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91_HB2022
LRB9103255KSmb
1 AN ACT to create the Soft Drink Industry Fair Dealing
2 Act.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 1. Short title. This Act may be cited as the
6 Soft Drink Industry Fair Dealing Act.
7 Section 5. Definitions. As used in this Act:
8 "Distribution agreement" means any contract, appointment,
9 agreement, course of dealing, or arrangement, express or
10 implied, whether oral or written, for a definite or
11 indefinite period, between a supplier and a distributor
12 pursuant to which the distributor has been granted the right
13 to (i) directly or through a cooperative or association of
14 which the distributor is a member, bottle or can one or more
15 soft drink beverages or process soft drink beverage
16 concentrate into beverage syrup, and (ii) sell, distribute,
17 or deliver such soft drink beverages or soft drink beverage
18 syrup under trademarks owned or licensed by the supplier.
19 "Distributor" means a person in this State who (i)
20 directly or through a cooperative or association of which the
21 person is a member, bottles or cans one or more soft drink
22 beverage or processes soft drink beverage concentrate into
23 beverage syrup, and (ii) sells, distributes, or delivers such
24 soft drink beverages or soft drink beverage syrup under
25 trademarks owned or licensed by a supplier.
26 "Distributorship" means a business relationship between a
27 supplier and a distributor established pursuant to a
28 distribution agreement. Except as otherwise expressly
29 provided in this Act, the term "distributorship" does not
30 include a partnership, joint venture, corporation, limited
31 liability company, or other entity owned in whole or in part
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1 by a supplier.
2 "Good cause" means the failure of a distributor to comply
3 substantially with essential, reasonable, and
4 non-discriminatory requirements imposed upon the distributor
5 by a distribution agreement. The failure of a distributor to
6 assent to any amendment, modification, or change in the terms
7 of a distribution agreement that would have the effect of
8 materially and adversely affecting the value of the rights
9 conferred upon the distributor by the distribution agreement
10 shall not constitute good cause. For purposes of this Act,
11 any amendment, modification, or change in the terms of a
12 distribution agreement that impairs, restricts, or
13 eliminates, in whole or in part, the distribution or delivery
14 rights of a distributor under the distribution agreement
15 shall be deemed to materially and adversely affect the value
16 of the rights conferred upon the distributor.
17 "Good faith" means honesty in fact and the observation of
18 reasonable commercial standards for fair dealing in trade.
19 "Person" means a natural person, partnership, joint
20 venture, corporation, limited liability company, or other
21 entity and includes heirs, assigns, successors, personal
22 representatives, and guardians.
23 "Soft drink" means a non-alcoholic, carbonated beverage
24 made from a concentrate, syrup, or other beverage base.
25 "Soft drink products" means ready-to-use soft drinks,
26 whether in bottles, cans, or other containers and soft drink
27 beverage syrup for use in servicing fountain equipment and
28 cup vending machines dispensing soft drinks.
29 "Supplier" means a person engaged in the manufacture or
30 marketing of soft drink beverage concentrate, syrup, or other
31 soft drink beverage base for use in the preparation of soft
32 drink products sold under trademarks owned or licensed by
33 such person.
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1 Section 10. Legislative declarations; construction;
2 variation by contract.
3 (a) The General Assembly makes the following findings
4 and declarations:
5 (1) The soft drink product industry is dominated by
6 a small number of suppliers which in many instances
7 control large processing, bottling, canning, and
8 distribution operations. Distributors, on the other
9 hand, often are comparatively small, family-owned
10 businesses.
11 (2) Distributors of soft drink products in the
12 State of Illinois have been and are required to make
13 substantial capital investments in plant, property, and
14 equipment in order to fulfill their obligations under
15 distribution agreements. Distributors must rely upon the
16 continuing right to sell and distribute soft drink
17 products to recover their investments and to obtain a
18 reasonable return on those investments.
19 (3) Distributorship relationships in the State of
20 Illinois vitally affect the general economy of the State
21 and the public's interest in the fair, efficient, and
22 competitive distribution of soft drink products. Some
23 suppliers have unfairly used their economic power to
24 coerce distributors to alter their business practices and
25 to surrender valuable rights under their distribution
26 agreements, including the right to sell, distribute, and
27 deliver soft drink products to large retail accounts.
28 Such actions threaten the ability of distributors to
29 continue to serve their remaining customers, which
30 consist in large part of small businesses such as
31 restaurants, convenience stores, service stations, and
32 schools, all to the great prejudice and harm of the
33 citizens of the State of Illinois.
34 (4) Protecting distributors against unfair
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1 treatment by suppliers, who inherently have superior
2 economic power and superior bargaining power in the
3 negotiation of distributorships and distribution
4 practices, is in the public interest.
5 (b) The purposes of this Act are to promote the public's
6 interest in the fair, efficient, and competitive distribution
7 of soft drink products by regulation and by the encouragement
8 of suppliers and distributors of soft drink products to
9 conduct their business relations toward these ends by:
10 (1) protecting distributors against unfair
11 treatment by suppliers who inherently have superior
12 economic power and superior bargaining power in the
13 negotiation of distributorships and distribution
14 practices;
15 (2) assuring that distributors are free to manage
16 their business enterprises;
17 (3) assuring suppliers and the public of continuing
18 service from distributors able to devote adequate efforts
19 and resources to the processing, bottling, canning,
20 distribution, and delivery of soft drink products as to
21 which they have been granted a distributorship; and
22 (4) providing distributors with rights and remedies
23 in addition to those existing by contract or at common
24 law.
25 This Act shall be liberally construed and applied to
26 promote its underlying purposes.
27 (c) The provisions of this Act are of a public order and
28 therefore the rights established by this Act cannot be waived
29 or varied by contract or agreement. Any contract or
30 agreement purporting to do so or purporting to preclude the
31 application of this Act to any distributorship subject to
32 this Act is void and unenforceable to that extent.
33 (d) This Act shall govern all relations between
34 distributors and suppliers to the fullest extent consistent
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1 with the constitutions of this State and of the United States
2 of America.
3 (e) This Act provides distributors with rights and
4 remedies in addition to those existing by contract or common
5 law and reaffirms rights and remedies provided by contract or
6 common law.
7 (f) In accordance with Section 1.31 of the Statute on
8 Statutes, if any provision of this Act, or the application of
9 any provision of this Act to any person or circumstance, is
10 held invalid, such invalidity shall not affect other
11 provisions or applications of this Act which can be given
12 effect without the invalid provision or application, and the
13 application of this Act to persons or circumstances other
14 than those as to which it is held invalid shall not be
15 affected thereby.
16 Section 15. Cancellation and alteration of
17 distributorships.
18 (a) No supplier, directly or through any officer, agent,
19 employee, or representative, shall:
20 (1) terminate, cancel, or fail to renew a
21 distribution agreement without good cause to do so;
22 (2) require or coerce a distributor to assent to
23 any amendment, modification, or change in the terms of a
24 distribution agreement that would have the effect of
25 materially and adversely affecting the value of the
26 rights conferred upon the distributor by the distribution
27 agreement;
28 (3) fail to exercise good faith in the negotiation
29 of any amendment, modification, or change in the terms of
30 a distribution agreement, engage in retaliatory conduct
31 against a distributor for the exercise of a legal right,
32 or otherwise fail to exercise good faith in its dealings
33 with a distributor;
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1 (4) discriminate in pricing, fees, charges or other
2 terms of the distributorship against any distributor that
3 withholds its assent to any amendment, modification, or
4 change in the terms of a distribution agreement that
5 would have the effect of materially and adversely
6 affecting the value of the rights conferred upon the
7 distributor by the distribution agreement;
8 (5) restrict or inhibit, directly or indirectly,
9 the right of free association among distributors for any
10 lawful purpose;
11 (6) fail to offer a distributor the right, within
12 its geographic territory, to (i) directly or through a
13 cooperative or association of which the distributor is a
14 member, bottle or can any new soft drink beverages
15 introduced by the supplier and process any new soft drink
16 beverage concentrate into beverage syrup, and (ii) sell,
17 distribute, and deliver such soft drink beverages or soft
18 drink beverage syrup under trademarks owned or licensed
19 by the supplier on substantially the same terms and
20 conditions as such right is offered to other distributors
21 of the supplier, including distributors owned in whole or
22 in part by the supplier.
23 (b) No supplier who, pursuant to a distribution
24 agreement, has granted a person the exclusive right in a
25 generally defined geographic area to (i) directly or through
26 a cooperative or association of which the person is a member,
27 bottle or can one or more soft drink beverages, or process
28 soft drink beverage concentrate into beverage syrup, and (ii)
29 sell, distribute, or deliver such soft drink beverages or
30 soft drink beverage syrup under trademarks owned or licensed
31 by the supplier, shall, directly or through any officer,
32 agent, employee, or representative, enter into an agreement
33 authorizing, permitting, contemplating, or providing for the
34 exercise of any of such rights in the same geographic area by
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1 any other person.
2 Section 20. Notice of cancellation. Except as
3 hereinafter provided in this Section, a supplier shall
4 provide a distributor at least 90 days prior written notice
5 of the termination, cancellation, or nonrenewal of a
6 distribution agreement. The notice shall state all the
7 reasons for termination, cancellation, or nonrenewal and
8 shall provide the distributor a reasonable period of time, in
9 no event less than 60 days, within which to cure any claimed
10 deficiency. If the deficiency is cured within such period
11 the notice shall be void. The notice provisions of this
12 Section shall not apply if the reason for termination,
13 cancellation, or nonrenewal is the insolvency of the
14 distributor, an assignment for the benefit of the
15 distributor's creditors, or the bankruptcy of the
16 distributor. If the reason for termination, cancellation, or
17 nonrenewal is nonpayment of sums due under the
18 distributorship, the distributor shall be entitled to written
19 notice of default and shall have 30 days from the date of
20 delivery or posting of the notice within which to cure the
21 default.
22 Section 25. Transfer of business assets and stock. No
23 supplier, directly or through any officer, agent, employee or
24 representative, shall:
25 (a) unreasonably withhold or delay its consent to any
26 assignment, sale, transfer, or other disposition of all or
27 any portion of (i) a distributor's business, assets, or
28 stock, or (ii) the stock, beneficial ownership, or control of
29 any other entity owning or controlling a distributor;
30 (b) upon the death of a person owning or controlling a
31 distributor, deny approval of a transfer of ownership or
32 control of the distributorship to a surviving spouse or adult
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1 child of such person;
2 (c) upon the death of one of the partners of a
3 partnership operating the business of a distributor, deny the
4 surviving partner or partners of such partnership the right
5 to become a successor-in-interest to the distribution
6 agreement between the supplier and such partnership;
7 (d) unreasonably withhold or delay its consent, if
8 requested by a distributor, to any assignment, sale, or
9 transfer to the distributor of all or any portion of the
10 business, assets, or stock of any other person who has been
11 granted the right to (i) directly or through a cooperative or
12 association of which the person is a member, bottle or can
13 one or more soft drink beverages or process soft drink
14 beverage concentrate into beverage syrup, and (ii) sell,
15 distribute, or deliver soft drink beverages or soft drink
16 beverage syrup under trademarks owned or licensed by the
17 supplier, where the distributor and such other person have
18 freely negotiated such an assignment, sale, or transfer.
19 Section 30. Reasonable compensation.
20 (a) Any supplier that (i) cancels, terminates, or fails
21 to renew any distribution agreement, or (ii) unlawfully
22 denies approval of or unreasonably withholds consent to any
23 assignment, transfer, or sale of a distributor's business,
24 assets, or stock, or of the stock, beneficial ownership, or
25 control of any other entity owning or controlling a
26 distributor, shall pay the distributor with which it has a
27 distribution agreement the fair market value of that portion
28 of the distributor's business relating to the affected brand
29 or brands of soft drink products. Fair market value shall
30 include, but shall not be limited to, the value of the
31 distributor's inventory of the affected brand or brands and
32 its goodwill, if any, associated with that portion of the
33 distributor's business, and shall be determined without
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1 regard to any marketability, minority interest, or other
2 similar discount or reduction.
3 (b) If a supplier and a distributor are unable to
4 mutually agree on the reasonable compensation to be paid for
5 that portion of the distributor's business relating to the
6 affected brand or brands of soft drink products, either party
7 may maintain a civil suit as provided in Section 35 of this
8 Act or the matter may, by mutual agreement of the parties, be
9 submitted to arbitration. Unless the parties otherwise
10 agree, the costs of arbitration shall be paid one-half by the
11 supplier and one-half by the distributor.
12 Section 35. Judicial remedies.
13 (a) In any action between the parties to a distribution
14 agreement where the existence of good cause for a supplier to
15 terminate, cancel, or fail to renew the distribution
16 agreement is at issue, the burden of proving good cause shall
17 be on the supplier.
18 (b) If a supplier engages in any of the practices
19 prohibited by Section 15 of this Act or violates any of the
20 provisions of Sections 20, 25, or 30 of this Act, any
21 aggrieved distributor may bring an action against the
22 supplier for damages sustained by the distributor as a
23 consequence thereof, together with the actual costs and
24 expenses of the action, including reasonable attorney's fees.
25 The distributor also may be granted injunctive relief,
26 including injunctive relief against an unlawful termination,
27 cancellation, or nonrenewal of a distribution agreement.
28 (c) Upon proper application to the court, a supplier or
29 distributor may bring an action to determine reasonable
30 compensation under Section 30 of this Act.
31 (d) A supplier or distributor may bring an action for a
32 declaratory judgment to determine any controversy arising
33 under this Act or out of the distributorship relationship.
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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.
14 (g) Nothing in this Act shall prohibit a supplier and a
15 distributor from agreeing to arbitrate any dispute or
16 prohibit the enforcement of any arbitration agreement in
17 accordance with applicable law.
18 Section 40. Preliminary injunctions; temporary
19 restraining orders. In any action brought under this Act,
20 for purposes of determining whether a preliminary injunction
21 or a temporary restraining order should be issued, (i) any
22 violation of this Act shall be deemed to constitute an
23 irreparable injury, (ii) the party seeking relief shall be
24 deemed to have no adequate remedy at law, and (iii)
25 enforcement of rights under this Act shall be deemed to be in
26 the public interest and to outweigh any competing interest.
27 Section 45. Application of this Act. This Act shall, to
28 the fullest extent permitted by law, apply (i) to conduct
29 occurring after the effective date of this Act, whether or
30 not such conduct relates to a distribution agreement entered
31 into prior to the effective date of this Act, and (ii) to
32 distribution agreements entered into after the effective date
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1 of this Act, including distribution agreements in existence
2 on or before the effective date of this Act which are amended
3 or renewed after that date. Renewal of a distribution
4 agreement with a specified term or duration shall mean (i)
5 the establishment of a new term or duration, (ii) an
6 extension of the distribution agreement on any other basis,
7 or (iii) the shipment of soft drink concentrate or syrup to
8 the distributor after the expiration of the specified term or
9 duration. Renewal of a distribution agreement that provides
10 for a month to month, year to year, or other periodic term or
11 duration, shall mean (i) the continuation of the
12 distributorship into the next month, year, or other period
13 commencing after the effective date of this Act, (ii) an
14 extension of the distribution agreement on any other basis,
15 or (iii) the shipment of concentrate or syrup to a
16 distributor after the expiration of the month, year, or other
17 period of the distribution agreement. Renewal of any
18 distribution agreement that is terminable at will or upon
19 notice shall mean the shipment of concentrate to a
20 distributor after the effective date of this Act.
21 Section 99. Effective date. This Act takes effect upon
22 becoming law.