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91_HB1061enr HB1061 Enrolled LRB9105378WHdv 1 AN ACT concerning soft drink beverage distribution. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 1. Short title. This Act may be cited as the 5 Soft Drink Industry Fair Dealing Act. 6 Section 5. Definitions. As used in this Act: 7 "Distribution agreement" means any contract, appointment, 8 agreement, course of dealing, or arrangement, express or 9 implied, whether oral or written, for a definite or 10 indefinite period, between a supplier and a distributor 11 pursuant to which the distributor has been granted the right 12 to (i) directly or through a cooperative or association of 13 which the distributor is a member, bottle or can one or more 14 soft drink beverages or process soft drink beverage 15 concentrate into beverage syrup, and (ii) sell, distribute, 16 or deliver such soft drink beverages or soft drink beverage 17 syrup under trademarks owned or licensed by the supplier. 18 "Distributor" means a person in this State who (i) 19 directly or through a cooperative or association of which the 20 person is a member, bottles or cans one or more soft drink 21 beverage or processes soft drink beverage concentrate into 22 beverage syrup, and (ii) sells, distributes, or delivers such 23 soft drink beverages or soft drink beverage syrup under 24 trademarks owned or licensed by a supplier. 25 "Distributorship" means a business relationship between a 26 supplier and a distributor established pursuant to a 27 distribution agreement. Except as otherwise expressly 28 provided in this Act, the term "distributorship" does not 29 include a partnership, joint venture, corporation, limited 30 liability company, or other entity owned in whole or in part 31 by a supplier. HB1061 Enrolled -2- LRB9105378WHdv 1 "Good cause" means the material failure of a distributor 2 to comply with essential and reasonable requirements imposed 3 upon the distributor by a distribution agreement or bad faith 4 in the performance of a distribution agreement. The 5 requirements may not be discriminatory either by their terms 6 or in the methods or effects of enforcement as compared with 7 requirements imposed upon other similarly situated Illinois 8 distributors. The requirements may not be inconsistent with 9 this Act or in violation of any law or regulation. The 10 failure of a distributor to assent to any amendment, 11 modification, or change in the terms of a distribution 12 agreement that impairs, restricts, or eliminates, in whole or 13 in part, the distribution or delivery rights of a distributor 14 under the distribution agreement shall not constitute good 15 cause. 16 "Good faith" means honesty in fact and the observation of 17 reasonable commercial standards for fair dealing in trade. 18 "Person" means a natural person, partnership, joint 19 venture, corporation, limited liability company, or other 20 entity and includes heirs, assigns, successors, personal 21 representatives, and guardians. 22 "Soft drink" means a non-alcoholic, carbonated beverage 23 made from a concentrate, syrup, or other beverage base. 24 "Soft drink products" means ready-to-use soft drinks, 25 whether in bottles, cans, or other containers and soft drink 26 beverage syrup for use in servicing fountain equipment and 27 cup vending machines dispensing soft drinks. 28 "Supplier" means a person engaged in the manufacture or 29 marketing of soft drink beverage concentrate, syrup, or other 30 soft drink beverage base for use in the preparation of soft 31 drink products sold under trademarks owned or licensed by 32 such person. 33 Section 10. Legislative declarations; construction; HB1061 Enrolled -3- LRB9105378WHdv 1 variation by contract. 2 (a) The General Assembly makes the following findings 3 and declarations: 4 (1) Distributors of soft drink products in the 5 State of Illinois have been and are required to make 6 substantial capital investments in plant, property, and 7 equipment in order to fulfill their obligations under 8 distribution agreements. Distributors must rely upon the 9 continuing right to sell and distribute soft drink 10 products to recover their investments and to obtain a 11 reasonable return on those investments. 12 (2) Distributorship relationships in the State of 13 Illinois vitally affect the general economy of the State 14 and the public's interest in the fair, efficient, and 15 competitive distribution of soft drink products. 16 (b) The purposes of this Act are to promote the public's 17 interest in the fair, efficient, and competitive distribution 18 of soft drink products by regulation and by the encouragement 19 of suppliers and distributors of soft drink products to 20 conduct their business relations toward these ends by: 21 (1) protecting distributors against unfair 22 treatment by suppliers in the negotiation, revision, 23 renewal, and cancellation of distributorships and 24 distribution practices; 25 (2) assuring that distributors are free to manage 26 their business enterprises; 27 (3) assuring suppliers and the public of continuing 28 service from distributors able to devote adequate efforts 29 and resources to the processing, bottling, canning, 30 distribution, and delivery of soft drink products as to 31 which they have been granted a distributorship; and 32 (4) providing distributors with rights and remedies 33 in addition to those existing by contract or at common 34 law. HB1061 Enrolled -4- LRB9105378WHdv 1 This Act shall be liberally construed and applied to 2 promote its underlying purposes. 3 (c) Any contract or agreement purporting to waive or 4 vary the provisions of this Act, or purporting to preclude 5 the application of this Act to any distributorship subject to 6 this Act is void and unenforceable to that extent. 7 (d) This Act provides distributors with rights and 8 remedies in addition to those existing by contract or common 9 law and reaffirms rights and remedies provided by contract or 10 common law. 11 (e) In accordance with Section 1.31 of the Statute on 12 Statutes, the provisions of this Act are severable. If any 13 provision of this Act, or the application of any provision of 14 this Act to any person or circumstance, is held invalid, such 15 invalidity shall not affect other provisions or applications 16 of this Act which can be given effect without the invalid 17 provision or application, and the application of this Act to 18 persons or circumstances other than those as to which it is 19 held invalid shall not be affected thereby. 20 Section 15. Cancellation and alteration of 21 distributorships. 22 (a) No supplier, directly or through any officer, agent, 23 employee, or representative, shall: 24 (1) cancel, fail to renew, or otherwise terminate a 25 distribution agreement without good cause to do so; 26 (2) unilaterally impose any amendment, 27 modification, or change in the terms of a distribution 28 agreement; 29 (3) fail to exercise good faith in the negotiation 30 of any amendment, modification, or change in the terms of 31 a distribution agreement, engage in retaliatory conduct 32 against a distributor for the exercise of a legal right, 33 or otherwise fail to exercise good faith in its dealings HB1061 Enrolled -5- LRB9105378WHdv 1 with a distributor; 2 (4) discriminate in pricing, fees, charges or other 3 terms of the distributorship against any distributor that 4 withholds its assent to any amendment, modification, or 5 change in the terms of a distribution agreement; 6 (5) restrict or inhibit, directly or indirectly, 7 the right of free association among distributors for any 8 lawful purpose; 9 (6) fail, without good cause, to offer a 10 distributor the right, within its geographic territory, 11 to (i) directly or through a cooperative or association 12 of which the distributor is a member, bottle or can any 13 new soft drink beverages introduced by the supplier and 14 process any new soft drink beverage concentrate into 15 beverage syrup, and (ii) sell, distribute, and deliver 16 such soft drink beverages or soft drink beverage syrup 17 under trademarks owned or licensed by the supplier or 18 offer a distributor such right on terms and conditions 19 less favorable than such right is offered to any other 20 distributor of the supplier, including any distributor 21 owned in whole or in part by the supplier. 22 (b) No supplier who, pursuant to a distribution 23 agreement, has granted a person the exclusive right in a 24 generally defined geographic area to (i) directly or through 25 a cooperative or association of which the person is a member, 26 bottle or can one or more soft drink beverages, or process 27 soft drink beverage concentrate into beverage syrup, and (ii) 28 sell, distribute, or deliver such soft drink beverages or 29 soft drink beverage syrup under trademarks owned or licensed 30 by the supplier, shall, directly or through any officer, 31 agent, employee, or representative, enter into an agreement 32 authorizing, permitting, contemplating, or providing for the 33 exercise of any of such rights in the same geographic area by 34 any other person. HB1061 Enrolled -6- LRB9105378WHdv 1 Section 20. Notice of cancellation. 2 (a) Except as hereinafter provided in subsection (c), no 3 supplier may cancel, fail to renew, or otherwise terminate a 4 distribution agreement unless the supplier furnishes prior 5 notification to the affected party in accordance with 6 subsection (b). 7 (b) The notification required by subsection (a) of this 8 Section shall contain (i) a statement of the supplier's 9 intention to cancel, fail to renew, or otherwise terminate 10 the distribution agreement, (ii) a complete statement of the 11 reasons therefor, including all data and documentation 12 necessary to fully apprise the distributor of the reasons for 13 the action, and (iii) the date on which the action is 14 intended to take effect. The notification shall be in 15 writing and sent to the affected distributor by certified 16 mail not less than 90 days before the date on which the 17 supplier intends to cancel, fail to renew, or otherwise 18 terminate the distribution agreement, and shall provide the 19 distributor a reasonable period of time, in no event less 20 than 60 days from the date of delivery or posting of the 21 notice, within which to cure any claimed deficiency. If the 22 reason for cancellation, nonrenewal, or other termination is 23 nonpayment of sums due under the distributorship, the 24 notification shall be sent not less than 30 days before the 25 date on which the supplier intends to cancel, fail to renew, 26 or otherwise terminate the distribution agreement, and the 27 distributor shall have 30 days from the date of delivery or 28 posting of the notice within which to cure the default. If 29 the deficiency is cured within the applicable period, the 30 notice shall be void. 31 (c) The notice requirements of this Section shall not 32 apply if the reason for cancellation, failure to renew, or 33 other termination of a distributorship agreement is: 34 (1) an assignment for the benefit of the HB1061 Enrolled -7- LRB9105378WHdv 1 distributor's creditors or similar disposition of 2 substantially all of the assets of the distributor's 3 business; 4 (2) the insolvency of the distributor or the 5 institution of proceedings in bankruptcy by or against 6 the distributor; or 7 (3) the dissolution or liquidation of the 8 distributor. 9 Section 25. Transfer of business assets and stock. No 10 supplier, directly or through any officer, agent, employee or 11 representative, shall: 12 (a) unreasonably withhold or delay its consent, if 13 requested by a distributor, to any assignment, sale, 14 transfer, or other disposition of all or any portion of (i) a 15 distributor's business, assets, or stock, or of the 16 beneficial ownership or control of a distributor, or (ii) the 17 stock, beneficial ownership, or control of any other entity 18 owning or controlling a distributor; 19 (b) upon the death of a person owning or controlling a 20 distributor, unreasonably deny approval of a transfer of 21 ownership or control of the distributorship to a surviving 22 spouse or adult child of such person; 23 (c) upon the death of one of the partners of a 24 partnership operating the business of a distributor, deny the 25 surviving partner or partners of such partnership the right 26 to become a successor-in-interest to the distribution 27 agreement between the supplier and such partnership; 28 (d) unreasonably withhold or delay its consent, if 29 requested by a distributor, to any assignment, sale, or 30 transfer to the distributor of all or any portion of the 31 business, assets, or stock of any other person who has been 32 granted the right to (i) directly or through a cooperative or 33 association of which the person is a member, bottle or can HB1061 Enrolled -8- LRB9105378WHdv 1 one or more soft drink beverages or process soft drink 2 beverage concentrate into beverage syrup, and (ii) sell, 3 distribute, or deliver soft drink beverages or soft drink 4 beverage syrup under trademarks owned or licensed by the 5 supplier, where the distributor and such other person have 6 freely negotiated such an assignment, sale, or transfer. 7 Section 30. Reasonable compensation. 8 (a) Any supplier that (i) cancels, fails to renew, or 9 otherwise terminates any distribution agreement, or (ii) 10 unlawfully denies approval of or unreasonably withholds 11 consent to any assignment, transfer, or sale of a 12 distributor's business, assets, stock, or other ownership 13 interest in a distributor, shall (i) pay the distributor the 14 fair market value of that portion of the distributor's 15 business that the supplier has cancelled, failed to renew, or 16 otherwise terminated, or (ii) pay the distributor or other 17 aggrieved person the fair market value of that portion of the 18 business, assets, stock, or other ownership interest sought 19 to be assigned, transferred, or sold. Fair market value shall 20 include, but shall not be limited to, the value of the 21 goodwill associated with the business, assets, stock, or 22 other ownership interest valued hereunder, and such fair 23 market value shall be determined without regard to any 24 marketability, minority interest, or other similar discount 25 or reduction. 26 (b) If a supplier and a distributor or other aggrieved 27 person are unable to agree on the reasonable compensation to 28 be paid under subsection (a), any such party may maintain a 29 civil suit as provided in Section 35 of this Act or the 30 matter may, by mutual agreement of the parties, be submitted 31 to arbitration or mediation. Unless the parties otherwise 32 agree, the costs of arbitration shall be shared equally by 33 the parties. HB1061 Enrolled -9- LRB9105378WHdv 1 (c) No distributorship agreement may require the 2 distributor to pay more than half the costs of arbitration or 3 mediation or require arbitration or mediation to be conducted 4 outside this State. 5 Section 35. Judicial remedies. 6 (a) It shall be an affirmative defense in an action 7 between the parties to a distributorship agreement that good 8 cause existed for a supplier to cancel, fail to renew, or 9 otherwise terminate the distributorship agreement at issue. 10 (b) If a supplier engages in any of the practices 11 prohibited by Section 15 of this Act or violates any of the 12 provisions of Sections 20, 25, or 30 of this Act, any 13 aggrieved distributor or other aggrieved person may bring an 14 action against the supplier for damages sustained by the 15 distributor as a consequence thereof, together with the 16 actual costs and expenses of the action, including reasonable 17 attorney's fees. The aggrieved distributor or other 18 aggrieved person also may be granted injunctive relief, 19 including injunctive relief against an unlawful termination, 20 cancellation, nonrenewal, or other termination of a 21 distribution agreement. The remedies provided in this 22 subsection (b) are cumulative with all other remedies 23 available to an aggrieved distributor or other aggrieved 24 person, including but not limited to the remedies provided 25 for in subsections (c), (d) and (e) of this Section. 26 (c) Upon proper application to the court, a supplier, 27 distributor, or other aggrieved person may bring an action to 28 determine reasonable compensation under Section 30 of this 29 Act. 30 (d) A supplier, distributor, or other aggrieved person 31 may bring an action for a declaratory judgment to determine 32 any controversy arising under this Act or out of the 33 distributorship relationship. HB1061 Enrolled -10- LRB9105378WHdv 1 (e) If, in any action brought pursuant to this Act, a 2 finding is made that a party has not acted in good faith with 3 respect to any other party to a distribution agreement, an 4 appropriate penalty shall be assessed against that party and, 5 in addition, that party shall also be ordered to pay the 6 actual costs and expenses of the action, including reasonable 7 attorney's fees incurred by the other party. 8 (f) Any action brought pursuant to this Act shall be 9 brought in a court of this State or in a federal court in 10 this State vested with jurisdiction over the controversy. 11 Venue in any such action shall be in accordance with the Code 12 of Civil Procedure or Title 28 of the U.S. Code, as the case 13 may be, provided that in any action brought in a court of 14 this State, venue also shall exist in any county in which the 15 distributorship is located. 16 (g) Nothing in this Act shall (i) prohibit the parties 17 to any dispute from agreeing to arbitrate the dispute or to 18 submit the dispute to mediation or (ii) prohibit the 19 enforcement of any arbitration or mediation agreement in 20 accordance with applicable Illinois law. In any such 21 arbitration or mediation, the definitions and substantive 22 provisions of this Act shall apply and the arbitrator or 23 mediator may afford the remedies provided for by this Act. 24 Section 40. Application of this Act. This Act shall 25 govern all relations between suppliers and distributors to 26 the fullest extent consistent with the constitutions of this 27 State and of the United States. All provisions of this Act 28 which are declarative of or clarify existing law, including 29 the provisions of Section 15(a)(3) of this Act, apply to all 30 agreements between a supplier and a distributor whether those 31 agreements were entered into before or after the effective 32 date of this Act. In addition, this Act shall, to the 33 fullest extent permitted by law, apply (i) to conduct HB1061 Enrolled -11- LRB9105378WHdv 1 occurring after the effective date of this Act, whether or 2 not such conduct relates to a distribution agreement entered 3 into before the effective date of this Act, and (ii) to 4 distribution agreements entered into or amended after the 5 effective date of this Act, including any renewal of a 6 distribution agreement in existence on or before the 7 effective date of this Act. Renewal of a distribution 8 agreement with a designated term or duration shall mean (i) 9 the establishment of a new term or duration, (ii) an 10 extension of the distribution agreement on any other basis, 11 or (iii) the shipment of soft drink concentrate or syrup to 12 the distributor after the expiration of the designated term 13 or duration. Renewal of a distribution agreement that 14 provides for a month to month, year to year, or other 15 periodic term or duration, shall mean (i) the continuation of 16 the distributorship into the next month, year, or other 17 period commencing after the effective date of this Act, (ii) 18 an extension of the distribution agreement on any other 19 basis, or (iii) the shipment of soft drink concentrate or 20 syrup to a distributor after the expiration of the month, 21 year, or other period of the distribution agreement. Renewal 22 of any distribution agreement that does not have a designated 23 term or duration, or that is terminable at will or upon 24 notice, shall mean the shipment of soft drink concentrate or 25 syrup to a distributor after the effective date of this Act. 26 Section 99. Effective date. This Act takes effect upon 27 becoming law.