SB 0529 - Fiscal Note

Fiscal Note - SB 0529 - Regulates wholesalers and brewers of beer

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 1978-04

BILL NO. SB 529

SUBJECT: Alcohol

TYPE: Original

DATE: January 12, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
Total Estimated Net Effect on All State Funds	$0	$0	$0

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Attorney General's Office assume this proposal would not fiscally impact their agency.

Officials of the Department of Public Safety, Division of Liquor Control (DLS) states there are 150 solicitors that ship beer into the state and 85 wholesalers that sell over 1,400 brands of beer in the state. DLS further states that this proposal would require them to monitor and administer commercial agreements between brewers and wholesalers and to monitor and enforce sales territories under these agreements. DLS assumes the maintaining of contract information and administering of this proposal in accordance with contractual law that is subject to arbitration and civil action would require General Counsel and a Clerk IV. The General Counsel would be responsible for monitoring compliance of this proposal, while the Clerk IV would be responsible for general record keeping and would serve as clerical support for the General Counsel. DLS estimates costs associated with the 2 FTE at $90,466 in FY99, $90,675 in FY00, and $93,027 in FY01.

This legislation is similar to proposals from prior years. In responding to our fiscal impact request for these previous proposals, DLS assumed it would not fiscally impact their agency. Therefore, Oversight assumes this proposal would have no fiscal impact on DLS.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	0	0	0
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	0	0	0

FISCAL IMPACT - Small Business

This proposal would protect beer wholesalers from brewers cancelling contracts without cause; therefore, it would have a positive economic impact on wholesalers.

DESCRIPTION

This proposal creates the Beer Industry Fair Dealing Law, which regulates agreements between wholesalers and brewers of beer. It prohibits brewers from terminating or refusing to renew any agreement with a wholesaler for the purchase and distribution of beer unless the brewer provides written notice pursuant to certain procedures and acts in good faith and with good cause. The proposal provides several exemptions to the written notice provision. It would also prohibit brewers from requiring certain contractual provisions and require brewers to assign brand extensions to the same wholesaler that has the exclusive sales territory for the underlying brand.

The legislation requires brewers to assign brand extensions to the wholesaler with the exclusive sales territory for the brand, unless assigned prior to the effective date of this act. Brewers are prohibited from unreasonably delaying its approval of any sale or transfer of a wholesaler's assets or voting stock, whenever the person to be substituted meets reasonable standards imposed upon wholesalers of that general class. Upon the death of a partner, no brewer shall deny any surviving partner the right to become a successor in interest, provided that partner is capable of carrying on the business of the partnership. Any sale or transfer by a surviving spouse or adult child of a wholesaler shall meet these requirements. ssssAny brewer who acts in violation of the provisions of this act shall pay the fair market value of the wholesaler's business with relation to the affected brands. In case a brewer and wholesalers cannot agree on good cause for cancellation of an agreement, or on fair market value, the parties may submit the dispute to a neutral arbitrator. If the dispute is not subject to arbitration, the injured wholesaler may file a civil action in the county of its principal place of business. ssssNo brewer shall set the prices for wholesalers. If a wholesalers exceeds the resale price increase recommended by a brewer, the brewer shall not raise its prices for sixty days. No brewer shall require a wholesaler to waive compliance with this act. ssssNew owners continuing the business of the brewery shall comply with all agreements of predecessor brewers that are in effect on the date of purchase. No brewer or wholesaler shall restrict the right of free association for any lawful purpose. The act covers agreements in existence on the date of enactment and thereafter, including any revisions to existing contracts.

This legislation is not federally mandated, would not duplicate any other program, and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Department of Economic Development

Public Service Commission

Office of Public Counsel

Department of Natural Resources

Jeanne Jarrett, CPA

Director

January 8, 1998