Hancock’s Spirit Cooler Bill Locks In Wholesalers, Old Deals Included

The text as introduced · 3,280 words

89R8664 MPF-D

By: Hancock
S.B. No. 2225

A BILL TO BE ENTITLED

AN ACT

relating to the creation of a spirit cooler certificate;

authorizing a fee.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 1.04, Alcoholic Beverage Code, is

amended by amending Subdivisions (3) and (5) and adding Subdivision

(32) to read as follows:

(3) "Distilled spirits" means alcohol, spirits of

wine, whiskey, rum, brandy, gin, or any liquor produced in whole or

in part by the process of distillation, including all dilutions or

mixtures of them, and includes spirit coolers [ that may have an

alcoholic content as low as four percent alcohol by volume and that

contain plain, sparkling, or carbonated water and may also contain

one or more natural or artificial blending or flavoring

ingredients ].

(5) "Liquor" means any alcoholic beverage, other than

a malt beverage, containing alcohol in excess of five percent by

volume, unless otherwise indicated , and any spirit coolers . Proof

that an alcoholic beverage is alcohol, spirits of wine, whiskey,

liquor, wine, brandy, gin, rum, tequila, mescal, habanero, or

barreteago, is prima facie evidence that it is liquor.

(32) "Spirit cooler" means an alcoholic beverage that:

(A) consists of:

(i) alcohol, spirits of wine, whiskey, rum,

brandy, gin, or any liquor produced wholly or partly by the process

of distillation; and

(ii) plain, sparkling, or carbonated water,

or juices, and may also contain one or more natural or artificial

blending or flavoring ingredients; and

(B) has an alcoholic content of less than 17

percent by volume.

SECTION 2. Subtitle A, Title 3, Alcoholic Beverage Code, is

amended by adding Chapter 39 to read as follows:

CHAPTER 39. SPIRIT COOLER CERTIFICATE

Sec. 39.01. ELIGIBLE PERMIT AND LICENSE HOLDER. A spirit

cooler certificate may be issued to the holder of a wine only

package store permit, wine and malt beverage retailer's permit,

wine and malt beverage retailer's off-premise permit, or retail

dealer's off-premise license whose premises are located in an area

where the sale of alcoholic beverages is legal as provided by a

ballot issue approved by the voters under Section 501.035(b)(5),

(6), or (7), Election Code.

Sec. 39.02. AUTHORIZED ACTIVITIES. The holder of a spirit

cooler certificate may:

(1) purchase spirit coolers from the holder of a

wholesaler's permit or general class B wholesaler's permit;

(2) if the certificate holder is a wine only package

store permittee, wine and malt beverage retailer's off-premise

permittee, or retail dealer's off-premise licensee, sell spirit

coolers at retail for consumption off the premises where sold but

not for resale; and

(3) if the certificate holder is a wine and malt

beverage retailer's permittee, sell spirit coolers at retail for

consumption on or off the premises where sold but not for resale.

Sec. 39.03. FEE. The fee for a spirit cooler certificate

shall be set at a level sufficient to recover the cost of issuing

the certificate and administering this chapter.

Sec. 39.04. HOURS OF SALE. The holder of a spirit cooler

certificate issued under this chapter may remain open and sell

spirit coolers as provided under this chapter on any day and during

the same hours as those prescribed for the sale of malt beverages

under Section 105.05.

SECTION 3. Section 102.31(a), Alcoholic Beverage Code, is

amended to read as follows:

(a) This section applies to:

(1) the sale of malt beverages or malt beverage

containers or the original packages in which malt beverages are

received, packaged, or contained by a distributor's licensee to a

retail dealer's on-premise or off-premise licensee, a wine and malt

beverage retailer's permittee, or a wine and malt beverage

retailer's off-premise permittee; [ and ]

(2) the sale of malt beverages by a local distributor's

permittee, or by any licensee authorized to sell those beverages

for resale, to a mixed beverage permittee ; and

(3) the sale of spirit coolers by a wholesaler's or

general class B wholesaler's permittee to a wine only package store

permittee, wine and malt beverage retailer's permittee, wine and

malt beverage retailer's off-premise permittee, or retail dealer's

off-premise licensee .

SECTION 4. Section 102.32, Alcoholic Beverage Code, is

amended by adding Subsection (a-1) to read as follows:

(a-1) This section does not apply to the sale of a spirit

cooler by a wholesale dealer to a retailer.

SECTION 5. Chapter 102, Alcoholic Beverage Code, is amended

by adding Subchapters E and F to read as follows:

SUBCHAPTER E. TERRITORIAL LIMITS ON SALE OF SPIRIT COOLERS

Sec. 102.101. DEFINITIONS. In this subchapter:

(1) "Brand" means any word, name, group of letters,

symbol, or trademark or a combination of any word, name, group of

letters, symbol, or trademark adopted and used by a manufacturer or

nonresident seller's permittee on a label or on packaging to

identify a specific spirit cooler and distinguish the spirit cooler

from the label or packaging of another spirit cooler produced or

marketed by any manufacturer or nonresident seller's permittee.

The term does not include the name of the manufacturer or

nonresident seller's permittee unless that name is included in the

name of the brand.

(2) "Brand extension" means a brand that incorporates

a brand name or brand logo, or a substantial part of an existing

brand name or brand logo, of the same manufacturer or nonresident

seller's permittee.

(3) "Manufacturer" means a person licensed under

Chapter 14 or 16.

(4) "Retailer" means a person who holds a certificate

issued under Chapter 39.

(5) "Wholesaler" means a person licensed under Chapter

19 or 20.

Sec. 102.102. SETTING TERRITORIAL LIMITS. (a) Each

manufacturer or nonresident seller's permittee shall designate

territorial limits in this state within which the brands of spirit

coolers the manufacturer or nonresident seller's permittee

manufactures may be sold by a wholesaler.

(b) Each wholesaler shall enter into a written agreement

with each manufacturer or nonresident seller's permittee from which

the wholesaler purchases spirit coolers for distribution and sale

in this state. The contract shall set forth the sales territory

within which the wholesaler may distribute and sell each brand of

spirit coolers. A wholesaler may not sell any brand of spirit

coolers outside of the sales territory specified in the contract.

The contract does not interfere with the rights of a retailer to

purchase spirit coolers as provided by Section 102.104.

(c) A manufacturer or nonresident seller's permittee may

not assign all or any part of the same sales territory to more than

one wholesaler.

(d) A copy of a contract entered into under Subsection (b)

shall be filed with the administrator.

Sec. 102.103. RIGHTS OF WHOLESALERS. Nothing in Section

102.102 limits or alters a wholesaler's right to sell spirit

coolers to any other wholesaler, except that a wholesaler who

purchases spirit coolers from another wholesaler may distribute and

sell the spirit coolers only in the sales territory designated by

contract for the wholesaler making the purchase.

Sec. 102.104. RIGHTS OF RETAILERS. Nothing in Section

102.102 or 102.103 limits or alters a retailer's right to purchase

spirit coolers on the permitted premises of any wholesaler in this

state and transport those spirit coolers to the retailer's

permitted or licensed premises, except that the retailer may sell

the spirit coolers only within a territory for which the

manufacturer or nonresident seller's permittee of the brand has

designated that the spirit coolers may be sold by a wholesaler.

Sec. 102.105. TERRITORIAL ASSIGNMENTS. (a) A brand

extension is not a new or different brand.

(b) A manufacturer or nonresident seller shall assign a

brand extension to a wholesaler to whom the brand was originally

assigned if the wholesaler elects to distribute and sell the brand

extension.

SUBCHAPTER F. SPIRIT COOLER INDUSTRY FAIR DEALING LAW

Sec. 102.131. DEFINITIONS. In this subchapter:

(1) "Agreement" means a contract, agreement, or

arrangement, whether expressed or implied, whether oral or written,

for a definite or indefinite period between a manufacturer or

nonresident seller's permittee and a wholesaler under which the

wholesaler has the right to purchase, resell, and distribute any

brand of spirit cooler offered by the manufacturer or nonresident

seller's permittee.

(2) "Brand" has the meaning assigned by Section

102.101.

(3) "Brand extension" has the meaning assigned by

Section 102.101.

(4) "Good cause" means the failure by any party to an

agreement, without reasonable excuse or justification, to comply

substantially with an essential, reasonable, and commercially

acceptable requirement imposed by the other party under the terms

of the agreement.

(5) "Manufacturer" has the meaning assigned by Section

102.101.

(6) "Retailer" has the meaning assigned by Section

102.101.

(7) "Territory" or "sales territory" means the

geographic territory of distribution and sale responsibility

designated by an agreement between a manufacturer or nonresident

seller's permittee and a wholesaler, as provided in Section

102.102, for any brand of spirit cooler offered by the manufacturer

or nonresident seller's permittee.

(8) "Wholesaler" has the meaning assigned by Section

102.101.

Sec. 102.132. PURPOSE. (a) This subchapter is enacted

pursuant to authority of the state under the provisions of the

Twenty-first Amendment to the United States Constitution to promote

the public's interest in the fair, efficient, and competitive

distribution of liquor within this state by requiring manufacturers

or nonresident seller's permittees and wholesalers to conduct their

business relations so as to assure that:

(1) the wholesaler is free to manage its business

enterprise, including having the right to independently establish

its selling prices; and

(2) the public, retailers, and manufacturers or

nonresident seller's permittees are served by wholesalers who will

devote their reasonable efforts and resources to the sales and

distribution of all the manufacturer's or nonresident seller's

permittee's products that the wholesaler has the right to sell and

distribute and maintain satisfactory sales levels in the sales

territory assigned the wholesaler.

(b) This subchapter governs all relations between

manufacturers or nonresident seller's permittees and their

wholesalers, including any renewals or amendments to agreements

between them, to the full extent consistent with the constitutions

and laws of this state and the United States.

Sec. 102.133. WAIVER PROHIBITED. The provisions of this

subchapter may not be waived, voided, or nullified by agreement.

Sec. 102.134. TERMINATION AND NOTICE OF CANCELLATION. (a)

Except as provided by Subsection (c) and as otherwise specifically

agreed upon by the parties to an agreement, a manufacturer,

nonresident seller's permittee, or wholesaler may not cancel, fail

to renew, or otherwise terminate an agreement unless the

manufacturer, nonresident seller's permittee, or wholesaler

provides prior notice in accordance with Subsection (b) to the

other party to the agreement.

(b) The notice provided under Subsection (a) must be in

writing and received by the affected party not later than the 90th

day before the date on which the agreement will be canceled, not

renewed, or otherwise terminated. The notice must contain:

(1) a statement of the party's intention to cancel, not

renew, or otherwise terminate the agreement;

(2) a statement of reasons for the cancellation,

nonrenewal, or termination; and

(3) the date on which the cancellation, nonrenewal, or

termination takes effect.

(c) A manufacturer, nonresident seller's permittee, or

wholesaler may cancel, fail to renew, or otherwise terminate an

agreement without providing prior notice to the other party to the

agreement for the following reasons:

(1) the other party is insolvent, files for

bankruptcy, or is dissolved or liquidated;

(2) the other party assigns for the benefit of

creditors or otherwise disposes of substantially all of the assets

of the party's business;

(3) the party's ability to continue in business is

materially and adversely affected because:

(A) the party is convicted of or pleads guilty or

no contest to a charge of violating a law or regulation; or

(B) the party's permit is revoked or suspended

for a period of 30 or more days; or

(4) the party fails to pay an amount owed to the other

party when due, on demand for the payment, in accordance with the

agreement.

Sec. 102.135. CANCELLATION. A manufacturer, nonresident

seller's permittee, or wholesaler selling spirit coolers may not

cancel, fail to renew, or otherwise terminate an agreement under

this subchapter unless:

(1) the manufacturer, nonresident seller's permittee,

or wholesaler has good cause for the cancellation, failure to

renew, or termination; and

(2) if required to provide prior notice under Section

102.134:

(A) the manufacturer or nonresident seller's

permittee has provided the notice; and

(B) the other party has not eliminated the

reasons specified in the notice as the reasons for cancellation,

nonrenewal, or termination on or before the 90th day after the

receipt of the notice.

Sec. 102.136. PROHIBITED CONDUCT. (a) A manufacturer or

nonresident seller's permittee may not:

(1) induce or coerce, or attempt to induce or coerce, a

wholesaler to engage in any illegal act or course of conduct;

(2) require a wholesaler to assent to any unreasonable

requirement, condition, understanding, or term of an agreement

prohibiting a wholesaler from selling the product of another

manufacturer or nonresident seller's permittee;

(3) fix or maintain the price at which a wholesaler may

resell spirit coolers;

(4) fail to provide each wholesaler of its brands a

written contract embodying the manufacturer's or nonresident

seller's permittee's agreement with the wholesaler;

(5) require a wholesaler to accept delivery of any

spirit coolers or any other item or commodity that is not ordered by

the wholesaler;

(6) adjust the price at which the manufacturer or

nonresident seller's permittee sells spirit coolers to a wholesaler

based on the price at which a wholesaler resells spirit coolers to a

retailer, but a manufacturer or nonresident seller's permittee may

set its own price if the price adjustment is based on factors other

than a wholesaler's increase in the price it charges to a retailer

and the adjustment is not intended to otherwise coerce illegal

behavior under this section; or

(7) accept payment in exchange for an agreement

providing for territorial rights.

(b) Nothing in this section shall interfere with the rights

of a manufacturer, nonresident seller's permittee, or wholesaler to

enter into contractual agreements that could be construed as

governing ordinary business transactions, including agreements

concerning allowances, rebates, refunds, services, capacity,

advertising funds, promotional funds, or sports marketing funds.

Sec. 102.137. TRANSFER OF BUSINESS ASSETS OR STOCK. (a) A

manufacturer or nonresident seller's permittee may not

unreasonably withhold or delay its approval of any assignment,

sale, or transfer of a wholesaler's stock or all or any portion of a

wholesaler's assets, a wholesaler's voting stock, the voting stock

of any parent corporation, or the beneficial ownership or control

of any other entity owning or controlling the wholesaler, including

the wholesaler's rights and obligations under the terms of an

agreement whenever the person to be substituted meets reasonable

standards imposed on the wholesaler and all other wholesalers of

that manufacturer or nonresident seller's permittee of the same

general class, taking into account the size and location of the

sales territory and market to be served.

(b) On the death of one of the partners of a partnership

operating the business of a wholesaler, a manufacturer or

nonresident seller's permittee may not deny the surviving partner

of the partnership the right to become a successor-in-interest to

the agreement between the manufacturer or nonresident seller's

permittee and the partnership provided the surviving partner has

been active in the management of the partnership or is otherwise

capable of carrying on the business of the partnership.

(c) Notwithstanding Subsection (a), on the death of an owner

of a wholesaler, a manufacturer or nonresident seller's permittee

may not deny approval for a transfer of ownership to a surviving

spouse or adult child of the owner. A subsequent transfer of

ownership by the surviving spouse or adult child is subject to

Subsection (a).

Sec. 102.138. REASONABLE COMPENSATION. (a) A manufacturer

or nonresident seller's permittee who, without good cause, cancels,

fails to renew, or otherwise terminates an agreement or unlawfully

denies approval of or unreasonably withholds consent to an

assignment, transfer, or sale of a wholesaler's business assets or

voting stock or other equity securities shall pay the wholesaler

with whom it has an agreement the fair market value of the

wholesaler's business with relation to the affected brand. In

determining fair market value, consideration shall be given to all

elements of value, including goodwill and going concern value.

(b) If the manufacturer or nonresident seller's permittee

and wholesaler are unable to mutually agree on whether or not good

cause exists for cancellation under Section 102.134 or on the

reasonable compensation to be paid for the value of the

wholesaler's business as provided by Subsection (a), the matter

may, at the option of either the wholesaler or the manufacturer or

nonresident seller's permittee, be submitted to three arbitrators,

one of whom shall be named in writing by each party and the third of

whom shall be chosen by the two arbitrators selected by the parties.

If the arbitrators selected fail to choose a third arbitrator on or

before the 10th day after the date the arbitrators were selected, a

judge of a district court in the county in which the wholesaler's

principal place of business is located shall select the third

arbitrator. Arbitration shall be conducted in accordance with

Chapter 171, Civil Practice and Remedies Code. Arbitration costs

shall be paid one-half by the wholesaler and one-half by the

manufacturer or nonresident seller's permittee. The award of the

arbitrators is binding on the parties unless appealed not later

than the 10th day after the date of the award. All proceedings on

appeal shall be in accordance with and governed by Chapter 171,

Civil Practice and Remedies Code.

Sec. 102.139. RIGHT OF FREE ASSOCIATION. A manufacturer or

nonresident seller's permittee or wholesaler may not restrict or

inhibit, directly or indirectly, the right of free association

among manufacturers, nonresident sellers, or wholesalers for any

lawful purpose.

Sec. 102.140. JUDICIAL REMEDIES. (a) If a manufacturer or

nonresident seller's permittee or wholesaler who is a party to an

agreement fails to comply with this subchapter or engages in

conduct prohibited under this subchapter, or if a manufacturer or

nonresident seller's permittee and wholesaler are not able to

mutually agree on reasonable compensation under Section 102.138 and

the matter will not be submitted to arbitration, the aggrieved

manufacturer, nonresident seller's permittee, or wholesaler may

maintain a civil action in an appropriate court in the county in

which the wholesaler's principal place of business is located.

(b) In any action under Subsection (a), the court may grant

such relief the court determines necessary or appropriate

considering the purposes of this subchapter.

(c) The prevailing party in an action under Subsection (a)

is entitled to actual damages, including the value of the

wholesaler's business, as specified in Section 102.138, reasonable

attorney's fees, and court costs.

Sec. 102.141. STATUTE OF LIMITATIONS. A person must bring a

cause of action arising under this subchapter not later than the

fourth anniversary of the date the cause of action accrues. If a

termination related to a change in ownership of the brand occurs,

the cause of action accrues when either the new brand owner or the

transferring or selling brand owner provides notice of termination

to the wholesaler.

Sec. 102.142. APPLICABILITY. (a) This subchapter applies

to an agreement entered into before, on, or after September 1, 2025.

(b) This subchapter does not apply to an agreement

concerning malt beverages to which Subchapter C applies by

operation of Section 102.81.

SECTION 6. Section 105.01(a), Alcoholic Beverage Code, is

amended to read as follows:

(a) Except as provided in Sections 39.04, 105.02, 105.03,

105.04, 105.08, and 105.091, no person may sell, offer for sale, or

deliver any liquor:

(1) on New Year's Day, Thanksgiving Day, or Christmas

Day;

(2) on Sunday; or

(3) before 10 a.m. or after 9 p.m. on any other day.

SECTION 7. This Act takes effect September 1, 2025.