Bill Summary – FastDemocracy

Unofficial Draft Copy
****                                              As of: 11/18/2024, 11:41:20
69th Legislature 2025                            Drafter: Jameson Walker, ****                                     LC 0201
                                                   **** BILL NO. ****
                                                INTRODUCED BY ****
                                BY REQUEST OF THE DEPARTMENT OF REVENUE
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  A BILL FOR AN ACT ENTITLED: “AN ACT GENERALLY REVISING ALCOHOL LAW RELATED TO
  WHOLESALERS; CREATING THE BEER AND TABLE WINE DISTRIBUTION ACT; AMENDING SECTIONS
  16-1-106, 16-1-303, 16-1-406, 16-1-411, 16-3-101, 16-3-104, 16-3-212, 16-3-214, 16-3-241, 16-3-242, 16-3-
  243, 16-3-244, 16-3-301, 16-3-316, 16-3-321, 16-3-402, 16-3-406, 16-3-411, 16-4-101, 16-4-106, 16-4-107, 16-
  4-113, 16-4-313, 16-4-314, 16-4-401, 16-4-406, 16-4-407, 16-4-501, AND 16-4-906, MCA; REPEALING
  SECTIONS 16-3-217, 16-3-218, 16-3-219, 16-3-220, 16-3-221, 16-3-222, 16-3-223, 16-3-224, 16-3-225, 16-3-
  226, 16-3-230, 16-3-231, 16-3-232, 16-3-233, 16-3-234, 16-3-401, 16-3-403, 16-3-404, 16-3-415, 16-3-416, 16-
  3-417, 16-3-418, 16-3-419, 16-3-420, AND 16-3-421, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE
  DATE.”
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  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
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           NEW SECTION. Section 1.        Short title -- public policy -- purpose. (1) This part may be cited as the
  “Beer and Table Wine Distribution Act”.
           (2)     The public policy of the state of Montana is to maintain a system to provide for, regulate, and
  control the acquisition, importation, and distribution of beer and table wine.
           (3)     The legislature finds and declares that the purposes of this part is to assure continued
  interbrand competition in beer and table wine sales through competing independent distributors and to assure
  breweries and wineries the ability to protect the reputations of their products through quality control
  arrangements.
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           NEW SECTION. Section 2.        Definitions. As used in this part, unless the context requires otherwise,
  the following definitions apply:
           (1)     "Agreement of distributorship" means a contract, agreement, commercial relationship, license,
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69th Legislature 2025                              Drafter: Jameson Walker, ****                                      LC 0201
  or other arrangement for a definite or an indefinite period of time between a supplier and a distributor that
  provides for the sale of beer, table wine, or sacramental wine by the supplier to the distributor.
          (2)      "Distribute" means to deliver beer, table wine, or sacramental wine to a retailer’s premises
  licensed to sell beer, table wine, or sacramental wine as well as an alternate alcoholic beverage storage facility
  as allowed in 16-4-213(8), 16-3-311(6), and [section 16(7)] and to deliver table wine to an agency liquor store.
          (3)      "Good cause" means failure by a distributor to comply with reasonable business requirements
  imposed, or sought to be imposed, by a supplier under the terms of an agreement of distributorship if the
  requirements are imposed on other similarly situated distributors either by the terms of their agreements or in
  the manner of their enforcement by the supplier.
          (4)      "Person" means a natural person, corporation, partnership, trust, agency, or other entity and
  includes individual officers, directors, or other persons in active control of the activities of the entity.
          (5)      "Supplier" means a brewery, winery or an importer of beer, table wines, or sacramental wines
  that enters into or is a party to an agreement of distributorship with a distributor.
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          NEW SECTION. Section 3.          Distributor's license. (1) Any person desiring to sell and distribute beer,
  table wine, or sacramental wine at wholesale to retailers under the provisions of this code shall apply to the
  department for a license to do so and shall submit with the application the initial license fee of $400. The
  department may issue licenses to qualified applicants in accordance with the provisions of this code.
          (2)      All distributors' licenses issued in any year expire on June 30 of that year at midnight.
          (3)      A license fee may not be imposed upon distributors by a municipality or any other political
  subdivision of the state.
          (4)      The license must be at all times prominently displayed in the distributor’s licensed premises.
          (5)      An applicant must have a fixed place of business, sufficient capital, the facilities, storehouse,
  and receiving house or warehouse for the receiving, storage, handling, and moving of beer, table wine, or
  sacramental wine in large and jobbing quantities for distribution and sale in original packages to other licensed
  distributors or licensed retailers. Each distributor is entitled to only one license, which must be issued for the
  distributor's licensed premises in Montana. A license may be issued for each subwarehouse operated by the
  distributor. The license must at all times be prominently displayed at the subwarehouse.
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                                                    Unofficial Draft Copy
****                                                As of: 11/18/2024, 11:41:20
69th Legislature 2025                              Drafter: Jameson Walker, ****                                     LC 0201
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          NEW SECTION. Section 4.          Distributor Financial interest in retailers prohibited. A distributor may
  not advance or loan money to or furnish money for or pay for or on behalf of any retailer any license or tax that
  may be required to be paid for any retailer. A distributor may not be financially interested, either directly or
  indirectly, in the conduct or operation of the business of a retailer. A distributor is considered to have a financial
  interest within the meaning of this section if:
          (1)      the distributor owns or holds any interest in or a lien or mortgage against the retailer or the
  retailer's premises;
          (2)      the distributor is under any contract with a retailer concerning future purchases or the sale of
  merchandise by one from or to the other; or
          (3)      any retailer holds an interest, as a stockholder or otherwise, in the business of the distributor.
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          NEW SECTION. Section 5.          Beer agreement of distributorship provisions. (1) A brewery or beer
  importer and distributor must have a written agreement of distributorship that provides for purchase of the
  brewery or beer importer’s products from the brewery or beer importer by the distributor.
          (2)      A beer agreement of distributorship must provide:
          (a)      that the brewer or beer importer or any officer, agent, or representative of any brewer or beer
  importer and the distributor involved mutually shall determine the size or extent of the area in which the
  distributor may sell or distribute the products of the brewer or beer importer to the retail licensees. The territory
  must be the territory agreed upon between the distributor and brewer or the distributor and beer importer and
  may not be changed without the mutual consent of both the distributor and brewer or the distributor and beer
  importer.
          (b)      the agreed-upon brands of the brewer or beer importer to be sold by the distributor;
          (c)      that the brewer or beer importer recognizes that the distributor is free to manage the
  distributor's business in the manner that the distributor considers best and that this prerogative vests in the
  distributor the exclusive right to establish selling prices, to select the brands that the distributor wishes to
  handle, and to determine the effort and resources that the distributor will exert to develop and promote the sale
  of the brewer's or beer importer's products handled by the distributor;
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           (d)      a procedure for the review of alleged distributor deficiencies asserted by the brewer or beer
  importer to constitute good cause as provided in [section 9], including the submission in writing to the distributor
  by the brewer or beer importer of the deficiencies, if the deficiencies are susceptible of correction and if the
  distributor desires to correct the deficiencies, and that a reasonable period of time must be given the distributor
  for rectification of the deficiencies prior to any notice of intent to terminate;
           (e)      a termination clause providing that the brewer or beer importer shall deliver, in writing, to the
  distributor a 60-day notice of intent to terminate the agreement, contract, or franchise;
           (f)      that all agreements between a brewer and a distributor are interpreted and governed by the
  laws of Montana and that those laws must be liberally construed to effectuate the remedial purpose of the
  protections of this part;
           (g)      that in any dispute resulting in litigation between a brewer or a beer importer and a distributor,
  the litigation must occur in a Montana court, either federal or state, unless that forum would create an
  unreasonable burden on any party, as determined by the court in which the litigation is commenced; and
           (h)      that all agreements between a brewer or a beer importer and a distributor must recognize the
  constitutional right to a jury trial as set forth in Article II, section 26, of the Montana constitution.
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           NEW SECTION. Section 6.          Table wine agreement of distributorship provisions. (1) A winery or
  wine importer and distributor must have a written agreement of distributorship that provides for purchase of the
  winery or wine importer’s products from the winery or wine importer by the distributor.
           (2)      A table wine agreement of distributorship must provide that:
           (a)      a winery or wine importer shall notify a distributor in writing at least 60 days prior to termination
  of an agreement of distributorship unless a termination without notice is permitted as provided in [section 7].
  The written notice must state the reasons for termination. Notice of termination is void if within 60 days of the
  notice, the distributor rectifies the deficiency stated as the reason for termination and if the deficiency was not
  stated as reason for termination in a notice previously voided under the provisions of this subsection.
           (b)      a winery or wine importer may not unreasonably withhold or delay approval of a sale or transfer
  of the ownership, management, or control of a distributorship. However, a distributor shall give a winery or wine
  importer no less than 60 days' prior written notice of any material change in ownership, management, or
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69th Legislature 2025                                Drafter: Jameson Walker, ****                                     LC 0201
  control.
             (3)      If a winery or wine importer terminates an agreement of distributorship under the provisions of
  subsection (2)(a), the distributor subject to the termination is entitled to compensation for the laid-in cost of
  inventory. In the event of any termination of the agreement by the winery or wine importer other than
  termination for good cause or for any reason set forth in [section 7(3)], the distributor is entitled to
  compensation for the laid-in cost of inventory and to liquidated damages based on the sales of the brand or
  brands involved, as may be provided in the agreement. If the winery or wine importer and the distributor are
  unable to agree on the amount of liquidated damages, the amount of liquidated damages must be determined
  by an arbitrator appointed under subsection (5) of this section.
             (4)      If undertaken in good faith by a winery or wine importer, a winery or wine importer may
  terminate an agreement of distributorship for a legitimate business reason not within the definition of good
  cause if an arbitrator appointed by the department finds, after hearing the winery or wine importer and the
  distributor, that the termination is in the best interest of the brands concerned. Arbitration under this section
  must be conducted under the provisions of Title 27, chapter 5.
             (5)   All agreements of distributorship are interpreted and governed by the laws of Montana.
             (6)   In any dispute resulting in litigation between a winery or wine importer and a distributor, the
  litigation must occur in a Montana court, federal or state, unless that forum would create an unreasonable
  burden on any party, as determined by the court in which the litigation is commenced.
             (7)   Agreements between a winery or wine importer and a distributor must recognize the constitutional
  right to a jury trial as set forth in Article II, section 26, of the Montana constitution.
             (8)   A provision in an agreement of distributorship that is inconsistent with the requirements of this
  section is void.
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             NEW SECTION. Section 7.         Winery and wine importer agreement of distributorship provisions.
  (1)        An agreement of distributorship for a winery or wine importer’s product must provide that a distributor
  shall:
             (a)      maintain the financial and competitive capability to efficiently and effectively distribute a winery
  or wine importer's products;
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69th Legislature 2025                              Drafter: Jameson Walker, ****                                     LC 0201
           (b)      maintain the quality and integrity of a winery or wine importer's products in a manner set forth
  by the winery or wine importer;
           (c)      exert the distributor's best efforts to sell the winery or wine importer’s brands;
           (d)      merchandise the products in retail stores as agreed between the distributor and the winery or
  wine importer; and
           (e)      give a winery or wine importer not less than 60 days' written notice of the distributor's intent to
  terminate an agreement of distributorship.
           (2)      As provided in [section 6], a winery or wine importer may terminate an agreement of
  distributorship based on a deficiency or other good cause by giving 60 days' prior written notice to the
  distributor.
           (3)      A winery or wine importer may terminate an agreement of distributorship immediately and
  without notice if the reason for the termination is insolvency, assignment for the benefit of creditors, bankruptcy,
  or revocation or suspension for more than 14 days of a license to operate that is required by the state or the
  federal government.
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           NEW SECTION. Section 8.         Table wine distributor. (1) (a) A winery or wine importer may appoint
  one or more distributors to distribute its table wines in a specified territory. If the winery or wine importer
  appoints two or more distributors to sell its table wines in the same or overlapping territories, the winery or wine
  importer shall offer the same prices, delivery, terms, and promotional support to each distributor.
           (b)      A winery or wine importer may not appoint more than one distributor to distribute its hard cider
  in a specified territory.
           (c)      For the purposes of this subsection (1), "table wine" has the meaning assigned in 16-1-106, but
  does not include hard cider.
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           NEW SECTION. Section 9.         Distributors' service obligations for beer -- applicability. (1) A
  distributor appointed to distribute a brand of beer within a territory specified by agreement pursuant to [section
  5] shall call on and offer that brand to at least 75% of the retailers within that territory at least every 3 weeks.
  However, if the brand of beer for which the distributor is appointed is a product of a brewer or beer importer
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69th Legislature 2025                                 Drafter: Jameson Walker, ****                                    LC 0201
  whose products are not generally available, the distributor shall, at least every 3 weeks, call on and offer that
  brand to as man