A BILL TO BE ENTITLED
AN ACT to preserve the three‑tier distribution system for wine in north carolina, to prohibit a wine wholesaler from distributing wine beyond its designated sales territory, and to confirm that good cause for the termination of a wine franchise does not include a supplier's desire to consolidate its franchise or distribution pattern.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 18B‑1200(b) reads as rewritten:
"(b)	The underlying purposes and policies of the Article are:
(1)	To promote the compelling interest of the public in fair business relations between wine wholesalers and wineries, and in the continuation of wine wholesalerships on a fair basis.
(2)	To protect wine wholesalers against unfair treatment by wineries.
(3)	To provide wine wholesalers with rights and remedies in addition to those existing by contract or common law.
(4)	To govern all wine wholesalerships, including any renewals or amendments, to the full extent consistent with the Constitution of this State and the United States.
(5)	To promote and maintain a sound, stable, and viable three‑tier system of distribution of wine to the public."
SECTION 2.  G.S. 18B‑1201(2) reads as rewritten:
"(2)	"Territory" or "sales territory" means the area of primary sales responsibility expressly or implicitly designated by any agreement between any wine wholesaler and winery for a brand offered by any winery. "
SECTION 3.  G.S. 18B‑1203 reads as rewritten:
"§ 18B‑1203.  Primary area of responsibility; no discrimination.
(a)	Each agreement shall designate the sales territory of the wholesaler. No winery may enter into more than one agreement for each brand of wine or beverage it offers in any territory. A wholesaler shall not distribute any brand of wine to a retailer whose premises are located outside the territory designated in the wholesaler's agreement for that brand. With the approval of the Commission, a wholesaler may distribute wine outside the wholesaler's designated territory during periods of temporary service interruption, when requested to do so by the winery and the wholesaler whose service is interrupted. Unless the winery and wine wholesaler agree otherwise in writing, the territory designated as the wholesaler's "area of primary sales responsibility" as of the effective date of this section shall be the wholesaler's designated sales territory. Redesignations of sales territories occurring after the effective date of this section shall be reported to the Commission within 30 days. No provisions of this Article, however, may prohibit the continuation of a multi‑wholesaler agreement entered into before March 21, 1983, as between the winery and the original wine wholesalers thereto, provided, that upon termination of any such agreement the affected territory shall be designated for a single wholesaler.
(b)	 A wholesaler shall service all retail permit holders within its designated territory without discrimination and shall make a good faith effort to make available to each retail permit holder in the territory each brand of wine that the wholesaler has been authorized to distribute in that area."
SECTION 4.  G.S. 18B‑1204 reads as rewritten:
"§ 18B‑1204.  Cancellation.
Notwithstanding the terms, provisions, or conditions of any agreement, no winery may amend, cancel, terminate, or refuse to continue to renew any agreement, or cause a wholesaler to resign from an agreement, unless good cause exists for amendment, termination, cancellation, nonrenewal, noncontinuation, or resignation. "Good cause" does not include a change in ownership of a winery, or the desire of a winery to consolidate its franchises or its distribution patterns without demonstrating a failure of the wholesaler to effectively market or distribute its product. "Good cause" does include:
(1)	Revocation of the wholesaler's permit or license to do business in this State;
(2)	Bankruptcy or receivership of the wholesaler;
(3)	Assignment for the benefit of creditors or similar disposition of the assets of the wholesaler; or
(4)	Failure of the wholesaler to comply substantially, without reasonable excuse or justification, with any reasonable and material requirement imposed upon him by the winery, including a substantial failure by a wine wholesaler to:
a.	Maintain a sales volume of the brands offered by the winery, or
b.	Render services comparable in quality, quantity, or volume to the sales volumes maintained and services rendered by other wholesalers of the same brands within the State.
In any determination as to whether a wholesaler has failed to comply substantially, without reasonable excuse or justification, with any reasonable and material requirement imposed upon him by the winery, consideration shall be given to the relative size, population, geographical location, number of retail outlets, demand for the products applicable to the territory of the wholesaler in question and to comparable territories, and any reasonable sales quota set by the agreement. The burden of proving good cause for amendment, termination, cancellation, nonrenewal, noncontinuation, or resignation is on the winery."
SECTION 5.  If any provision of this act or its application is held invalid, the invalidity does not affect other provisions or applications of this act that can be given effect without the invalid provisions or application, and to this end the provisions of this act are severable.
SECTION 6.  This act is effective when it becomes law, and its provisions shall apply to all existing franchise agreements.  A winery's shipment of wine to a wholesaler in North Carolina following the effective date of this act shall constitute acceptance by the winery of the terms of this act, which shall be considered incorporated into the agreement between the winery and wholesaler.