HOUSE BILL No. 4528 March 19, 1997, Introduced by Reps. Anthony, Harder, Prusi, Griffin, Tesanovich, Gagliardi, Wetters and Gire and referred to the Committee on Regulatory Affairs. A bill to amend 1933 (Ex Sess) PA 8, entitled "The Michigan liquor control act," by amending section 3a (MCL 436.3a), as added by 1996 PA 440. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 3a. (1) If the commission privatizes any portion of 2 the system existing onthe effective date of the amendatory act3that added this sectionDECEMBER 19, 1996, under which spirits 4 are warehoused or distributed, the commission shall, as pro-5vided in section 3(1), by orderappoint BY ORDER, AS PROVIDED IN 6 SECTION 3(1), authorized distribution agents to engage in the 7 warehousing and delivery of spirits in this state so as to ensure 8 that all retail licensees continue to be properly serviced with 9 spirits. THE COMMISSION MAY APPOINT AS AN AUTHORIZED 10 DISTRIBUTION AGENT AN OUT-OF-STATE DISTRIBUTOR OR WHOLESALER 11 UNDER CIRCUMSTANCES WHERE 1 OR MORE RETAIL LICENSEES DEMONSTRATE 02317'97 LBO 2 1 FAILURE OF AN IN-STATE AUTHORIZED DISTRIBUTION AGENT TO PROVIDE 2 PROPER SERVICE. An authorized distribution agent is subject to 3 uniform requirements, including business operating procedures, 4 which the commission may prescribe by rule, subject to this 5 section. 6 (2) A person is eligible for appointment by the commission 7 as an authorized distribution agent if the following circum- 8 stances exist: 9 (a) The person satisfies all applicable commission rules 10 prescribing qualifications for licensure promulgated under sec- 11 tion 7 EXCEPT THAT RULES CONCERNING RESIDENCY DO NOT APPLY IN THE 12 CASE OF AN OUT-OF-STATE AUTHORIZED DISTRIBUTION AGENT. 13 (b) The person has entered into a written agreement or con- 14 tract with a supplier of spirits for the purposes of warehousing 15 and delivering a brand or brands of spirits of that supplier of 16 spirits. 17 (c)TheEXCEPT IN THE CASE OF AN OUT-OF-STATE AUTHORIZED 18 DISTRIBUTION AGENT, THE person has an adequate warehousing facil- 19 ity located in this state for the storing of spirits from which 20 all delivery of spirits to retail licensees shall be made. 21 (3) An authorized distribution agent shall not have a direct 22 or indirect interest in a supplier of spirits or in a retailer. 23 A supplier of spirits or a retailer shall not have a direct or 24 indirect interest in an authorized distribution agent. An autho- 25 rized distribution agent shall not hold title to spirits. After 26 September 24, 1996, an authorized distribution agent or an 27 applicant to become an authorized distribution agent who directly 02317'97 3 1 or indirectly becomes licensed subsequently as a wholesaler shall 2 not be appointed or authorized to sell or distribute a brand of 3 wine in an area for which a wholesaler has been assigned or 4 authorized to sell or distribute that brand under an agreement 5 required by this act. A wholesaler who directly or indirectly 6 becomes an authorized distribution agent shall not be appointed 7 or authorized to sell or distribute a brand of wine to a retailer 8 in an area for which another wholesaler has been assigned or 9 authorized to sell or distribute that brand under an agreement 10 required by this act, if the wholesaler was not selling or dis- 11 tributing that brand to retailers in that area on or before 12 September 24, 1996. 13 (4) An authorized distribution agent shall deliver to each 14 retailer located in its assigned distribution area on at least a 15 weekly basis if the order meets the minimum requirements. The 16 minimum requirements shall be set by the commission and shall be 17 a sufficient number of bottles to comprise not more than 2 cases 18 and not less than 1 case. A retailer may pick up the product at 19 the authorized distribution agent's warehouse. To avoid occa- 20 sional emergency outages of spirits, a retail licensee may make 21 up to 12 special emergency orders to an authorized distribution 22 agent per calendar year which order shall be made available to 23 the retail licensee within 18 hours of the placing of the order. 24 A special emergency order placed on Saturday or Sunday shall be 25 made available to the retail licensee before noon on the follow- 26 ing Monday. An authorized distribution agent may impose a fee of 02317'97 4 1 up to $20.00 to deliver a special emergency order to a retail 2 licensee. 3 (5) Except as otherwise provided in subsection (4), an 4 authorized distribution agent shall not charge a delivery fee or 5 a split-case fee for delivery of spirits sold by the commission 6 to a retailer. 7 (6) An authorized distribution agent or prospective autho- 8 rized distribution agent shall maintain and make available to the 9 commission or its representatives, upon notice, any contract or 10 written agreement it may have with a supplier of spirits or other 11 authorized distribution agent for the warehousing and delivery of 12 spirits in this state. 13 (7) For any violation of this act, rules promulgated under 14 this act, or the terms of an order appointing an authorized dis- 15 tribution agent, an authorized distribution agent shall be 16 subject to the suspension, revocation, forfeiture, and penalty 17 provisions of sections 20(1) and 21 in the same manner in which a 18 licensee would be subject to those provisions. An authorized 19 distribution agent aggrieved by a penalty imposed by the commis- 20 sion may invoke the hearing and appeal procedures of section 21 20(2) and rules promulgated under that section. 22 (8) A specially designated distributor may sell to an 23 on-premises licensee up to 9 liters of spirits during any 1-month 24 period and an on-premises licensee may purchase up to that amount 25 during any 1-month period. Notwithstanding any other provision 26 of this act or rule promulgated under this act, a specially 27 designated distributor is only liable for knowingly violating 02317'97 5 1 this section. Records verifying these purchases shall be 2 maintained by the on-premises licensee and be available to the 3 commission upon request. 4 (9) An authorized distribution agent shall demonstrate that 5 it has made a good faith effort to provide employment to those 6 former state employees who were terminated due to the privatiza- 7 tion of the liquor distribution system. A good faith effort is 8 demonstrated by the authorized distribution agent performing at 9 least the following actions: 10 (a) Seeking from the commission a list of names and resumes 11 of all such former state employees who have indicated a desire 12 for continued employment in the distribution of liquor in 13 Michigan. 14 (b) Providing a list of employment opportunities created by 15 the authorized distribution agent in the distribution of liquor 16 in Michigan to each individual whose name and resume is transmit- 17 ted from the commission. 18 (c) Providing an opportunity for application and interview 19 to any terminated state worker who indicates an interest in pur- 20 suing a job opportunity with the authorized distribution agent. 21 (d) Providing a priority in hiring for those individuals who 22 apply and interview under this process. 23 (10) Any former state employees terminated due to privatiza- 24 tion who have reason to believe that an authorized distribution 25 agent has not made a good faith effort to provide him or her with 26 employment opportunities as described in subsection (9) may file 27 a complaint with the commission who shall hear the complaint and 02317'97 6 1 make a determination on its validity. If the commission 2 determines that the complaint is valid, the violation may be 3 treated as a violation of this act and the authorized distribu- 4 tion agent may be subject to the suspension, revocation, forfei- 5 ture, and penalty provisions of sections 20(1) and 21. 6 (11) In addition to paying a vendor of spirits the acquisi- 7 tion price for purchasing spirits, the commission may pay a 8 vendor of spirits an additional amount of not less than $4.50 and 9 not more than $7.50 for each case of spirits purchased as an 10 offset to the costs being incurred by that vendor of spirits in 11 contracting with an authorized distribution agent for the ware- 12 housing and delivery of spirits to retailers. The payment 13 described in this subsection shall not be included in the cost of 14 purchasing spirits by the commission and shall not be subject to 15 the commission's markup, special taxes, or state sales tax. The 16 per-case offset established by this subsection may be increased 17 by the state administrative board each January to reflect reason- 18 able increases in the authorized distribution agent's cost of 19 warehousing and delivery. As used in this subsection, "case" 20 means a container holding twelve 750 ml bottles of spirits or 21 other containers containing spirits which are standard to the 22 industry. 02317'97 Final page. LBO