Pending signature: Brewers prohibited from owning distributor interest in Illinois

Breweries with distributorship interest are starting to feel a pinch in that relationship in the Midwest. Ohio just put a new law on the books, and Illinois just unanimously passed a bill through the state senate, HB 2606, that would prohibit manufacturers of beer from holding any stake in a distributor.

“HB 2606 reaffirms Illinois’ policy and the state’s regulatory structure that manufacturers of beer, including out-of-state brewers, are prohibited from holding a distributor’s license, from owning any ownership interest in a distributorship, and from exercising vertical integration between a manufacturer of beer and a distributor or importing distributor through any ownership interest or through control of the distributor or importing distributor,” said State Senator Tony Munoz (D-Chicago).

As we reported last month when the bill passed the Illinois House of Representatives, HB 2606 is more of a clarification on a Senate bill passed in 2011 that was intended to accomplish the same thing but wasn’t upheld in practice by the Illinois Liquor Commission. The Commission stated previously that the 2011 Senate bill was not sufficiently clear. This perceived vagueness allowed an Anheuser Busch InBev subsidiary to continue to hold a 30 percent ownership interest in City Beverage.

Passage of the bill is now in the hands of the governor. If you recall, in Ohio, there was a last second push by AB Inbev to ask the state’s governor to reconsider portions of the Buckeye State’s pro-craft brewing bill. Here in Illinois, there will be no backlash because HB 2606 comes as no surprise. Knowing that there was strong opposition to AB Inbev owning any interest in distributorships, AB Inbev agreed that they would divest themselves of their interest in City Beverage Illinois LLC, which holds four Illinois distributorships licenses. But they requested some time to find a purchaser and complete the buyout. If the governor signs the bill into law, any brewer holding any interest in a beer distributorship will have until Jan. 1, 2015, to divest its interest.

“The legislation clarifies that the three-tier regulatory system does not allow vertical integration [ownership in another tier] and reinforces the intent of SB 754 which became law on June 1, 2011,” said Rep. David Leitch (R-Peoria), chief co-sponsor of HB 2606. “Additionally, it affirms the General Assembly’s policy which is ‘to protect the health, safety and welfare of the people of this State through the sound and careful control and regulation of the manufacture, distribution, and sale of alcoholic liquor through a three-tier regulation system.’”