Relates to agreements between brewers and beer wholesalers

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 whole- salers 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 multi- national breweries and ensure if they did agree to sell their distrib- ution 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 consid- erable 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 whole- saler 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 fair- ly 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.