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.
Specify that a change in the ownership or management of a wholesaler or of a wholesaler's business is not good cause if the changed ownership or management meets the supplier's reasonable and material qualifications for wholesaler applicants in effect at the time of the change.
Notice of Termination or Change in Relationship
With certain exceptions described below, require a supplier to provide a wholesaler at least 90 days' prior written notice of termination, cancellation, nonrenewal or substantial alteration in the relationship or substantial change in the competitive circumstances of the wholesaler's business. Specify that: (a) the notice shall be given by certified mail or personal service to the wholesaler and to the Secretary of the Department of Revenue; (b) the notice shall state all of the supplier's reasons for terminating, canceling, not renewing or substantially altering the relationship, or substantially changing the competitive circumstances of the wholesaler's business; (c) the wholesaler shall have 60 days after receiving the notice in which to correct any claimed deficiency; and (d) if the wholesaler corrects the deficiency within 60 days after receiving the notice, the notice is void.
Provide that if the reason for the deficiency is nonpayment of sums owed, the wholesaler shall have only 10 days to correct the deficiency.
Specify that no notice is required for a termination, cancellation, nonrenewal or substantial change of a relationship caused by an assignment for the benefit of creditors or bankruptcy.
Provide that, within the time period for remedying any claimed deficiency, the wholesaler may file a written request with the Division of Hearings and Appeals for a hearing and serve the supplier and the Secretary of DOR by certified mail or in person, with a notice of the contested action. Specify that the service of notice stays any action proposed by the supplier in the notice of termination or change in relationship as described above. However, if a motion is made by the supplier to allow the action to proceed, then the Division shall conduct a hearing limited to whether or not to let the action go forward within 20 days.
Require the Division to conduct a contested case hearing on the matter within 180 days after the filing of a notice of contest and to determine whether the supplier has met the requirements for altering a relationship and providing notice of termination or change in a relationship. Specify that if the Division determines, after a hearing, that the supplier has failed to comply with these provisions, the relationship between the supplier and the wholesaler is still in effect, and the failure of the supplier to comply with the terms of the relationship is grounds for revocation, nonrenewal or failure to grant, by DOR, of that supplier's out-of-state shipper's permit.
In addition, provide that if the Division determines that a transferee has failed to comply with these provisions, the transferee shall comply with the terms of the relationship between the supplier and the wholesaler or DOR will have grounds for revocation, non-renewal, or failure to grant the transferee's out-of-state shippers permit.
Provide that, if the wholesaler prevails, it shall be awarded its actual costs incurred in the hearing, including reasonable attorney fees. Specify that the losing party at the hearing must pay to the Division the costs of the hearing as determined under the administrative provisions described above.
Specify that any person aggrieved by a decision of the Division may seek judicial review, under the provisions in the statutes on administrative procedure and review, in the circuit court in the county in which the wholesaler's premises is located.
Additional Provisions
Specify that a transferee of a supplier's business shall comply with the requirements for altering a relationship with a wholesaler and providing notice of termination or change in a relationship.
Provide that a wholesaler may bring an action to enjoin any violation of the provisions on the relationship between wholesalers and suppliers of intoxicating liquors described above to compel compliance with those provisions, and in the same action may recover damages, together with costs including reasonable actual attorney fees, notwithstanding the statutes on costs upon counterclaims and cross complaints. Specify that these provisions do not limit any other right or remedy provided by law that may be available to the wholesaler.
Effective Date
Provide that these provisions would take effect on the day after publication of the bill.
Chapter 135 of the statutes, enacted in 1973 as the Wisconsin Fair Dealership Act (WFDA), governs dealership practices in the state, providing dealers with rights and remedies in addition to those existing by contract or common law. These provisions would create similar and expanded provisions for the governance of intoxicating liquor dealerships and the relationship between suppliers and wholesalers of intoxicating liquor (excluding beer and wine). In addition, they would create an administrative review structure that calls for a hearing examiner in the Division of Hearings and Appeals of DOA to be assigned and preside over a hearing of a contested case involving the relationship between a supplier and a wholesale (under current law, a wholesaler wanting to contest an action by a supplier must bring an action in a court of competent jurisdiction). The provisions would also create a funding mechanism for the administrative review structure in the form of fees to holders of wholesale permits and cost recovery from the losing party at a hearing.
It should be noted that, according to the Legislative Reference Bureau Drafter's Note, these provisions may impermissibly impair contractual relationships in violation of certain sections of the Wisconsin Constitution and the United States Constitution.
Conference Committee/Legislature: Modify the Wisconsin Fair Dealership Act, which governs dealership practices, as follows:
Definition of Dealership
Expand the definition of "dealership." WFDA currently defines dealership to mean the following: (a) an oral or written contract or agreement, either expressed or implied, between two or more persons to sell or distribute goods or services or to use a trade name, trademark, service mark, logotype, advertising or other commercial symbol; and (b) a community of interest in the business of offering, selling or distributing goods or services at wholesale, retail, by lease, agreement or otherwise. The modified provisions would expand the definition to include the current definition or the following: an oral or written contract or agreement, either expressed or implied, between two or more persons by which a wholesaler is granted the right to sell or distribute intoxicating liquor or use a trademark, service mark, logotype, advertising or other commercial symbol related to intoxicating liquor.
For the purpose of this modification to the definition of dealership, define a "wholesaler" as a person, other than a brewer, manufacturer or rectifier, that sells alcohol beverages to a licensed retailer or to another person that holds a permit or license to sell alcohol beverages at wholesale. In addition, define "intoxicating liquor" as all beverages containing 0.5% or more alcohol by volume that are ardent, spirituous, distilled or vinous liquors, liquids or compounds, whether medicated, proprietary, patented or not (this definition of intoxicating liquor would include wine but not fermented malt beverages).
Specify that the expanded portion of the definition of a dealership would not apply to any of the following:
1. Dealerships in which a grantor, including any affiliate, division or subsidiary of the grantor, has never produced more than 200,000 gallons of intoxicating liquor in any year. [WFDA defines a "grantor" as a person who grants a dealership. In the case of intoxicating liquor dealerships, a liquor supplier would be a grantor.]
2. Dealerships in which: (a) the dealer's net revenues from the sale of all of the grantor's brands of intoxicating liquor, except wine, constitute less than 5% of the dealer's total net revenues from the sale of intoxicating liquor, except wine, for the dealer's most recent fiscal year preceding a grantor's cancellation or termination of the dealership; and (b) the dealer's net revenues from the sale of all of the grantor's brands of wine constitute less than 5% of the dealer's total net revenues from the sale of wine for the dealer's most recent fiscal year preceding a grantor's cancellation or alteration of the dealership. [WFDA defines a "dealer" as a person who is a grantee of a dealership. In the case of intoxicating liquor dealerships, a liquor wholesaler would be a dealer.]
Intoxicating Liquor Dealerships
Create a new section in WFDA with expanded provisions for the governance of certain intoxicating liquor dealerships in addition to the current law WFDA provisions covering such dealerships. Specify that the Legislature finds the following:
The Legislature finds that a balanced and healthy 3-tier system for distributing intoxicating liquor is in the best interest of this state and its citizens; that the 3-tier system for distributing intoxicating liquor has existed since the 1930s; that a balanced and healthy 3-tier system ensures a level system between the manufacturer and wholesale tiers; that a wholesale tier consisting of numerous healthy competitors is necessary for a balanced and healthy 3-tier system; that the number of intoxicating liquor wholesalers in this state is in significant decline; that this decline threatens the health and stability of the wholesale tier; that the regulation of all intoxicating liquor dealerships, regardless of when they were entered into, is necessary to promote and maintain a wholesale tier consisting of numerous healthy competitors; and that the maintenance and promotion of the 3-tier system will promote the public health, safety and welfare. The Legislature further finds that a stable and healthy wholesale tier provides an efficient and effective means for tax collection. The Legislature further finds that dealerships 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 dealerships expect changes to state legislation regarding those dealerships.
Definitions
Specify that the following definitions apply to the new section on intoxicating liquor dealerships:
1. "Intoxicating liquor" and "wholesaler" have the meanings described above under "Definition of Dealership."
2. "Net revenues" means the gross dollar amount received from the sale of intoxicating liquor minus adjustments for returns, discounts and allowances.
3. "Wine" means products obtained from the normal alcohol fermentation of the juice or must of sound, ripe grapes, other fruits or other agricultural products, imitation wine, compounds sold as wine, vermouth, cider, perry, mead and sake, if such products contain 0.5% or more of alcohol by volume.
Liability of Transferee of Intoxicating Liquor Grantor
Specify that a "transferee" is considered a grantor for the purposes of WFDA and is bound by the grantor's dealerships with the grantor's wholesalers. For the purpose of this provision, define "transferee" as a person that acquires any asset or activity of a grantor's intoxicating liquor business and that uses the goodwill associated with the intoxicating liquor of the grantor. In addition, define "goodwill" to include the use of a trademark, trade name, logotype or other commercial symbol and the use of a variation of a trademark, trade name, logotype, advertisement or other commercial symbol.
Change in Ownership
For the purpose of this provision, define a "successor wholesaler" as a wholesaler that succeeds to the management, ownership or control of a wholesaler or all or any part of a wholesaler's business, whether by stock purchase, sale of assets, transfer or assignment of a brand which is the subject of a dealership agreement or otherwise.
Provide that a change in the management, ownership or control of a wholesaler or all or any part of a wholesaler's business is not good cause for a grantor to terminate, cancel, fail to renew or substantially change the competitive circumstances of its dealership with a successor wholesaler if the successor wholesaler meets the grantor's reasonable and material qualifications for wholesaler applicants in effect at the time of the change. Specify that if the successor wholesaler meets the grantor's reasonable and material qualifications for wholesaler applicants in effect at the time of the change, the successor wholesaler will succeed to the dealership rights of the predecessor wholesaler and the grantor will continue to be bound by the dealership.
Nonapplicability and Severability
Specify that these provisions on intoxicating liquor dealerships are severable and do not apply to any intoxicating liquor dealerships that are specifically exempted from the expanded definition of a dealership (as described above under "Definition of Dealership").
Effective Date
Specify that these provisions would take effect retroactively to October 1, 1998.
Specify that these provisions would first apply to dealerships (as defined by WFDA and modified by these provisions) in effect on October 1, 1998, and to any cause of action under WFDA for which final judgement has not been entered on or before the day after publication of the bill.
Summary of Provisions
Similar to the Senate provisions, these provisions would extend the applicability of regulations on dealership practices to a broader spectrum of intoxicating liquor dealerships than those currently covered under WFDA. Both the Conference Committee and Senate provisions would extend the regulations to include all intoxicating liquor dealerships, whether or not there is a community of interest in the business of offering, selling or distributing goods or services at wholesale, retail, by lease agreement or otherwise. [However, both the Conference Committee and Senate provisions specify minimum volumes of business which must exist in a dealership relationship for the expanded provisions to apply.] In addition, both provisions would specify that a transferee of an intoxicating liquor grantor would be bound by a grantor's dealerships and that a successor wholesaler would generally succeed to the dealership rights of the predecessor wholesaler. The Conference Committee provisions would differ from the Senate provisions in areas including, but not limited to, the following:
