State of Illinois
91st General Assembly
Legislation

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91_HB2022

 
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 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.

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