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Public Act 91-0003
HB1061 Enrolled LRB9105378WHdv
AN ACT concerning soft drink beverage distribution.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Soft Drink Industry Fair Dealing Act.
Section 5. Definitions. As used in this Act:
"Distribution agreement" means any contract, appointment,
agreement, course of dealing, or arrangement, express or
implied, whether oral or written, for a definite or
indefinite period, between a supplier and a distributor
pursuant to which the distributor has been granted the right
to (i) directly or through a cooperative or association of
which the distributor is a member, bottle or can one or more
soft drink beverages or process soft drink beverage
concentrate into beverage syrup, and (ii) sell, distribute,
or deliver such soft drink beverages or soft drink beverage
syrup under trademarks owned or licensed by the supplier.
"Distributor" means a person in this State who (i)
directly or through a cooperative or association of which the
person is a member, bottles or cans one or more soft drink
beverage or processes soft drink beverage concentrate into
beverage syrup, and (ii) sells, distributes, or delivers such
soft drink beverages or soft drink beverage syrup under
trademarks owned or licensed by a supplier.
"Distributorship" means a business relationship between a
supplier and a distributor established pursuant to a
distribution agreement. Except as otherwise expressly
provided in this Act, the term "distributorship" does not
include a partnership, joint venture, corporation, limited
liability company, or other entity owned in whole or in part
by a supplier.
"Good cause" means the material failure of a distributor
to comply with essential and reasonable requirements imposed
upon the distributor by a distribution agreement or bad faith
in the performance of a distribution agreement. The
requirements may not be discriminatory either by their terms
or in the methods or effects of enforcement as compared with
requirements imposed upon other similarly situated Illinois
distributors. The requirements may not be inconsistent with
this Act or in violation of any law or regulation. The
failure of a distributor to assent to any amendment,
modification, or change in the terms of a distribution
agreement that impairs, restricts, or eliminates, in whole or
in part, the distribution or delivery rights of a distributor
under the distribution agreement shall not constitute good
cause.
"Good faith" means honesty in fact and the observation of
reasonable commercial standards for fair dealing in trade.
"Person" means a natural person, partnership, joint
venture, corporation, limited liability company, or other
entity and includes heirs, assigns, successors, personal
representatives, and guardians.
"Soft drink" means a non-alcoholic, carbonated beverage
made from a concentrate, syrup, or other beverage base.
"Soft drink products" means ready-to-use soft drinks,
whether in bottles, cans, or other containers and soft drink
beverage syrup for use in servicing fountain equipment and
cup vending machines dispensing soft drinks.
"Supplier" means a person engaged in the manufacture or
marketing of soft drink beverage concentrate, syrup, or other
soft drink beverage base for use in the preparation of soft
drink products sold under trademarks owned or licensed by
such person.
Section 10. Legislative declarations; construction;
variation by contract.
(a) The General Assembly makes the following findings
and declarations:
(1) Distributors of soft drink products in the
State of Illinois have been and are required to make
substantial capital investments in plant, property, and
equipment in order to fulfill their obligations under
distribution agreements. Distributors must rely upon the
continuing right to sell and distribute soft drink
products to recover their investments and to obtain a
reasonable return on those investments.
(2) Distributorship relationships in the State of
Illinois vitally affect the general economy of the State
and the public's interest in the fair, efficient, and
competitive distribution of soft drink products.
(b) The purposes of this Act are to promote the public's
interest in the fair, efficient, and competitive distribution
of soft drink products by regulation and by the encouragement
of suppliers and distributors of soft drink products to
conduct their business relations toward these ends by:
(1) protecting distributors against unfair
treatment by suppliers in the negotiation, revision,
renewal, and cancellation of distributorships and
distribution practices;
(2) assuring that distributors are free to manage
their business enterprises;
(3) assuring suppliers and the public of continuing
service from distributors able to devote adequate efforts
and resources to the processing, bottling, canning,
distribution, and delivery of soft drink products as to
which they have been granted a distributorship; and
(4) providing distributors with rights and remedies
in addition to those existing by contract or at common
law.
This Act shall be liberally construed and applied to
promote its underlying purposes.
(c) Any contract or agreement purporting to waive or
vary the provisions of this Act, or purporting to preclude
the application of this Act to any distributorship subject to
this Act is void and unenforceable to that extent.
(d) This Act provides distributors with rights and
remedies in addition to those existing by contract or common
law and reaffirms rights and remedies provided by contract or
common law.
(e) In accordance with Section 1.31 of the Statute on
Statutes, the provisions of this Act are severable. If any
provision of this Act, or the application of any provision of
this Act to any person or circumstance, is held invalid, such
invalidity shall not affect other provisions or applications
of this Act which can be given effect without the invalid
provision or application, and the application of this Act to
persons or circumstances other than those as to which it is
held invalid shall not be affected thereby.
Section 15. Cancellation and alteration of
distributorships.
(a) No supplier, directly or through any officer, agent,
employee, or representative, shall:
(1) cancel, fail to renew, or otherwise terminate a
distribution agreement without good cause to do so;
(2) unilaterally impose any amendment,
modification, or change in the terms of a distribution
agreement;
(3) fail to exercise good faith in the negotiation
of any amendment, modification, or change in the terms of
a distribution agreement, engage in retaliatory conduct
against a distributor for the exercise of a legal right,
or otherwise fail to exercise good faith in its dealings
with a distributor;
(4) discriminate in pricing, fees, charges or other
terms of the distributorship against any distributor that
withholds its assent to any amendment, modification, or
change in the terms of a distribution agreement;
(5) restrict or inhibit, directly or indirectly,
the right of free association among distributors for any
lawful purpose;
(6) fail, without good cause, to offer a
distributor the right, within its geographic territory,
to (i) directly or through a cooperative or association
of which the distributor is a member, bottle or can any
new soft drink beverages introduced by the supplier and
process any new soft drink beverage concentrate into
beverage syrup, and (ii) sell, distribute, and deliver
such soft drink beverages or soft drink beverage syrup
under trademarks owned or licensed by the supplier or
offer a distributor such right on terms and conditions
less favorable than such right is offered to any other
distributor of the supplier, including any distributor
owned in whole or in part by the supplier.
(b) No supplier who, pursuant to a distribution
agreement, has granted a person the exclusive right in a
generally defined geographic area to (i) directly or through
a cooperative or association of which the person is a member,
bottle or can one or more soft drink beverages, or process
soft drink beverage concentrate into beverage syrup, and (ii)
sell, distribute, or deliver such soft drink beverages or
soft drink beverage syrup under trademarks owned or licensed
by the supplier, shall, directly or through any officer,
agent, employee, or representative, enter into an agreement
authorizing, permitting, contemplating, or providing for the
exercise of any of such rights in the same geographic area by
any other person.
Section 20. Notice of cancellation.
(a) Except as hereinafter provided in subsection (c), no
supplier may cancel, fail to renew, or otherwise terminate a
distribution agreement unless the supplier furnishes prior
notification to the affected party in accordance with
subsection (b).
(b) The notification required by subsection (a) of this
Section shall contain (i) a statement of the supplier's
intention to cancel, fail to renew, or otherwise terminate
the distribution agreement, (ii) a complete statement of the
reasons therefor, including all data and documentation
necessary to fully apprise the distributor of the reasons for
the action, and (iii) the date on which the action is
intended to take effect. The notification shall be in
writing and sent to the affected distributor by certified
mail not less than 90 days before the date on which the
supplier intends to cancel, fail to renew, or otherwise
terminate the distribution agreement, and shall provide the
distributor a reasonable period of time, in no event less
than 60 days from the date of delivery or posting of the
notice, within which to cure any claimed deficiency. If the
reason for cancellation, nonrenewal, or other termination is
nonpayment of sums due under the distributorship, the
notification shall be sent not less than 30 days before the
date on which the supplier intends to cancel, fail to renew,
or otherwise terminate the distribution agreement, and the
distributor shall have 30 days from the date of delivery or
posting of the notice within which to cure the default. If
the deficiency is cured within the applicable period, the
notice shall be void.
(c) The notice requirements of this Section shall not
apply if the reason for cancellation, failure to renew, or
other termination of a distributorship agreement is:
(1) an assignment for the benefit of the
distributor's creditors or similar disposition of
substantially all of the assets of the distributor's
business;
(2) the insolvency of the distributor or the
institution of proceedings in bankruptcy by or against
the distributor; or
(3) the dissolution or liquidation of the
distributor.
Section 25. Transfer of business assets and stock. No
supplier, directly or through any officer, agent, employee or
representative, shall:
(a) unreasonably withhold or delay its consent, if
requested by a distributor, to any assignment, sale,
transfer, or other disposition of all or any portion of (i) a
distributor's business, assets, or stock, or of the
beneficial ownership or control of a distributor, or (ii) the
stock, beneficial ownership, or control of any other entity
owning or controlling a distributor;
(b) upon the death of a person owning or controlling a
distributor, unreasonably deny approval of a transfer of
ownership or control of the distributorship to a surviving
spouse or adult child of such person;
(c) upon the death of one of the partners of a
partnership operating the business of a distributor, deny the
surviving partner or partners of such partnership the right
to become a successor-in-interest to the distribution
agreement between the supplier and such partnership;
(d) unreasonably withhold or delay its consent, if
requested by a distributor, to any assignment, sale, or
transfer to the distributor of all or any portion of the
business, assets, or stock of any other person who has been
granted the right to (i) directly or through a cooperative or
association of which the person is a member, bottle or can
one or more soft drink beverages or process soft drink
beverage concentrate into beverage syrup, and (ii) sell,
distribute, or deliver soft drink beverages or soft drink
beverage syrup under trademarks owned or licensed by the
supplier, where the distributor and such other person have
freely negotiated such an assignment, sale, or transfer.
Section 30. Reasonable compensation.
(a) Any supplier that (i) cancels, fails to renew, or
otherwise terminates any distribution agreement, or (ii)
unlawfully denies approval of or unreasonably withholds
consent to any assignment, transfer, or sale of a
distributor's business, assets, stock, or other ownership
interest in a distributor, shall (i) pay the distributor the
fair market value of that portion of the distributor's
business that the supplier has cancelled, failed to renew, or
otherwise terminated, or (ii) pay the distributor or other
aggrieved person the fair market value of that portion of the
business, assets, stock, or other ownership interest sought
to be assigned, transferred, or sold. Fair market value shall
include, but shall not be limited to, the value of the
goodwill associated with the business, assets, stock, or
other ownership interest valued hereunder, and such fair
market value shall be determined without regard to any
marketability, minority interest, or other similar discount
or reduction.
(b) If a supplier and a distributor or other aggrieved
person are unable to agree on the reasonable compensation to
be paid under subsection (a), any such party may maintain a
civil suit as provided in Section 35 of this Act or the
matter may, by mutual agreement of the parties, be submitted
to arbitration or mediation. Unless the parties otherwise
agree, the costs of arbitration shall be shared equally by
the parties.
(c) No distributorship agreement may require the
distributor to pay more than half the costs of arbitration or
mediation or require arbitration or mediation to be conducted
outside this State.
Section 35. Judicial remedies.
(a) It shall be an affirmative defense in an action
between the parties to a distributorship agreement that good
cause existed for a supplier to cancel, fail to renew, or
otherwise terminate the distributorship agreement at issue.
(b) If a supplier engages in any of the practices
prohibited by Section 15 of this Act or violates any of the
provisions of Sections 20, 25, or 30 of this Act, any
aggrieved distributor or other aggrieved person may bring an
action against the supplier for damages sustained by the
distributor as a consequence thereof, together with the
actual costs and expenses of the action, including reasonable
attorney's fees. The aggrieved distributor or other
aggrieved person also may be granted injunctive relief,
including injunctive relief against an unlawful termination,
cancellation, nonrenewal, or other termination of a
distribution agreement. The remedies provided in this
subsection (b) are cumulative with all other remedies
available to an aggrieved distributor or other aggrieved
person, including but not limited to the remedies provided
for in subsections (c), (d) and (e) of this Section.
(c) Upon proper application to the court, a supplier,
distributor, or other aggrieved person may bring an action to
determine reasonable compensation under Section 30 of this
Act.
(d) A supplier, distributor, or other aggrieved person
may bring an action for a declaratory judgment to determine
any controversy arising under this Act or out of the
distributorship relationship.
(e) If, in any action brought pursuant to this Act, a
finding is made that a party has not acted in good faith with
respect to any other party to a distribution agreement, an
appropriate penalty shall be assessed against that party and,
in addition, that party shall also be ordered to pay the
actual costs and expenses of the action, including reasonable
attorney's fees incurred by the other party.
(f) Any action brought pursuant to this Act shall be
brought in a court of this State or in a federal court in
this State vested with jurisdiction over the controversy.
Venue in any such action shall be in accordance with the Code
of Civil Procedure or Title 28 of the U.S. Code, as the case
may be, provided that in any action brought in a court of
this State, venue also shall exist in any county in which the
distributorship is located.
(g) Nothing in this Act shall (i) prohibit the parties
to any dispute from agreeing to arbitrate the dispute or to
submit the dispute to mediation or (ii) prohibit the
enforcement of any arbitration or mediation agreement in
accordance with applicable Illinois law. In any such
arbitration or mediation, the definitions and substantive
provisions of this Act shall apply and the arbitrator or
mediator may afford the remedies provided for by this Act.
Section 40. Application of this Act. This Act shall
govern all relations between suppliers and distributors to
the fullest extent consistent with the constitutions of this
State and of the United States. All provisions of this Act
which are declarative of or clarify existing law, including
the provisions of Section 15(a)(3) of this Act, apply to all
agreements between a supplier and a distributor whether those
agreements were entered into before or after the effective
date of this Act. In addition, this Act shall, to the
fullest extent permitted by law, apply (i) to conduct
occurring after the effective date of this Act, whether or
not such conduct relates to a distribution agreement entered
into before the effective date of this Act, and (ii) to
distribution agreements entered into or amended after the
effective date of this Act, including any renewal of a
distribution agreement in existence on or before the
effective date of this Act. Renewal of a distribution
agreement with a designated term or duration shall mean (i)
the establishment of a new term or duration, (ii) an
extension of the distribution agreement on any other basis,
or (iii) the shipment of soft drink concentrate or syrup to
the distributor after the expiration of the designated term
or duration. Renewal of a distribution agreement that
provides for a month to month, year to year, or other
periodic term or duration, shall mean (i) the continuation of
the distributorship into the next month, year, or other
period commencing after the effective date of this Act, (ii)
an extension of the distribution agreement on any other
basis, or (iii) the shipment of soft drink concentrate or
syrup to a distributor after the expiration of the month,
year, or other period of the distribution agreement. Renewal
of any distribution agreement that does not have a designated
term or duration, or that is terminable at will or upon
notice, shall mean the shipment of soft drink concentrate or
syrup to a distributor after the effective date of this Act.
Section 99. Effective date. This Act takes effect upon
becoming law.
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