Chapter 100 of the statutes, which addresses marketing and trade practices, specifies minimum markups that apply to the sale of cigarettes. The statutes require cigarette wholesalers to mark up the price of cigarettes by 3% of the cost of the merchandise to the wholesaler, in the absence of proof of a lesser cost of doing business, when selling to a retailer. The "cost to the wholesaler," on which the markup is determined, is based on the invoice cost of the merchandise to the wholesaler, adjusted as follows: (a) certain trade discounts are to be deducted from the wholesaler costs; and (b) excise taxes previously imposed are to be included in the wholesaler costs. In a similar manner, retailers are required to mark up the price of cigarettes to the consumer by 6% of the cost to the retailer, excluding specified discounts and including excise taxes.
Chapter 100 defines multiple retailers as wholesalers. A sale at wholesale between wholesalers is exempt from the wholesaler mark-up requirement. Therefore, distributors may sell cigarettes to multiple retailers and any other wholesaler without charging the minimum 3% wholesaler markup. Section 100.30 (2)(f) requires that, in cases in which a merchant acts as both a wholesaler and a retailer, the merchant must add both the wholesaler and retailer markups to the retail sales price. However, unlike the wholesaler markup from a distributor to an individual retail store, which is applied after deducting certain trade discounts, the statutes specify that the wholesaler markup for a multiple retailer is to be determined disregarding any manufacturer's discounts and any discounts related to cigarette tax stamp payments.
These provisions would eliminate the cigarette multiple retailer permit and all statutory references to it. The individual retail stores currently operating under a multiple retailer permit would no longer be able to purchase cigarettes without paying a 3% wholesaler markup.
Assembly/Legislature: Delete provision.
2. LIQUOR LICENSE FOR A COLISEUM SUITE
Joint Finance/Legislature: Provide that a "Class B" license for retail sales of intoxicating liquor authorizes a coliseum or a business servicing a coliseum suite as a concessionaire to furnish a coliseum suite holder with a selection of intoxicating liquor in a coliseum suite that is not part of the "Class B" premises. Define a "coliseum" as a multipurpose facility designated principally for sports events, with a capacity of 18,000 or more. Specify that the conditions that apply to the furnishing of intoxicating liquor to a hotel guest in a guest room that is not part of the "Class B" premises would apply in the case of a coliseum and a coliseum suite, with the following exceptions: (a) provide that a coliseum suite could be locked in lieu of providing a locked storage place to store the liquor within the suite; (b) exclude a coliseum from the requirement for hotels that a key be provided (to a hotel guest) to the locked storage place and that a liquor price list be prominently displayed; and (c) specify that a coliseum suite holder may pay for the liquor in accordance with the terms of the agreement with the owner of the coliseum suite. Specify similar provisions with respect to a Class "B" license for fermented malt beverages.
[Act 9 Sections: 2165e and 2165j]
3. "CLASS C" LICENSE TO SELL WINE
Assembly/Legislature: Provide that a restaurant may obtain a "Class C" license for the retail sale of wine for consumption on the premises where sold whether or not there is a "Class B" license for the sale of liquor and wine available in the community. Specify that a "Class C" license could be issued if: (a) the sale of alcohol beverages accounts for less than 50% of the restaurant's gross receipts; and (b) the restaurant does not have a barroom or has a barroom in which wine is the only intoxicating liquor sold.
Under current law, a municipality may issue a restaurant a "Class C" wine license under the following conditions: (a) the sale of alcohol beverages accounts for less than 50% of gross receipts; (b) the restaurant does not have a barroom; and (c) there is not a "Class B" liquor license available in the municipality. These provisions would authorize a restaurant to obtain a "Class C" license even if a "Class B" license is available and even if the restaurant has a barroom (as long as the only intoxicating liquor sold in the barroom is wine).
[Act 9 Section: 2165L]
4. RESTAURANT-WINERY PERMIT
Assembly: Create a restaurant-winery permit authorizing the retail sale of wine manufactured on the premises for consumption on the premises where sold or in an original unopened package or container for consumption off the premises where sold. Specify that the permit, to be issued by the Department of Revenue, may be issued only for a restaurant in which the sale of alcohol beverages accounts for less than 50% of gross receipts and that manufactures less than 2,500 gallons of wine per year.
Conference Committee/Legislature: Delete provision.
5. "CLASS B" LIQUOR LICENSE FOR A HOTEL
Assembly/Legislature: Provide that a municipality that has issued its quota of "Class B" licenses for the sale of intoxicating liquor may issue a "Class B" license to a hotel under the following conditions: (a) the hotel has 50 or more rooms of sleeping accommodations; and (b) the hotel has either an attached restaurant with a seating capacity of 150 or more persons or a banquet room in which banquets attended by 400 or more persons may be held. Under current law, the same conditions apply except that a hotel must have a minimum number of 100 rooms of sleeping accommodations to be eligible for the license, rather the 50-room minimum under this provision.
[Act 9 Section: 2165m]
6. INTOXICATING LIQUOR DEALERSHIPS
Senate: Create the following provisions related to the governance of relationships between wholesalers and suppliers of intoxicating liquor:
Administrative Provisions
1. Require the administrator of the Division of Hearings and Appeals (Division) in the Department of Administration (DOA) to assign a hearing examiner to preside over any hearing of a contested case that is required to be conducted by the Department of Revenue with respect to relationships between wholesalers and suppliers of intoxicating liquor.
2. Authorize the administrator of the Division to set the fees to be charged for any services rendered to DOR by a hearing examiner under (1) above. Specify that the fee shall cover the total cost of the services less any costs covered by: (a) the DOA appropriation for Hearings and Appeals operations; and (b) those costs recovered through fees charged for such purposes by DOR to holders of wholesalers' permits [see (4) below].
3. Require DOR to pay all costs of the services of a hearing examiner assigned as in (1) above, including costs of support services, according to the fees set under (2) above.
4. Authorize DOR to establish, by rule, a procedure to collect annually from holders of wholesaler's permits fees in amounts necessary to reimburse DOR for charges paid to the Division for the services of a hearing examiner, including support services.
Relationships Between Wholesalers and Suppliers of Intoxicating Liquor
Specify that the Legislature finds the following:
The Legislature finds that the 3-tier system for distributing intoxicating liquor has existed in Wisconsin for over 60 years and continues to be necessary to promote the public health, safety and welfare; that the 3-tier system was established, among other reasons, to prevent suppliers from controlling pricing and distribution in a manner that harms the interests of the citizens of Wisconsin; that a stable and healthy middle tier of the 3-tier system, the wholesaler, is integral to the 3-tier system because the middle tier prevents supplier control of pricing and distribution and provides an efficient and effective means for tax collection; that significant consolidation of market power has occurred at the supplier level; that the number of intoxicating liquor wholesalers in Wisconsin has significantly declined over the past two decades increasing the risk of supplier control of pricing and distribution; and that this legislation is necessary to promote and maintain a stable and healthy middle tier. The Legislature further finds that relationships between intoxicating liquor wholesalers and suppliers have been subject to state regulation since the enactment of the 21st Amendment to the U.S. Constitution and that the parties to those relationships expect changes to state legislation regarding those relationships.
Applicability
Provide that the following apply with respect to relationships between wholesalers and suppliers of intoxicating liquor:
1. These provisions apply to all relationships, regardless of when they were entered into, except that the provisions do not apply to a relationship in which the volume of the business done by a wholesaler with a supplier, including a supplier's affiliates, does not exceed five percent of the wholesaler's total business volume;
2. The effect of these provisions may not be varied by contract or agreement. Any contract or agreement purporting to do so is void and unenforceable to that extent only.
3. Provisions of a relationship that prevent a wholesaler, through choice of law or forum provisions, from bringing an action or filing a notice of contest in this state under these provisions are void and unenforceable to that extent only.
Definitions
Specify the following definitions with respect to wholesaler-supplier relationships:
1. "Altered product" means an existing product altered by age, by alcohol content, blend mixture, flavor or in some other way and principally identified by a trademark, trade name, logotype or other commercial symbol used to identify an existing product.
2. "Existing product" means intoxicating liquor that is distributed in the United States before or on the effective date of these provisions.
3. "Good cause" means: (a) failure by a wholesaler to comply substantially with essential and reasonable requirements imposed upon the wholesaler by the supplier, or sought to be imposed by the supplier, which requirements are not discriminatory as compared with requirements imposed on other similarly situated wholesalers either by their terms or in the manner of their enforcement; or (b) bad faith by the wholesaler in carrying out the terms of the relationship.
4. "Geographic area" means that area where a wholesaler is both authorized to sell intoxicating liquor pursuant to a relationship and has in fact sold intoxicating liquor.
5. "Goodwill" includes use of a trademark, trade name, logotype or other commercial symbol, and use of a variation of a trademark, trade name, logotype, advertisement or other commercial symbol.
6. "Intoxicating liquors" means all ardent, spirituous, distilled liquors, liquids or compounds, whether medicated, proprietary, patented or not, and by whatever name called, containing 0.5% or more of alcohol by volume, which are beverages, but does not include "fermented malt beverages" and "wines."
7. "New product" means intoxicating liquor that is not an altered product and that is first distributed in the United States after the effective date of these provisions.
8. "Relationship" means a written or oral contract or agreement, either express or implied, between a supplier and a wholesaler that grants the wholesaler the right to purchase intoxicating liquor from the supplier for resale in this state.
9. "Supplier" means any person, other than a wholesaler, who sells intoxicating liquor to a wholesaler.
10. "Transferee" means a person who acquires any asset or activity of a supplier's business and who uses the goodwill associated with the supplier's goods.
Change of Relationship
Specify that a supplier may not do any of the following:
1. Terminate, cancel, fail to renew or substantially change a relationship without good cause. The supplier bears the burden of proving good cause and that the change is not substantial.
2. Substantially change the competitive circumstances of a wholesaler's business without good cause. The supplier bears the burden of proving good cause and that the change is not substantial.
3. Appoint more than one wholesaler to resell an existing product in a geographic area in which there was only one wholesaler reselling that existing product in that geographic area in the 12 months preceding the effective date of these provisions.
4. Refuse to sell an altered product or a new product to a wholesaler who has entered into a relationship with the supplier, except in the case of a supplier who has relationships with more than one wholesaler in the same geographic area, as described below.
Specify that a supplier who has relationships with more than one wholesaler in the same geographic area shall offer an altered product only to a wholesaler who previously resold the existing product principally identified by the same trademark, trade name, logotype or other commercial symbol used to identify the altered product.
