SB3730 103RD GENERAL ASSEMBLY

LRB103 38678 RPS 68815 b

103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB3730

Introduced 2/9/2024, by Sen. Cristina Castro

SYNOPSIS AS INTRODUCED:

235 ILCS 5/6-9.10
235 ILCS 5/6-9.15

Amends the Liquor Control Act of 1934. Provides that a licensee with a combined on-premises and off-premises license may make purchases for on-premises use only through an on-premises cooperative purchase group and may make purchases for off-premises use only through an off-premises cooperative purchase group. Provides that neither a cooperative agent nor a cooperative purchase group may receive cash or anything of value from a retail licensee or an importing distributor or distributor, non-resident dealer, or manufacturer as part of a cooperative purchasing agreement. Removes language providing that a cooperative agent that is compliant with certain provisions may receive cash or anything of value from both the retail licensee and an importing distributor or distributor, non-resident dealer or manufacturers as part of a cooperative purchase group agreement. Provides that cooperative agents and cooperative purchase groups may not have an ownership interest, direct or indirect, in any business or enterprise that provides marketing services or activities on behalf of manufacturers, non-resident dealers, foreign importers, importing distributors, and distributors. Provides that it is the duty of every cooperative agent and cooperative purchase group to make books and records available upon reasonable notice for the purpose of investigation and control by the Illinois Liquor Control Commission or any local liquor commission having jurisdiction over a licensee member of a cooperative purchase group. Makes changes concerning the surety bond a cooperative purchase group is required to retain. Changes references from "cooperative purchasing group" to "cooperative purchase group" to conform to the defined term.

A BILL FOR

AN ACT concerning liquor.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Liquor Control Act of 1934 is amended by changing Section 6-9.10 as follows:

(235 ILCS 5/6-9.10)

Sec. 6-9.10. Cooperative purchasing agreements.

(a) A cooperative purchasing agreement shall only be valid if the following conditions are met:

(1) the agreement is in writing and signed by all parties to the agreement;

(2) the agreement contains the complete license information for all parties to the agreement, including State and local license numbers and expiration dates as well as the date on which the retail member joined the cooperative purchase group;

(3) a retail licensee that is a party to the agreement must not be a party to any other related cooperative purchasing agreement;

(4) the agreement identifies and designates the name and address of the agent or agents with the authority to contract for the purchase and delivery of wine or spirits on behalf of the cooperative purchase group;

(5) a copy of the executed agreement, including any amendments, deletions, or additions, is kept on the premises of each party to the agreement for a period of 3 years;

(6) a copy of the executed agreement, including any amendments, deletions, or additions, is delivered to the relevant licensee with distribution privileges and to the State Commission before making any purchases under the agreement; any amendments, deletions, or additions must be submitted to the State Commission within 7 business days after the amendment, deletion, or addition is executed; and

(7) the agreement must designate whether the cooperative purchase purchasing group is comprised of retail licenses engaged in the sale of wine or spirits on or off the premises.

(b) A retail licensee may, pursuant to a cooperative purchasing agreement, make purchases as a member of a cooperative purchase group or independently of any such group. Nothing in this Section or any other Section of this Act shall be construed to prohibit commonly or not commonly owned retail licensees from making purchases separate and apart from any membership in a cooperative purchase group.

(c) A retailer may only be a member of one cooperative purchase group at a time. A retail licensee may change to a different cooperative purchase group no more than twice in a 12-month period. However, if an existing cooperative purchase group member purchases a retail location from a member of another cooperative purchase group, the new owner of the retail location may move the membership of the retail licensee to a different cooperative purchase purchasing group.

(d) When a retail licensee joins an existing cooperative purchase purchasing group, the new member must be a member for a period of 7 days before being able to participate in any quantity discount programs.

(e) Cooperative purchase purchasing group members must be either all on-premises retail licensees or all off-premises retail licensees. A licensee with a combined on-premises and off-premises license may make purchases for on-premises use only through an on-premises cooperative purchase group and may make purchases for off-premises use only through an off-premises cooperative purchase group.

(f) Any individual retail licensee that is a member of a cooperative purchase group that fails to comply with the terms and conditions of this Section may be deemed to be in violation of Section 6-5. Any distributor or importing distributor that fails to comply with this Section may be deemed to be in violation of Section 6-5.

(g) The State Commission shall keep a list of the members of each cooperative purchase group and shall make that list available on its website.

(h) A retail licensee that is a member of a cooperative purchase group shall not have an ownership interest, directly or indirectly, in any entity licensed by this Act other than a retailer.

(i) It is unlawful for a distributor or importing distributor to furnish, give, or lend money or anything of value to a cooperative agent.

(j) It is the duty of each retail licensee of the cooperative purchase group to make books and records available upon reasonable notice for the purpose of investigation and control by the State Commission or any local liquor control commission having jurisdiction over the retail licensee of the cooperative purchase group.

(k) A cooperative agent shall not have an ownership interest, directly or indirectly, in an entity licensed under any other license category under this Act.

(l) A retailer, manufacturer, importing distributor, distributor, or cooperative agent shall remain in compliance with federal law pursuant to the prohibitions and exceptions provided in 27 CFR Part 6 and any promulgated rules thereof. Neither a A cooperative agent nor a cooperative purchase group may that is compliant with Sections 6-5 and 6-6 shall not receive cash or anything of value from a both the retail licensee or and an importing distributor or distributor, non-resident dealer, or manufacturer manufacturers as part of a cooperative purchasing group agreement. Cooperative agents and cooperative purchase groups may not have an ownership interest, direct or indirect, in any business or enterprise that provides marketing services or activities on behalf of manufacturers, non-resident dealers, foreign importers, importing distributors, and distributors. Cooperative agents and cooperative purchase groups and owners thereof are strictly prohibited from, directly or indirectly, accepting things of value from, or providing marketing services or activities on behalf of, manufacturers, non-resident dealers, foreign importers, importing distributors, and distributors. Cooperative agents and cooperative purchase groups, as agents of retail licensees, are subject to the obligations and restrictions of retail licensees, including, but not limited to, Section 6-5, Section 6-6, Section 10-3, and 11 Ill. Adm. Code 100.500.

(m) It is the duty of every cooperative agent and cooperative purchase group to make books and records available upon reasonable notice for the purpose of investigation and control by the State Commission or any local liquor commission having jurisdiction over a licensee member of a cooperative purchase group.

(Source: P.A. 102-442, eff. 8-20-21.)

Section 10. The Liquor Control Act of 1934 is amended by changing Section 6-9.15 as follows:

(235 ILCS 5/6-9.15)

Sec. 6-9.15. Quantity discounting terms for wine or spirits cooperative purchase agreements.

(a) All wine or spirits quantity discount programs offered to consumption off the premises retailers must be offered to all consumption off the premises cooperative groups and cooperative agents, and all quantity discount programs offered to consumption on the premises retailers shall be offered to all consumption on the premises cooperative groups and cooperative agents. Quantity discount programs shall:

(1) be open and available for acceptance for 7 business days;

(2) be designed and implemented to produce product volume growth with retail licensees;

(3) be based on the volume of product purchased; however, discounts may include price reductions, cash, and credits, and no-charge wine or spirits products may be given instead of a discount;

(4) be documented on related sales invoices or credit memoranda;

(5) not require a retail licensee to take and dispose of any quota of wine or spirits; however, bona fide quantity discounts shall not be deemed to be quota sales; and

(6) not require a retail licensee to purchase one product in order to purchase another; this includes combination sales if one or more products may be purchased only in combination with other products and not individually.

(b) A distributor or importing distributor that makes quantity discount sales to participating members of a cooperative purchase group shall issue customary invoices to each participating retail licensee itemizing the wine or spirit sold and delivered as part of a quantity discount program to each participating retail licensee.

(c) If a distributor or importing distributor offers a quantity discount for wine or spirits, excluding any product fermented with malt or any substitute for malt, cooperative purchase groups shall purchase a minimum of 250 cases in each quantity discount program. Each individual participating member of a cooperative purchase group purchasing product through a quantity discount program may be required to purchase the following minimum amounts:

(1) 2% of cases of any quantity discount program of 500 or fewer cases.

(2) 1.5% of cases of any quantity discount program of at least 501 and not more than 2,000 cases.

(3) 1% of cases of any quantity discount program of 2,001 or more cases.

(d) The cooperative agent shall place each cooperative purchase order under the name of the cooperative purchase group and shall identify each participating retail member involved with the purchase, the quantity of product purchased, the price attributable to each retailer member's purchase, and a requested delivery date. A retail licensee may make purchases through a cooperative purchase purchasing group or independently of such group. Nothing in this Section shall be construed to prohibit retail licensees from making purchases separate and apart from any cooperative purchase purchasing group.

(e) Each distributor or importing distributor shall separately invoice each participating cooperative purchase group member for the purchase made on behalf of such participating member.

(f) A cooperative purchase purchasing group shall maintain the records of each cooperative purchase order placed for 90 days. The records shall include:

(1) the date the cooperative purchase purchasing group order was placed and the date of any amendments to the order;

(2) the distributor or importing distributor with which the cooperative purchase purchasing group placed the order;

(3) the names and license numbers of each cooperative purchase purchasing group member participating in the order;

(4) the price discounts and net price of all wine or spirits ordered by each cooperative purchase group member; and

(5) the requested delivery date for the order.

(g) A cooperative purchase group is subject to the books and records requirements of Section 6-10 and subsection (e) of 11 Ill. Adm. Code 100.130.

(h) A cooperative purchase purchasing group shall retain a surety bond in favor of each distributor with which it conducts business at all times for no less than $250,000. The bond shall provide a street address at which bond claims may be submitted. If a cooperative purchase purchasing group member is delinquent in payment pursuant to Section 6-5 on a purchase made through a cooperative purchase group or directly between the cooperative member and a distributor, the surety shall immediately pay the importing distributor or distributor the delinquent amount, unless the delinquent member submits a bona fide dispute to the State Commission within 5 business days. The surety bond required by this Section may be acquired from a company, agent, or broker of the cooperative purchase group's choice. If the surety bond does not cure the indebtedness within 5 business days after receipt of the demand and if the delinquent member has not submitted a bona fide dispute to the State Commission, the 30-day merchandising credit requirements of Section 6-5 shall apply jointly to each cooperative purchase purchasing group until the indebtedness is cured. The cooperative purchase purchasing group is responsible for all costs and fees related to the surety bond.

(i) Any licensee that fails to comply with the terms and conditions of this Section may be deemed to be in violation of this Act.

(j) Nothing in this Section shall apply to quantity discount programs offered for any product fermented with malt or any substitute for malt. Nothing in this Section shall be construed to prohibit, limit, or interfere with quantity discount, credit, or rebate programs offered for any product fermented with malt or any substitute for malt.

(Source: P.A. 102-442, eff. 8-20-21; 103-154, eff. 6-30-23.)