was posted in response to inquiries and complaints about the scope of permissible activity. When ABC receives multiple complaints about impermissible conduct, investigations and license accusations may well follow, so it would be prudent for suppliers to review the scope of permissible merchandising activities.

Permitted activity varies depending on the type of retailer and the products involved so we created a simple chart below to help keep it straight.

Note that in all cases, any merchandising activities can only be done with the retailer’s permission. In no case can a supplier move the inventory of another supplier, except for “incidental touching” to access the space allocated to the licensee providing the merchandising service.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2015 · All Rights Reserved ·


Arizona Issues Three Wholesaler Trade Practice Advisories

December 06, 2012

The Arizona Department of Liquor Licenses and Control (“DLLC”) issued three Industry Advisories in the last month addressing wholesaler industry practices. The advisories come in the wake of a September 19, 2012wholesaler licensee meeting, which “was held so that laws, rules and industry practices would be reviewed to ensure an open and competitive market in Arizona where no advantage is given to one liquor-licensed business over another.”

On November 6, 2012, the DLLC issued the first advisory, Wholesale Licensee Industry Practices, which provides clarification on numerous trade practices. The advisory is quite detailed, but key points include:

- Channel pricing can be for on-premise or off-premise, but no sub-categories of liquor pricing are permissible.

- Cumulative quantity discounts are prohibited.

- Promotional item limit is $500 per wholesaler per retailer, not per brand or per producer represented by a wholesaler.

- Items useful to the retailer in the conduct of business cannot be provided to retailers under the $500 allowance, even if rendered unusable (e.g. patio umbrellas).

- Third party promotional companies can’t be used to provide items to retailers that the licensee cannot provide directly.

- The advisory also addresses shelf space, product displays, buy backs, signage, and equipment.

The DLLC’s November 30, 2012 advisory, Removal of Unauthorized Signs, sets a deadline of February 1, 2013 for wholesalers to remove unauthorized signs from retail premises. The advisory provides that an authorized sign is one that:

- The wholesale licensee LENDS to the retailer,

- Has a value that does not exceed $400,

- Has no utilitarian value; and,

- Doesn’t mention a particular retailer (e.g. Joe’s Bar) or directional information (e.g. Enter Here).

The DLLC’s most recent advisory, the December 4th Wholesale Licensee Industry Practices #2, addresses three wholesaler practices not covered in the earlier advisories. Specifically,

- Glassware: may be provided to on-sale retailers as part of $500 promotional item allowance and must be supplier-branded.

- Energy drinks may only be sold to retailers at or above the wholesaler’s cost, and may not be given to retailers.

- Inventory for sampling events must be supplied by an off-sale retail licensee for a sampling conducted by that retail licensee, and must be provided by a wholesaler or producer for a sampling conducted by a producer or wholesaler at an off-sale retailer.

Given the breadth of the guidance contained in the advisories, the DLLC will likely be on the lookout for compliance in the coming months.


New North Carolina Beer Franchise Act Now Effective

June 15, 2012

Revisions to the North Carolina malt beverages franchise act became effective yesterday when the Governor signed Senate Bill 745. Last year’s similar bill was stalled after brewers took issues with some of the terms. Senate Bill 745 is a compromise bill that passed the legislature with wide margins. Among the changes, the new law explicitly states that the meaning of “good cause” for termination purposes cannot be modified from the definition set forth in North Carolina law; however, there is a provision in the law that allows brewers that obtain self-distribution approval from the North Carolina Alcoholic Beverage Control Commission to terminate a wholesaler franchise relationship without good cause if “fair market value for the distribution rights for the affected brand” is paid to the wholesaler. Fair market value is determined not as an average price, but must be “highest dollar amount at which a seller would be willing to sell and a buyer willing to buy.” See Senate Bill 745, § 18B-1305(a1). The bill also revises what constitutes good cause, what factors a supplier may consider when approving an assignment, transfer or merger of a wholesaler, treatment of brand extensions, and prohibited acts by suppliers.

The new law also introduces a mandatory mediation requirement. If a dispute arises among a supplier and a wholesaler that is likely to lead to litigation, then the North Carolina Alcoholic Beverage Control Commission can require the parties to submit to mediation in an effort to resolve the dispute. This requirement may arise solely by the initiative of the Commission, or either party to the dispute may request that the Commission mandate the mediation. See Senate Bill 745, § 18B-1309. This new provision makes North Carolina one of the few states with laws on mediation for resolution of conflicts between beer suppliers and wholesalers. California and Maryland are the only other two states that discuss mediation in their beer franchise acts. See Cal. Bus & Prof. Code § 25000.2; Md. Code Ann. § 21-103.

It remains imperative for suppliers to review a state’s laws and regulations when entering into a distribution agreement and also to give oneself enough time for review and negotiation of the agreement, especially in light of the fact that states like North Carolina are further restricting the ability of suppliers and wholesalers to contract around franchise act laws. For more information about distribution agreements and franchise acts, please see our prior post available here or feel free to contact an attorney at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·


Gallo Case Sheds Light on Interpretation of Distribution Rights in North Carolina

January 18, 2012

The Fourth Circuit of the United States Court of Appeals recently decided that North Carolina’s former Wine Distribution Act did not require that a wholesaler used by an importer of foreign wine must be used by a new importer of that wine. Country Vintner of N.C., LLC v. E & J Gallo Winery, Inc., No. 10-2289 (4th Cir., January 6, 2012). Wine from Bodegas Esmeralda, an Argentinean winery, was being imported into the United States by Billington Imports, which in turn used Country Vintner of North Carolina as its exclusive North Carolina wholesaler for the wine. Bodegas Esmeralda then switched its importer to E & J Gallo. After the switch Gallo began using its own wholesaler network, as opposed to Country Vintner. The Fourth Circuit upheld the district court’s conclusion that there had never been a commercial relationship between Gallo and Country Vintner and therefore, Country Vintner had no protections from North Carolina’s Wine Distribution Act. The protections Country Vintner had under the act with Billington Imports were no longer relevant due to the fact that Billington ceased to import the wine.

In 2010, North Carolina amended its Wine Distribution Act to provide a continuation of wholesaler rights upon a succession to importer rights; however, that amendment only applies prospectively. N.C. Gen. Stat. § 18B-1213. Thus, in importer-wholesaler relationships entered into after the 2010 amendment in North Carolina, the holding of this case will not apply. For relationships entered into prior to the change, however, the case provides instructive insight into wholesaler continuation rights in a change of importer situation.

If you’d like to discuss specific distribution issues, please feel free to contact any of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·


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