MCA Chapter 7

in effect

Miss. Code Ann. § 67-7-1 Short title.

This chapter shall be known and may be cited as the “Beer Industry Fair Dealing Act.”

Miss. Code Ann. § 67-7-3 Purpose.

The legislative purpose of this chapter is to provide a structure for the business relations between a wholesaler and a supplier of light wine or beer. Regulation in this area is considered necessary for the following reasons: To maintain stability and healthy competition in the light wine and beer industry in this state. To promote and maintain a sound, stable and viable system of distribution of light wine and beer to the public. To provide for the private settlement of disputes between wholesalers and suppliers of light wine or beer as an alternative to civil litigation which consumes the time and resources of the parties and the judicial system. To promote the public health, safety and welfare.

Miss. Code Ann. § 67-7-5 Definitions.

As used in this chapter, the following words or phrases, or the plural thereof, whenever they appear in this chapter, unless the context clearly requires otherwise, shall have the meaning ascribed to them in this section. “Agreement” means any agreement between a wholesaler and a supplier, whether oral or written, whereby a wholesaler is granted the right to purchase and sell a brand or brands of light wine or beer sold by a supplier. “Ancillary business” means a business owned by the wholesaler, by a substantial stockholder of a wholesaler, or by a substantial partner of a wholesaler, the primary business of which is directly related to the transporting, storing or marketing of the brand or brands of light wine or beer of a supplier with whom the wholesaler has an agreement; or a business owned by a wholesaler, a substantial stockholder of a wholesaler. “Commission” or “department” means the Department of Revenue of the State of Mississippi. “Commissioner” means the Commissioner of Revenue of the Department of Revenue. “Designated member” means the spouse, child, grandchild, parent, brother or sister of a deceased individual who owned an interest, including a controlling interest, in a wholesaler, or any person who inherits under the deceased individual’s will, or under the laws of intestate succession of this state; or any person who or entity which has otherwise, through a valid testamentary device by the deceased individual, succeeded the deceased individual in the wholesaler’s business, or has succeeded to the deceased individual’s ownership interest in the wholesaler pursuant to a written contract or instrument which has been previously approved by supplier; “designated member” includes the appointed and qualified personal representative and the testamentary trustee of a deceased individual owning an ownership interest in a wholesaler, and it includes the person appointed by a court as the guardian or conservator of the property of an incapacitated individual owning an ownership interest in a wholesaler. “Establish” means to adjust or regulate, to provide for and uphold. “Good faith” means honesty in fact and observance of reasonable commercial standards of fair dealing in the trade, as defined in and interpreted under the Uniform Commercial Code. “Reasonable qualifications” means the standard of the reasonable criteria established and consistently used by the respective supplier for similarly situated wholesalers that entered into, continued or renewed an agreement with the supplier during a period of twenty-four (24) months before the proposed transfer of the wholesaler’s business, or for similarly situated wholesalers who have changed managers or designated managers, under the agreement, during a period of twenty-four (24) months before the proposed change in the manager or successor manager of the wholesaler’s business. “Retaliatory action” means the refusal to continue an agreement, or a material reduction in the quality of service or quantity of products available to a wholesaler under an agreement, which refusal or reduction is not made in good faith. “Sales territory” means a primary area of sales responsibility for the brand or brands of light wine or beer sold by a supplier as designated by an agreement. “Substantial stockholder or substantial partner” means a stockholder of or partner in the wholesaler who owns an interest of ten percent (10%) or more of the partnership or of the capital stock of a corporate wholesaler. “Successor” means a person who replaces a supplier with regard to the right to manufacture, sell, distribute or import a brand or brands of light wine or beer. “Supplier” means a manufacturer or importer of light wine or beer as regulated by the department under Sections 67-3-1 through 67-3-73. “Transfer of wholesaler’s business” means the voluntary sale, assignment or other transfer of ten percent (10%) or more of control of the business or all or substantially all of the assets of the wholesaler, or ten percent (10%) or more of control of the capital stocks of the wholesaler, including without limitation the sale or other transfer of capital stock or assets by merger, consolidation or dissolution, or of the capital stock of the parent corporation, or of the capital stock or beneficial ownership of any other entity owning or controlling the wholesaler. “Wholesaler” means a wholesaler of light wine or beer as regulated by the department under Sections 67-3-1 through 67-3-73. “Similarly situated wholesalers” means wholesalers of a supplier that are of a generally comparable size and operate in markets in Mississippi and adjoining states with similar demographic characteristics, including population size, density, distribution and vital statistics, as well as reasonably similar economic and geographic conditions. “Light wine and/or beer” has the meaning ascribed to such terms in Section 67-3-5.

Miss. Code Ann. § 67-7-7 Prohibited acts; suppliers.

A supplier shall not do the following: Fail to provide each wholesaler of the supplier’s brand or brands with a written agreement which contains in total the supplier’s agreement with each wholesaler, and designates a specific sales territory. Any agreement which is in existence on April 7, 1995 shall be renewed consistent with this chapter, provided that this chapter may be incorporated by reference in the agreement. Nothing contained herein shall prevent a supplier from appointing, one (1) time for a period not to exceed ninety (90) days, a wholesaler to service temporarily a sales territory not designated to another wholesaler, until such time as a wholesaler is appointed by the supplier; and such wholesaler who is designated to service the sales territory during this period of temporary service shall not be in violation of the chapter, and, with respect to the temporary service territory, shall not have any of the rights provided under Sections 67-7-11 and 67-7-15. Fix, maintain or establish the price at which a wholesaler shall sell any light wine or beer. Enter into an additional agreement with any other wholesaler for, or to sell to any other wholesaler, the same brand or brands of light wine or beer in the same territory or any portion thereof, or to sell directly to any retailer in this state. Require any wholesaler to accept delivery of any light wine or beer or other commodity which has not been ordered by the wholesaler, except that a supplier may impose reasonable inventory requirements upon a wholesaler if the requirements are made in good faith and are generally applied to other similarly situated wholesalers who have an agreement with the supplier. Require any wholesaler to accept delivery of any light wine or beer or other commodity ordered by a wholesaler if the order was properly cancelled by the wholesaler in accordance with the supplier’s procedure. Require any wholesaler to do any illegal act or to violate any law or regulation by threatening to amend, modify, cancel, terminate or refuse to renew any agreement existing between the supplier and wholesaler. Require a wholesaler to assent to any condition, stipulation or provision limiting the wholesaler’s right to sell the brand or brands of light wine or beer of any other supplier unless the acquisition of the brand or brands of another supplier would materially impair or adversely affect the wholesaler’s quality of service, sales or ability to compete effectively in representing the brand or brands of the supplier presently being sold by the wholesaler, except that in any action challenging a supplier’s position, the supplier shall have the burden of providing that such acquisition of such other brand or brands would have such effect. Require a wholesaler to purchase one or more brands of light wine or beer products in order for the wholesaler to purchase another brand or brands of light wine or beer for any reason, except that a wholesaler that has agreed to distribute a brand or brands before April 7, 1995 shall continue to distribute the brand or brands in conformance with this chapter. Require a wholesaler to submit audited profit and loss statements, balance sheets or financial records as a condition of renewal or continuation of an agreement, except that a supplier may require reasonable proof of a wholesaler’s financial condition prior to extending credit terms to a wholesaler. Withhold delivery of light wine or beer ordered by wholesaler, or change a wholesaler’s quota of a brand or brands if the withholding or change is not made in good faith. Require a wholesaler by any means directly to participate in or contribute to any local or national advertising fund controlled directly or indirectly by a supplier. Take any retaliatory action against a wholesaler that files a complaint in good faith regarding an alleged violation by the supplier of federal, state or local law or an administrative rule as a result of that complaint. Require or prohibit any change in the manager or successor manager of any wholesaler who has been approved by the supplier as of or after April 7, 1995 unless the supplier acts in good faith. Should a wholesaler change an approved manager or successor manager, a supplier shall not require or prohibit the change unless the person selected by the wholesaler fails to meet the nondiscriminatory, material and reasonable standards and qualifications for managers consistently applied to similarly situated wholesalers by the supplier, except that, in any action challenging a supplier’s decision, the supplier shall have the burden of proving that such person fails to meet such standards and qualifications. Upon written notice of intent to transfer the wholesaler’s business, interfere with, prevent or unreasonably delay (not to exceed thirty (30) days) the transfer of the wholesaler’s business if the proposed transferee is a designated member. Upon written notice of intent to transfer the wholesaler’s business other than to a designated member, withhold consent to or approval of, or unreasonably delay (not to exceed thirty (30) days after receipt of all material information reasonably requested) a response to a request by the wholesaler for any transfer of a wholesaler’s business if the proposed transferee meets the nondiscriminatory material and reasonable qualifications and standards required by the supplier for similarly situated wholesalers. Restrict or inhibit the right of free association among wholesalers for any lawful purpose. Threaten to cancel or withhold credit, or to reduce the time period normally given the wholesaler to make payment on a delivery from the supplier as a means of compelling the wholesaler to meet certain standards of performance in any area of business not directly related to credit.

Miss. Code Ann. § 67-7-9 Prohibited acts; wholesalers.

A wholesaler shall not do any of the following: Fail to devote such efforts and resources to the sale and distribution of all the supplier’s brands of light wine or beer which the wholesaler has been granted the right to sell or distribute as are required in the wholesaler’s agreement with the supplier. Sell or deliver light wine or beer to a retail licensee located outside the sales territory designated to the wholesaler by the supplier of a particular brand or brands of light wine or beer, except that during periods of temporary service interruptions impacting a particular sales territory, a supplier may appoint another wholesaler to service the sales territory during the period of temporary service interruption. A wholesaler who is designated to service the impacted sales territory during the period of temporary service interruption shall not be in violation of this chapter and shall not have any of the rights provided under Sections 67-7-11 and 67-7-15 with respect to the temporary service territory. Transfer the wholesaler’s business without giving the supplier written notice of intent to transfer the wholesaler’s business and, where required by this chapter, receiving the supplier’s written approval for the proposed transfer, except that the consent or approval of the supplier shall not be required of any transfer of the wholesaler’s business to a designated member, or of any transfer of less than ten percent (10%) of the wholesaler’s business unless such transfer results in a change in control. The wholesaler shall give the supplier written notice of any change in ownership of the wholesaler.

Miss. Code Ann. § 67-7-11 Amendment, modification, cancellation, termination, nonrenewal, or discontinuance of agreements by suppliers.

Except as otherwise provided for in this chapter, a supplier shall not amend or modify an agreement; cause a wholesaler to resign from an agreement; or cancel, terminate, fail to renew or refuse to continue under an agreement, unless the supplier has complied with all of the following: Has satisfied the applicable notice requirements of this section. Has acted in good faith. Has good cause for the amendment, modification, cancellation, termination, nonrenewal, discontinuance or forced resignation. In any action challenging such amendment, modification, termination, cancellation, nonrenewal or discontinuance, the supplier shall have the burden of proving that it has acted in good faith, that the notice requirements under this section have been complied with, and that there was good cause for the amendment, modification, termination, cancellation, nonrenewal or discontinuance. Except as otherwise provided in this section, and in addition to the time limits set forth in subsection (4)(d) of this section, the supplier shall furnish written notice of the amendment, modification, termination, cancellation, nonrenewal or discontinuance of an agreement to the wholesaler not less than thirty (30) days before the effective date of the amendment, modification, termination, cancellation, nonrenewal or discontinuance. The notice shall be by certified mail and shall contain all of the following: A statement of intention to amend, modify, terminate, cancel, nonrenew or discontinue the agreement. A statement of the reason for the amendment, modification, termination, cancellation, nonrenewal or discontinuance. The date on which the amendment, modification, termination, cancellation, nonrenewal or discontinuance takes effect. Good cause shall exist for the purposes of a termination, cancellation, nonrenewal or discontinuance under subsection (1)(c) of this section when all of the following occur: There is a failure by the wholesaler to comply with a provision of the agreement which is both reasonable and of material significance to the business relationship between the wholesaler and the supplier. The supplier first acquired knowledge of the failure described in subparagraph (a) not more than twenty-four (24) months before the date notification was given pursuant to subsection (3) of this section. The wholesaler was given notice by the supplier of failure to comply with this agreement. The wholesaler has been afforded thirty (30) days in which to submit a plan of corrective action to comply with the agreement and an additional ninety (90) days to cure such noncompliance in accordance with the plan. Notwithstanding subsections (1) and (3) of this section, a supplier may terminate, cancel, fail to renew or discontinue an agreement immediately upon written notice given in the manner and containing the information required by subsection (3)(a)(b) and (c) of this section if any of the following occur: Insolvency of the wholesaler, the filing of any petition by or against the wholesaler under any bankruptcy or receivership law or the assignment for the benefit of creditors or dissolution or liquidation of the wholesaler which materially affects the wholesaler’s ability to remain in business. Revocation or suspension of the wholesaler’s state or federal license by the appropriate regulatory agency whereby the wholesaler cannot service the wholesaler’s sales territory for more than thirty-one (31) days. The wholesaler, or a partner or an individual who owns ten percent (10%) or more of the partnership or stock of a corporate wholesaler, has been convicted of a felony under the United States Code or the laws of any state which reasonably may adversely affect the good will or interest of the wholesaler or supplier. However, an existing stockholder or stockholders, or partner or partners, or a designated member or members, shall have, subject to the provisions of this chapter, the right to purchase the partnership interest or the stock of the offending partner or stockholder prior to the conviction of the offending partner or stockholder, and if the sale is completed prior to conviction the provisions of this subparagraph shall not apply. There was fraudulent conduct relating to a material matter on the part of the wholesaler in dealings with the supplier or its product, except that the supplier shall have the burden of proving fraudulent conduct relating to a material matter on the part of the wholesaler in any legal action challenging such termination. The wholesaler failed to confine to the designated sales territory its sales of a brand or brands to retailers except that this subsection does not apply if there is a dispute between two (2) or more wholesalers as to the boundaries of the assigned territory, and the boundaries cannot be determined by a reading of the description contained in the agreements between the supplier and the wholesalers. A wholesaler has failed to pay for light wine or beer ordered and delivered in accordance with established terms and the wholesaler fails to make full payment within five (5) business days after receipt of written notice of the delinquency and demand for immediate payment from the supplier. A wholesaler intentionally has made a transfer of wholesaler’s business, other than a transfer to a designated member without prior written notice to the supplier. A wholesaler intentionally has made a transfer of wholesaler’s business, other than a transfer to a designated member, although the wholesaler has prior to said transfer received from supplier a timely notice of disapproval of said transfer in accordance with this chapter. The wholesaler intentionally ceases to carry on business with respect to any of supplier’s brand or brands previously serviced by wholesaler in its territory designated by the supplier, unless such cessation is due to force majeure or to labor dispute and the wholesaler has made good faith efforts to overcome such events. Provided, however, this shall affect only that brand or brands with respect to which the wholesaler ceased to carry on business. Notwithstanding subsections (1), (3) and (5) of this section, a supplier may terminate, cancel, not renew or discontinue an agreement upon not less than thirty (30) days prior written notice if the supplier discontinues production or discontinues distribution in this state of all the brands sold by the supplier to the wholesaler, except that nothing in this section shall prohibit a supplier from: (a) upon not less than thirty (30) days notice, discontinuing the distribution of any particular brand or package of light wine or beer; or (b) conducting test marketing of a new brand of light wine or beer which is not currently being sold in this state, except that the supplier has notified the State Tax Commission in writing of its plans to test market, which notice shall describe the market area in which the test shall be conducted; the name or names of the wholesaler or wholesalers who will be selling the light wine or beer; the name or names of the brand of light wine or beer being tested; and the period of time, not to exceed eighteen (18) months, during which the testing will take place.

Miss. Code Ann. § 67-7-12 Successor supplier to become obligated to all terms and conditions of agreements between original supplier and wholesaler in effect on date of succession.

A successor shall become obligated to all of the terms and conditions of the agreement in effect on the date of succession. This section applies regardless of the character or form of the succession. A successor has the right to contractually require its wholesalers to comply with operational standards of performance if the standards are uniformly established for all the successor’s wholesalers and conform to the provisions of this chapter.

Miss. Code Ann. § 67-7-13 Transfer of business and assignment of rights of wholesalers.

Upon written notice of intent to transfer the wholesaler’s business, any individual owning or deceased individual who owned an interest in a wholesaler may transfer the wholesaler’s business to a designated member, or to any other person who meets the nondiscriminatory material and reasonable qualifications and standards required by the supplier for similarly situated wholesalers. The consent or approval of the supplier shall not be required of any transfer of the wholesaler’s business, including the assignment of the wholesaler’s rights under the agreement, to a designated member or shall not be withheld or unreasonably delayed to a proposed transferee who meets such nondiscriminatory, material and reasonable qualifications and standards. Such designated member or transferee shall in no event be qualified as a transferee, without the written approval or consent of the supplier, where such proposed transferee shall have been involved in the following: Insolvency, filing of any voluntary or involuntary petition under any bankruptcy or receivership law, or execution of any assignment for the benefit of creditors; or Revocation or suspension of a special occupational tax license by the regulatory agency of the United States Government or any state, whereby service was interrupted for more than thirty-one (31) days; or Conviction of the proposed transferee or any owner thereof of a felony under the United States Code or the laws of any state which reasonably may adversely affect the good will or interest of the wholesaler or supplier; or Had an agreement involuntarily terminated, cancelled, not renewed or discontinued by a supplier for good cause. The supplier shall not interfere with, prevent or unreasonably delay the transfer of the wholesaler’s business, including an assignment of wholesaler’s rights under the agreement, if the proposed transferee is a designated member, or if the transferee other than a designated member meets such nondiscriminatory, material and reasonable qualifications and standards required by the supplier for similarly situated wholesalers. Where the transferee is other than a designated member, the supplier may in good faith and for good cause related to the reasonable qualifications refuse to accept the transfer of the wholesaler’s business or the assignment of the wholesaler’s rights under the agreement.

Miss. Code Ann. § 67-7-15 Duty of supplier to compensate wholesaler for conduct resulting in diminished value of business; determination of compensation by arbitration.

Except as provided for in this chapter, a supplier that has amended, modified, cancelled, terminated or refused to renew any agreement; or caused a wholesaler to resign from an agreement; or has interfered with, prevented or unreasonably delayed, or where required by this chapter, has withheld or unreasonably delayed consent to or approval of, any assignment or transfer of a wholesaler’s business, shall pay the wholesaler reasonable compensation for the diminished value of the wholesaler’s business, including any ancillary business which has been negatively affected by the act of the supplier. The value of the wholesaler’s business or ancillary business shall include, but not be limited to, its good will, except that nothing contained in this chapter shall give rise to a claim against the supplier or wholesaler by any proposed purchaser of wholesaler’s business. Should either party, at any time, determine that mutual agreement on the amount of reasonable compensation cannot be reached, the supplier or the wholesaler may send by certified mail, return receipt requested, written notice to the other party declaring its intention to proceed with arbitration. Arbitration shall proceed only by mutual agreement of both parties. Not more than ten (10) business days after the notice to enter into arbitration has been delivered, the other party shall send written notice to the requesting party declaring its intention either to proceed or not to proceed with arbitration. Should the other party fail to respond within ten (10) business days, it shall be conclusively presumed that said party shall have agreed to arbitration. The matter of determining the amount of compensation may, by agreement of the parties, be submitted to a three (3) member arbitration panel consisting of one (1) representative selected by the supplier but unassociated with the affected supplier; one (1) wholesaler representative selected by the wholesaler but unassociated with the wholesaler; and an impartial arbitrator. Not more than ten (10) business days after mutual agreement of both parties has been reached to arbitrate, each party shall designate, in writing, its one (1) arbitrator representative and the party initiating arbitration shall request, in writing, a list of five (5) arbitrators from the American Arbitration Association or its successor and request that the list be mailed to each party by certified mail, return receipt requested. Not more than ten (10) business days after the receipt of the list of five (5) choices, the wholesaler arbitrator and the supplier arbitrator shall strike and disqualify up to two (2) names each from the list. Should either party fail to respond within the ten (10) business days or should more than one (1) name remain after the strikes, the American Arbitration Association shall make the selection of the impartial arbitrator from the names not stricken from said list. Not more than thirty (30) days after the final selection of the arbitration panel is made, the arbitration panel shall convene to decide the dispute. The panel shall conclude the arbitration within twenty (20) days after the arbitration panel convenes and shall render a decision by majority vote of the arbitrators within twenty (20) days from the conclusion of the arbitration. The award of the arbitration panel shall be final and binding on the parties as to the amount of compensation for said diminished value. The cost of the impartial arbitrator, the stenographer and the meeting site shall be equally divided between the wholesaler and the supplier. All other costs shall be paid by the party incurring them. After both parties have agreed to arbitrate, should either party, except by mutual agreement, fail to abide by the time limitations as prescribed in subsections (3), (5) and (6) of this section, or fail or refuse to make the selection of any arbitrators, or fail to participate in the arbitration hearings, the other party shall make the selection of its arbitrators and proceed to arbitration. The party who has failed or refused to comply as prescribed in this section shall be considered to be in default. Any party considered to be in default pursuant to this subsection shall have waived any and all rights the party would have had in the arbitration and shall be considered to have consented to the determination of the arbitration panel.

Miss. Code Ann. § 67-7-17 Waiver of rights by wholesalers generally; good faith settlement of disputes.

A wholesaler may not waive any of the rights granted in any provision of this chapter and the provisions of any agreement which would have such an effect shall be null and void. Nothing in this chapter shall be construed to limit or prohibit good faith dispute settlements voluntarily entered into by the parties.

Miss. Code Ann. § 67-7-19 Agreements subject to chapter; applicability of terms and conditions of transferred agreements.

This chapter shall apply to agreements entered into or renewed after April 7, 1995. A transferee of a wholesaler that continues in business as a wholesaler shall have the benefit of and be bound by all terms and conditions of the agreement with the supplier in effect on the date of the transfer, except that a transfer of a wholesaler’s business which requires supplier’s consent or approval but is disapproved by the supplier shall be null and void.

Miss. Code Ann. § 67-7-21 Civil damage actions for violations of chapter; damages and costs recoverable; actions for declaratory and injunctive relief; venue.

If a supplier or wholesaler engages in conduct prohibited under this chapter, either party may maintain a civil action against the other to recover actual damages reasonably incurred as the result of the prohibited conduct. A supplier or wholesaler that violates any provision of this chapter shall be liable for all actual damages and all court costs and, in the court’s discretion, reasonable attorney fees incurred by the other party as a result of that violation. A supplier or wholesaler may bring an action for declaratory judgment for determination of any controversy arising pursuant to this chapter. Upon proper application to the court, a supplier or wholesaler may obtain injunctive relief against any violation of this chapter. Any legal action taken under this chapter, or in a dispute over the provisions of an agreement shall be filed in a court, state or federal, located in Mississippi, which state court is located in, or which federal court has jurisdiction and venue of, the county in which the wholesaler maintains its principal place of business in this state.

Miss. Code Ann. § 67-7-23 Waiver of rights or causes of action.

No right or cause of action authorized by Mississippi law shall be waived by the supplier or wholesaler unless specifically waived in the agreement.