5-04 Beer Wholesaler and Brewer Relationships
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<![CDATA[CHAPTER 5-04BEER WHOLESALER AND BREWER RELATIONSHIPS5-04-01. Definitions. As used in this chapter, unless the context otherwise requires:1."Agreement" means one or more of the following:a.A commercial relationship between a licensed beer wholesaler and a licensed<br>brewer of a definite or indefinite duration which is not required to be evidenced<br>in writing.b.A relationship whereby the beer wholesaler is granted the right to offer and sell<br>a brand or brands of beer offered by a brewer.c.A relationship whereby the beer wholesaler, as an independent business,<br>constitutes a component of a brewer's distribution system.d.A relationship whereby the beer wholesaler's business is substantially<br>associated with a brewer's brand or brands, designating the brewer.e.A relationship whereby the beer wholesaler's business is substantially reliant on<br>a brewer for the continued supply of beer.f.A written or oral arrangement for a definite or indefinite period whereby a<br>brewer grants a license to a beer wholesaler to use a brand, trade name,<br>trademark, or service mark, and in which there is a community of interest in the<br>marketing of goods or services at wholesale or retail.2."Ancillary business" means a business owned by a wholesaler, a stockholder of a<br>wholesaler, or a partner of a wholesaler, the primary business of which is directly<br>related to the transporting, storing, or marketing of the brewer's products with whom<br>the wholesaler has an agreement.3."Beer wholesaler" or "wholesaler" means any licensee, as outlined in section<br>5-03-01, importing or causing to be imported into this state or purchasing or causing<br>to be purchased within this state, any beer for sale or resale to retailers or<br>wholesalers licensed pursuant to chapter 5-02 or 5-03, without regard to whether the<br>business of the person is conducted under the terms of an agreement with a<br>licensed brewer.4."Brand" means any word, name, group of letters, symbol, or combination thereof,<br>that is adopted and used by a brewer or importer to identify a specific beer product,<br>and to distinguish that beer product from another beer product.5."Brand extension" is any brand that incorporates all or a substantial part of the<br>unique features of a preexisting brand of the same brewer or importer and which<br>relies to a significant extent on the goodwill associated with that preexisting brand.6."Brewer" means every licensed brewer or importer of beer located within or without<br>this state who enters into an agreement with any beer wholesaler licensed to do<br>business in this state.7."Person" means a natural person, corporation, limited liability company, partnership,<br>trust, agency, or other entity as well as the individual officers, directors, or other<br>persons in active control of the activities of each such entity. "Person" also includes<br>heirs, assigns, personal representatives, conservators, and guardians.Page No. 18."Territory" or "sales territory" means the area of primary sales responsibility<br>designated by any agreement between any beer wholesaler and brewer for the<br>brand or brands of any brewer.5-04-02. Inducement or coercion prohibited. No brewer may:1.Induce or coerce, or attempt to induce or coerce, any beer wholesaler to accept<br>delivery of any alcoholic beverage or any other commodity which has not been<br>ordered by the beer wholesaler.2.Induce or coerce, or attempt to induce or coerce, any beer wholesaler to enter any<br>agreement or take any action that would violate any law or rule of this state by<br>threatening to amend, cancel, terminate, or refuse to renew any agreement existing<br>between a brewer and a beer wholesaler.3.Require a wholesaler to assent to any condition, stipulation, or provision limiting the<br>wholesaler's right to sell any other brewer's product anywhere in this state, provided<br>the sale of another brewer's product does not materially impair the quality of service<br>or quantity of sales of the existing brand or brands of the brewer seeking to impose<br>the condition, stipulation, or provision.4.Require a wholesaler to submit specific, confidential information regarding<br>competitive brands, as a condition of renewal or continuation of an agreement.5.Fail to provide each wholesaler of its brands with a written contract which conforms<br>to this chapter and embodies the brewer's agreement with each wholesaler.5-04-03. Dual distributorship prohibited. No brewer who designates a sales territoryfor which a wholesaler shall be primarily responsible shall enter into an additional agreement with<br>any other beer wholesaler for its brand or brands of beer in the same territory. No wholesaler<br>may deliver beer to a retail account outside a sales territory designated by the brewer of a<br>particular brand or brands.5-04-04. Agreement cancellation. Notwithstanding the terms, provisions, or conditionsof any agreement, no brewer may amend, cancel, terminate, or refuse to renew any agreement,<br>or cause a wholesaler to resign from an agreement, unless good cause exists for amendment,<br>termination, cancellation, nonrenewal, noncontinuation, or causing a resignation. "Good cause"<br>does not include the sale or purchase of a brewer. "Good cause" includes, but is not limited to,<br>the following:1.Revocation of the wholesaler's license to do business in this state.2.The wholesaler's bankruptcy or insolvency.3.Assignment for the benefit of creditors or similar disposition of the wholesaler's<br>assets.4.The wholesaler's failure to comply, without reasonable excuse or justification, with<br>any reasonable and material requirement imposed upon the wholesaler by the<br>brewer.In any dispute over an amendment, cancellation, termination, or nonrenewal, the brewer has the<br>burden of proving the existence of good cause. If a wholesaler initiates a civil action, the brewer<br>bears the burden of proving the existence of good cause after a prima facie showing by the<br>wholesaler that good cause does not exist.5-04-05. Notice of intent to terminate. Except as otherwise provided in this section, abrewer shall provide a wholesaler with at least ninety days prior written notice of any intent to<br>amend, terminate, cancel, or not renew any agreement. The notice must state all the reasons forPage No. 2the intended amendment, termination, cancellation, or nonrenewal. The wholesaler has ninety<br>days after receiving notice in which to rectify any claimed deficiency. If the deficiency is rectified<br>within ninety days of notice, the proposed amendment, termination, cancellation, or nonrenewal<br>is void.The notice provisions of this section do not apply if the reason for the termination,cancellation, or nonrenewal is:1.The wholesaler's bankruptcy or insolvency.2.An assignment for the benefit of creditors or similar disposition of the business<br>assets.3.Revocation of the wholesaler's license.4.Conviction or a plea of guilty or no contest to a charge of violating a law relating to<br>the business that materially affects the wholesaler's ability to remain in business.5-04-06. Assignment, transfer, or sale of business. No brewer may unreasonablywithhold consent to any assignment, transfer, or sale of the wholesaler's business whenever the<br>wholesaler to be substituted meets the material and reasonable qualifications and standards<br>required of the brewer's wholesalers.No brewer may unreasonably refuse, withhold, or unduly delay its approval of theissuance, sale, or transfer by a corporate beer wholesaler of its capital stock or any other<br>corporate equity or debt security.5-04-07. Reasonable compensation for wrongful cancellation.1.Any brewer which amends, cancels, terminates, or refuses to renew any beer<br>agreement, or causes a wholesaler to resign from an agreement, unless for "good<br>cause" as defined by section 5-04-04, or which unreasonably withholds consent to<br>any assignment, transfer, or sale of a wholesaler's business, shall pay the<br>wholesaler reasonable compensation for the value of the wholesaler's business with<br>relationship to the terminated brand or brands.The value of the wholesaler'sbusiness includes, but is not limited to, the fair market value of the wholesaler's<br>business with respect to the terminated brand or brands, including the value of any<br>ancillary business of the wholesaler and the goodwill of the business or ancillary<br>business. The value of the wholesaler's business may not exceed the wholesaler's<br>actual damages.2.If the brewer and the beer wholesaler are unable to mutually agree on reasonable<br>compensation for the value of the wholesaler's business, the matter must be<br>submitted to a neutral arbitrator to be selected by the parties or, if they cannot agree,<br>by the presiding district judge of the district in which the wholesaler's main office is<br>located. All arbitration costs shall be divided equally between the wholesaler and the<br>brewer. The award of the neutral arbitrator shall be final and binding on the parties.5-04-08.Judicial remedies.If a brewer engages in conduct prohibited under thischapter, a wholesaler, with whom the brewer has an agreement pursuant to this chapter, may<br>maintain a suit against the brewer. The venue of any legal action taken under this section, or<br>pursuant to a dispute arising out of an agreement or breach thereof, or over the provisions of an<br>agreement, is a court, state or federal, located in North Dakota, or where the wholesaler<br>maintains its principal place of business in this state. The court may grant equitable relief as is<br>necessary to remedy the effects of conduct which it finds to exist and which is prohibited under<br>this chapter, including, but not limited to, declaratory judgment and injunctive relief. The court<br>may award actual damages and costs. If the court finds the brewer has acted in bad faith in<br>invoking amendment, termination, cancellation, or nonrenewal under this chapter or has<br>unreasonably withheld its consent to any assignment, transfer, or sale of the wholesaler's<br>agreement, the court may also award reasonable attorney's fees.Page No. 35-04-09. Product price. No brewer, whether by means of a term or condition of anagreement or otherwise, may fix or maintain the price at which the wholesaler sells any alcoholic<br>beverage.5-04-10.Retaliatory action prohibited.A brewer may not take retaliatory actionagainst a wholesaler who files or manifests an intention to file a complaint of alleged violation of<br>state or federal law or regulation by the brewer with the appropriate state or federal regulatory<br>authority."Retaliatory action" includes, but is not limited to, refusal without good cause tocontinue the agreement, or a material reduction in the quality of service or quantity of products<br>available to the wholesaler under the agreement.5-04-11. Wholesaler management. No brewer may require or prohibit any change inmanagement or personnel of any wholesaler unless the current or potential management or<br>personnel fails to meet essential, reasonable, and nondiscriminatory requirements.5-04-12.Discrimination prohibited.No brewer may discriminate among its NorthDakota wholesalers in the price of beer sold to the North Dakota wholesalers or in price<br>promotions. No wholesaler may refuse to sell to any licensed alcoholic beverage retailer in its<br>sales territory. No wholesaler may discriminate among the licensed alcoholic beverage retailers<br>in its sales territory in the price of beer sold to the retailers or in price promotions.5-04-13.Waiver prohibited.No brewer may require any wholesaler to waivecompliance with any provision of this chapter. Nothing in this chapter may be construed to limit<br>or prohibit good-faith dispute settlements voluntarily entered into by the parties. However, no<br>provision of any written agreement may require the law of any state other than North Dakota to<br>govern the relationship of the parties.5-04-14. Sale of brewer. Except for good cause, as defined by section 5-04-04, thepurchase of a brewer as defined in section 5-04-01, when the purchaser continues in business as<br>a brewer, shall obligate the new brewer to all terms and conditions of the agreement in effect on<br>the date of purchase. "Purchase", for the purposes of this chapter, includes the sale of stock,<br>sale of assets, merger, lease, transfer, or consolidation.5-04-15. Application to agreements. The provisions of this chapter cover agreementsin existence on July 1, 1981, as well as agreements entered into after July 1, 1981.5-04-16. Right of free association. No brewer or wholesaler may restrict or inhibit,directly or indirectly, the right of free association among brewers or wholesalers for any lawful<br>purpose.5-04-17. Chapter to apply when in conflict with title 51. The provisions of this chapterapply in any instances when the provisions of this chapter conflict with the unfair practice<br>provisions of title 51.5-04-18. Same brands - Assignment of brand extensions. Different categories ofproducts manufactured and marketed under a common identifying trade name are the same<br>brand. For example, "old faithful" includes "old faithful", "old faithful light", "old faithful draft", "old<br>faithful dry", and other products identified principally by the old faithful name. Differences in<br>packaging do not establish different brands. A brewer or importer may assign a brand extension<br>only to the wholesaler with an exclusive sales territory to the brand that is the basis for the brand<br>extension. This limitation does not apply to assignments of brand extensions to wholesalers<br>which were made by a brewer or importer before August 1, 1995. If, before August 1, 1995, a<br>brewer or importer assigned a brand extension to a wholesaler that is without exclusive sales<br>territory to the brand that is the basis of the brand extension, any additional brand extension must<br>be assigned to the wholesaler who first had the brand.Page No. 4Document Outlinechapter 5-04 beer wholesaler and brewer relationships]]>