IL Trade Practices

ANNOUNCEMENT

DATE: JANUARY 23, 2003

REVISED TRADE PRACTICE POLICIES (effective January 1, 2003)

Please take notice that the Illinois Liquor Control Commission has now published the revised Trade Practice Policies, placing the updated version on the Commission's website.

These policies were subject to numerous comment periods and meetings with the industry and their representatives, as well as verbal and written comments and observations. Some of the suggestions received by the Commission were incorporated into the revision; others had to be rejected as contrary to the provisions of the Liquor Control Act; and others are still being reviewed for possible addition at a later date.

All comments, which were submitted to the Commission, have been reviewed and acted upon in one fashion or another. It should be understood generally that these revised policies express the Commission’s best decision on questions presented to it, given the facts and circumstances involved and the state of prevailing law.

It should further be understood that ALL policies will remain under continuous review to better develop revisions responsive to new and changing circumstances.

Trade Practice Policies

INDEX (click on link to view each corresponding policy)

TPP-1: "Of Value" Standards

TPP-2: (Reserved) Specific Items or Activities which have been reviewed by the Commission for “of value” violations.

TPP-3: Manufacturer, Non-Resident Dealer, Distributor, Importing Distributor and Foreign Importer sponsorship of events at Retail Premises

TPP-4: Donations of Product and Services to Organizations

TPP-5: Retailer Payments to Manufacturers, Distributors Importing Distributors and Foreign Importers

TPP-6: Cooperative Purchasing Agreements

TPP-7: Reserved Point of Sale Materials - Manufacturer to Distributor

TPP-8: (Reserved)

TPP-9: Signage and other Advertising Materials

TPP-10: Reserved Signage Dollar Limits (1997 to present)

TPP-11: Consumer Coupons and Rebates

TPP-12: Hotel/Motel Mini Bars

TPP-13: Riverboat Gaming Operations

TPP-14: Standards for Approval of Test Marketing, Tastings and Product Sampling of products

TPP-15: Geographic Territories

TPP-16: Deposits on Bottles and Barrels for Beer

TPP-17: Non-Alcoholic Products

TPP-18: Pre-Mixing of Alcoholic Products

TPP-19: Auction of Liquor

TPP-20: Brew Pubs

TPP-21: (Reserved)

TPP-22: Happy Hour Law (***REVISED November 2011***)

TPP-23: Transportation and Delivery of Alcohol

TPP-24: (Reserved)

TPP-25: Stocking, Rotating and Re-Setting of Products

TPP-26: Transfer of Alcohol

TPP-27: Special Event Retailer (Not-For-Profit) License

TPP-28: Employment/Ownership Arrangements between Classes of Licensees

TPP-29: Retailers Making Excessive Purchases

TPP-30: Salvaged Alcoholic Liquors

TPP-31: Electronic Data Interchanges and Fund Transfers

TPP-32: Reserved Breakage: Replacement of Damaged or Defective Product (***REVISED November 2011***)

TPP-33: Brew on Premises

TPP-34: Reserved Indirect Payments through Third Party Arrangements

TPP-35: Original Package: Refilling

TPP-36: Consignment Sales

TPP-37: Importation of Alcohol into Illinois

TPP-38: Distributor Warehousing

TPP-39: Multi-tier licensing arrangements

TPP-40: Introduction of new spirits producer

ILLINOIS LIQUOR CONTROL COMMISSION

TRADE PRACTICE POLICIES

TPP-1 “Of Value” Standards (“Tied House”)

I. Purpose

To set the procedures of the Illinois Liquor Control Commission whereby the term “of value” (also referred to as “tied house”) shall be defined, and to determine what constitutes items “of value,” and not “of value,” under the Illinois Liquor Control Act, Rules and Regulations of the Commission, case authority, and prior interpretive opinions.

II. Policy Statement

It is the policy of this Commission to enforce the provisions of the Liquor Control Act in relation to prohibiting manufacturers, distributors and importing distributors from giving anything “of value” to retailers, and simultaneously prohibiting retailers from accepting anything “of value” from manufacturers, distributors and importing distributors, unless such transactions are specifically allowable pursuant to Illinois Statute, Rule, Regulation, case law, or Trade Practice of this Commission.

III. Precedent

A. Statutory History

The term “of value” originates in the Federal Tied House Laws (Federal Alcohol Administrative Act (FAAA), 27 U.S.C. 205 (a), (b) and (c)), which sections respectively refer to “Exclusive outlet,” “Tied house” and “Commercial bribery.” By granting gifts and loaning money to retailers, manufacturers, distributors and importing distributors had effectively “tied” themselves to retailers to the point of excluding competitors. This form of vertical integration between manufacturers, distributors and retailers allowed the distributors to exercise virtual control over the retailers. The federal Tied House Laws prohibited manufacturers and distributors from giving equipment, fixtures, signs, supplies, money, services, or other things “of value” to retailers. The federal Tied House Laws also prohibited manufacturers and distributors from inducing retailers to purchase alcoholic products from them only, to the exclusion of other suppliers. The Congressional objective sought by passage of the federal Tied House Laws, was the prevention of this wholesaler control of retailers. The concern was that buying decisions of the retailers were in actuality being made by the wholesalers, or by retailers too strongly influenced by the wholesalers, so that no independent business decision was being made. Congress also intended that the Act would promote a competitive alcohol market. The underlying premise being a genuinely competitive market led to lower prices, and lower prices removed the incentives for the creation of a black market. This federal law was implemented by rules, found at 27 CFR 1, et seq., as well as Trade Practice Regulations.

The Illinois General Assembly enacted its own “tied house” provisions in 1934, with the enactment of Laws 1933-34, 2nd. Sp. Sess., p. 57, art. VI, subsec. 4; subsequently Ill. Rev. Stat., ch. 43, par. 122 and 123; now known as 235 ILCS 5/6-5 and 5/6-6. These statutes have been interpreted in single subject opinion letters and most recently by these Trade Practice Policies. Also directly related to this “tied house” concept, Sec. 5/6-4 of the Illinois Compiled Statutes deals with prohibited “Retail Sales by Distillers, Manufacturers, Subsidi­aries or Affiliates -Prohibited Transactions and Inter­ests - Exemptions,” which is dealt with elsewhere in these policies.

235 ILCS 5/6-5 states, in summary, that no retail licensee may accept, receive or borrow money, or anything else of value, or accept or receive credit for greater than 30 days, directly or indirectly, from any distributor or manufacturer. And, no distributor or manufacturer may give or lend money or anything of value, or extend credit for greater than 30 days, directly or indirectly, to any retail licensee.

235 ILCS 5/6-6 states that no manufacturer or distributor shall, directly or indirectly:

sell, supply, furnish, give, pay for, or loan or lease any furnishing, fixture or equipment to a retail licensee;

pay for or advance, furnish, lend or give money to a licensee for payment of a license;

purchase or become owner of a note, mortgage or other indebtedness of a retail licensee;

be interested in the ownership, conduct or operation of a retail licensee;

be interested as the owner of a premises upon which a retail licensee is operating.

235 ILCS 5/6-6 does, however, allow manufacturers, distributors and importing distributors to supply retailers with designated types of signage and advertising materials, all such items being subject to additional statutorily prescribed dollar limitations.

Note: Always consult the most recent version of these statutory provisions when examining individual transactions against the “of value” standard.

B. Relationship between federal laws and regulations and Illinois law and regulations

Although the Tied House provisions were developed at the Federal level, the 21st Amendment to the U.S. Constitution granted each State the right to self-determination in regard to the transportation, importation and possession of intoxicating liquors. Therefore, Illinois statutory and regulatory provisions will generally override Federal law and regulation, especially in situations in which strictly intrastate transactions are involved. Where, however, there is no specific Illinois statutory or regulatory guidance regarding a specific issue in the area of “of value” transactions, this Commission will look to Federal law and regulation as a guide in interpreting Trade Practices under which Illinois licensees shall operate.

C. Commission discretion in determining trade practices under which Illinois licensees shall operate

Federal and State case laws clearly demonstrate that this Commission’s exercise of its “reasonable discretion” will be given “wide latitude” in its interpretation of the statutes and regulations which it is responsible to enforce. Courts give “substantial weight and deference” to interpretations of this Commission. Precedent indicates that this Commission will be granted such deference because of its considerable experience and expertise in administering and enforcing provisions of the Illinois Liquor Control Act. Case law indicates that courts will reverse decisions of this Commission only in the event the decision is “arbitrary and capricious” or if the sanction imposed is “overly harsh.”

D. Concept of “exclusion” of retail licensees as it applies to the “of value” provisions

Case Law

In National Distributing Co. v. United States Treasury Department, 626 F.2d 997 (D.C. Cir., 1980), the Court of Appeals ruled that selling alcoholic product below cost was not something “of value” under the FAAA. Tied House provisions did not prohibit suppliers from cutting prices, even selling below cost, “so long as the price cut [was] not connected with an agreement or understanding to purchase products from one wholesaler to the exclusion of others.” The primary purpose of the “Tied House” sections of the FAAA was the prevention of a form of vertical integration whereby wholesalers or producers might gain effective control of ostensibly independent retail outlets. Thus, price cuts did not violate the FAAA unless they were accompanied by an agreement or understanding to exclude other suppliers’ wares, or by some reasonable prospect of domination or control of a retail outlet by the supplier. The operative term in this analysis was “exclusion.” While a change in purchasing habits of any retailer may certainly have the effect of “exclusion” without the proof of an agreement to exclude, the practice of selling below cost was found not to be a violation.

In Sharpenter v. Illinois Liquor Control Commission, 119 Ill.2d 169, 518 N.E.2d 128 (1988) the Illinois Supreme Court ruled that suppliers allowing differential price discounts between on-premises and off-premises retail establishments did not violate the “of value” provisions of 235 ILCS 5/6-5, if such discounts were not established to create a tied house, but only to increase the volume of alcohol sales. “Price cuts are prohibited by the Act only when they are coupled with an agreement or understanding that a retailer will buy other products of the wholesaler or producer to the exclusion of competitors, or when they lead to domination and control of a retail outlet by the wholesaler or producer.” The Court held that Section 5/6-5 was not violated where the producer maintained such a preferential discount pricing policy only for the purpose of increasing the volume of sales. Please note that the term “exclusion” does not appear in the Illinois “of value” statutory provisions, so the Supreme Court heavily relied upon cases construing the federal standard of “exclusion.”

In Foremost Sales Promotions, Inc. v. Director, Bureau of Alcohol, Tobacco, and Firearms, 880 F.2d 229 (7th Cir.,1988), the Seventh Circuit held that it was not a violation of the “of value” provisions of the FAAA for a wholesaler to advertise in a promotional newspaper distributed by a retail liquor chain. The Court believed that “inducing” a retailer to deal with a particular supplier, “to the exclusion in whole or part” of that supplier’s competitors, as that language is used in the FAAA, must be construed to incorporate some threshold requirement. The Court found that transactions between suppliers and retailers did not induce the “exclusion in whole or part” of competing suppliers unless their purpose was to lead to supplier control over ostensibly independent purchasers. The “exclusion” did not occur merely because an inducement ultimately led to a participating retailer buying less of a competing product. Again, this case appears to have been decided as it was due to a lack of proof of any “bad intent” on the part of the wholesaler.

And finally, in Fedway Associates, Inc. et al v. United States Treasury, Bureau of Alcohol, Tobacco and Firearms, 976 F.2d 1416 (D.C.Cir., 1992), the Circuit Court of Appeals ruled that a distributor’s promotion of giving away videos and televisions to retailers purchasing large quantities of its brands of liquor was allowable. The Court decided that the FAAA did not prohibit a distributor from giving such items to retailers as inducements to purchase quantities of the distributor’s alcohol. The “exclusion” criterion had to give due credence to the significance of competitive wholesale promotions. Such promotional practices not only fostered the traditional benefits of competition in terms of lower prices and improved product quality, but also supported a competitive alcohol market thereby helping to deter the formation of a black market. Again, this case stands for the proposition that a violation of any of the federal “tied house” standards must be proven. This Court specifically noted that the BATF in zealously attempting to control inter-tier relationships neglected to actually prove its case with competent evidence.

Federal Regulations

In April 1995 the Bureau of Alcohol, Tobacco and Firearms (BATF) modified its “tied house” regulations. In making such revision, the BATF utilized the criterion promulgated under the Fedway decision to set the standard under which the “exclusion” of retail licensees would be found to exist. “Exclusion” was defined under a two-prong test of whether:

(1) “a practice by a manufacturer or distributor, whether direct, indirect, or through an affiliate, places (or has the potential to place) retailer independence at risk by means of a tie or link between the manufacturer or distributor and the retailer or by any means of manufacturer or distributor control over the retailer;” and,

(2) “the practice results in the retailer purchasing less than it would have of a competitor’s product.” (27 CFR, Subchapter A, Subpart E, Section 6.151(a)(1) & (2))

In determining whether “exclusion” has occurred, the regulatory body must determine whether:

(a) the practice restricts or hampers the free economic choice of the retailer in deciding which products to purchase or the quantities in which to purchase same for resale;

(b) the manufacturer or distributor obligates the retailer to participate in the promotion to obtain the industry member’s product;

(c) the retailer has a continuing obligation to purchase or otherwise promote the product of the manufacturer or distributor;

(d) the retailer has a commitment not to terminate its relationship with the manufacturer or distributor with respect to purchase of the manufacturer or distributor’s products;

(e) the practice involves the industry manufacturer or distributor in the day-to-day operations of the retailer;

(f) the practice is discriminatory in that it is not offered to all retailers in the local market on the same terms without business reasons present to justify the difference in treatment (27 CFR, Subchapter A, Subpart E, Section 6.153)

IV. Procedures

A. This Commission possesses broad discretion in making “of value” determinations

Under both Federal and Illinois case law, this Commission possesses reasonable discretion and wide latitude in determining whether activities of licensees violate the “of value” provisions of the Illinois Liquor Control Act.

B. Absent specific Illinois statutory or regulatory language, this Commission will look to Federal law and regulation for guidance in making determinations regarding “of value”

Violations

If there is an Illinois statute or regulation specifically determining whether a trade practice violates, or is allowed under, the “of value” provisions of the Illinois Liquor Control Act, this Commission enforces such provision as written. However, where the Illinois statutes and regulations are silent regarding a particular trade practice, this Commission will review federal law and regulation for guidance in making determinations whether a particular trade practice is a violation of the “of value” provisions of the Illinois Liquor Control Act.

C. Products and services presumed to be “of value”

Unless specifically enumerated as being allowable under the Illinois Liquor Control Act, the Rules and Regulations of this Commission, or Trade Practice enunciated by this Commission, products and services provided by manufacturers, distributors and importing distributors to retailers, as well as such products and services being asked for or received by the retailer, shall be presumed to be “of value” and in violation of the Illinois Liquor Control Act. This Commission recognizes that there may be specific situations in which trade practices which provide something of value to retailers may nonetheless be allowable, and such practices shall be reviewed on a case-by-case basis. Practices which have not received prior determination as being allowable shall be presumed to be “of value,” and in violation. The Commission is attempting to expeditiously update this policy as such case-by-case determinations are made. [See TPP-2 for specific practices upon which the Commission has made determinations whether the practices violated state “tied house” provisions.]

D. Trade Practices may not be discriminatory

Manufacturers, distributors and importing distributors cannot enter into transactions with retailers, or a class of retailers, which are discriminatory in favor of such retailers, or which allow a particular retailer, or class of retailers, a competitive advantage. However, this Commission recognizes the holding of the Sharpenter case which allowed quantity discount price differentials between on-premises and off-premises retailers, so long as such promotions did not lead to the exclusion of competitors and domination and control over retailers. This Commission will enforce the proposition that promotions which induce exclusion of retailers products in whole or in part are not to be entered into.

TPP-2 Specific items or activities which have been reviewed by the Commission for “of value” violations

The following listing captures a large number of trade practices issues which have been submitted to the Commission for determination.

1) “Consumer Specialties”

Items commonly referred to as “consumer specialties” such as, for example, hats, t-shirts, jackets, sweat shirts, mugs, steins, key chains, sunglasses, lighters and the like, which are intended to be given to and received by the consumer, shall be distributed in person by the manufacturer, distributor, importing distributor or foreign importer licensee or by an employee of the manufacturer, non-resident dealer, distributor, importing distributor or foreign importer licensee so as to verify that the items are being received by the consumer. Such consumer specialties which are determined to be retained, used, or not distributed by any retail liquor licensee, will be determined to be items “of value” to such retailer, and items “of value” to have been given by the manufacturer, non-resident dealer, distributor, or importing distributor or foreign importer subjecting both licensees to potential discipline by the Commission.

Generally, a manufacturer, non-resident dealer, distributor, or importing distributor or foreign importer may not provide free items to a retailer, if such items inure to the benefit of the retailer, as such items would be considered something "of value". A retailer may purchase consumer advertising specialties from a manufacturer, distributor or importing distributor. If the retailer pays for the consumer advertising specialties, such items may be retailer specific.

Consumer advertising specialties may be provided for free to a retailer if the retailer gives such items away to the ultimate consumer. If the retailer does not pay for the consumer advertising specialties, then such items may be brand or promotion specific only, but may not be retailer specific.

2) Courtesy Wagons

Retail Licensees

Pursuant to Reg. Sec. 100.210, a distributor or manufacturer may provide a courtesy wagon or coil boxes and pumps, free of charge, one time per year, for a one day period, for picnics held by a retailer. The manufacturer or distributor, however, may not supply free beer, wine or spirits for such event. If the event is held off the retail licensee's premise, the retail licensee must first obtain a special use permit pursuant to 235 ILCS 5/5-1(q).

Special Event Retailers

Pursuant to Trade Practice Policy TPP-4, a manufacturer or distributor may not supply product directly to a special event retailer licensee. Pursuant to 235 ILCS 5/1-3.17.1 a Special Event Retailer is an educational, fraternal, political, civic, religious or non-profit organization which sells or offers for sale beer or wine, or both, only for consumption at the location and on the date(s) designated on a special event retail license. Such organization must obtain a Special Event Retailer's License pursuant to 235 ILCS 5/5-1(e). In addition, a manufacturer or distributor may supply, free of charge, coil boxes and pumps, to any special event licensee. Such services are not considered something "of value" under 235 ILCS 5/6-5 and 5/6-6.

3) Meal and Entertainment Expenses

Distributors, importing distributors and manufacturers may incur reasonable expenses related to meals and entertainment with retailers. This Commission considers reasonable business meal and entertainment expenses as a standard business practice and conduct not in violation of the intent of the "of value" provisions of 235 ILCS 5/6-5 or 5/6-6. The practice of paying for a retailer's meal or entertainment expenses will be permitted so long as the inducement does not result in full or partial exclusion of products sold by other industry members. A manufacturer distributor or importing distributor may incur these expenses so long as it does not provide such meals and entertainment repeatedly to one retailer or a group of retailers, does not exclude other Illinois retailers, and does not violate the purpose or spirit of the federal Tied House Laws.

4) Participation in Retail Association Activities

This Commission shall allow distributors or manufacturers to participate in the following retail association activities:

a) Display of their products at a convention or trade show;

b) Rent display booth space, if the rental fee is not excessive and is the same as paid by all exhibitors;

c) Provide hospitality, where it is done as a separate activity or in conjunction with a banquet or dinner;

d) Purchase tickets to functions and pay registration fees, if the fees paid are not excessive and are the same as paid by all exhibitors;

e) Make payments for advertisements in programs or brochures issued by a retailer or association at a convention or trade show, if the total payment for all such advertisements do not exceed $300 per year for any retail association.

5) Retailers Charging for Floor or Shelf Space

The practice of a retailer charging a distributor or manufacturer for the floor or shelf space upon which its alcoholic beverage products sit is a violation of 235 ILCS 5/6-5 which forbids a retailer from accepting anything "of value" directly or indirectly from any manufacturer or distributor. Likewise, 5/6-5 prohibits any manufacturer or distributor from giving anything "of value" directly or indirectly to any retailer. Thus, both the payment for floor or shelf space and the receipt of such payment are violations of the statute by both the retailer and the supplier.

This Commission will investigate practices in which payment of space for non-alcoholic products is used to ensure placement of alcoholic products in a retailer's premise. In addition, this Commission will consider it to be a violation by both the supplier and retailer if a third-party promotion company is used to pass payment for prominent floor or shelf space from the supplier to the retailer. This Commission believes that an allowance for payment for floor and shelf space would result in" bidding wars" between suppliers, thereby resulting in the discriminatory exclusion of brands in retailer outlets.

6) Assisting in Pricing and Providing Products To Retailers

Pursuant to 235 ILCS 5/6-5, manufacturers, distributors and importing distributors may not provide anything "of value" to a retailer, which includes services provided to a retailer. It is a violation for distributors and manufacturers to perform functions which are usually performed by the retailer in the normal operations of its business. Allowing manufacturers, distributors and importing distributors to perform such functions would be equivalent to the distributors or manufacturers performing employee functions for the retailer, and therefore will not be allowed. This Commission will review the such "services" provided to retailers on a case-by-case basis.

Manufacturers, distributors and importing distributors shall not affix prices to product on behalf of retailers. This prohibition maintains the historic division between manufacturers, distributors and retailers relative to the determination of prices of alcoholic liquor at the retail level. Additionally, this prohibition will avoid even the appearance of any attempt by manufacturers, distributors and importing distributors to obtain control over the operations of retailers. Pricing of product shall include distributors or manufacturers affixing price stickers directly to product or entering prices into retailer computer systems.

Manufacturers, distributors and importing distributors may however after stocking a shelf affix “shelf tags” which identify the product and price of the product; however, at no time shall a manufacturer, distributor or importing distributor delegate or contract this service to a third party. “Shelf tags” shall be considered advertising materials and are subject to the provisions of Section 6-6 of the Liquor Control Act. Therefore, manufacturer shall not directly or indirectly require the distributor or importing distributor to purchase “shelf tags” or directly or indirectly require the distributor or importing distributor to purchase any advertising materials from the manufacturer or the manufacturer’s designated supplier. If the stocking involves movement and a change in the placement of the product on the shelf, the “shelf tags” may be moved to the new position of the product.

7) “No Charge” Products

Recently agents of the Commission have been finding invoices upon retailer premises which appear to be evidence of providing products without payment. These invoice items are usually designated as “N/C.” As you know, Sec. 5/6-5 prohibits manufacturers, distributors and importing distributors from giving and retailers from receiving items “of value” within the meaning of the statute. Rule 100.280 provides that no licensee, shall give away any alcoholic liquor for commercial purposes.

The Commission agents regularly report to the Legal staff marketing practices upon which they observe during regular licensee inspections. Frequently the agents are given the explanation by the retailer and distributor that "this is the way business has always been done," however, Commission agents can only examine whatever documents are available at the retailer's premises when they perform their inspections and base their observations on those documents. If the distributor has advertised price promotions directly to its clients, or the price is based upon oral representations by the distributor's sales personnel, etc., there is no information upon which an agent could come to the conclusion that the "N/C" alcohol represents a product-based price reduction. It is suggested that the confusion created in the minds of our agents is created by bare identifier "N/C" alcohol.

The Commission also understands that distributors usually assign an internal code number to each invoice item reflecting "no charge" merchandise, but such internal coding, without explanation of same to the agent is meaningless. The addition of a legend of "N/C" with a numeric identifier also provides no more information to the agents than does the bare reference to "N/C" alcohol. A legend, such as, for example, "product in lieu of price reduction," or words to that effect, would more properly allow the Commission's agents to prepare reports of their findings after reviewing invoices and other documents, upon which reports the Legal Staff could come to reasoned decisions concerning a particular promotion.

It may turn out that the product is being given "no charge" for a valid reason, i.e. replacement of product broken upon delivery, a product in lieu of a reduction in price, etc.; however, it is incumbent upon the retailer and distributor to advise the agent of the reason for the apparent delivery of product without charge.

8) Retailer Warehousing

It is the policy of the Commission that a retailer may not warehouse alcohol on unlicensed business premises.

The following statutory provisions have application to the question of whether retailers are permitted to warehouse products.

A. Definitions

5/1-3.15. Distributor

"Distributor" means any person, other than a manufacturer or non‑resident dealer licensed under this Act, who is engaged in this State in purchasing, storing, possessing or warehousing any alcoholic liquors for resale or reselling at wholesale, whether within or without this State. (Source: P.A. 83‑1254) (from Ch. 43, par. 95.15) 5/1-3.17. Retailer

"Retailer" means a person who sells, or offers for sale, alco­holic liquor for use or consumption and not for resale in any form. (Source: P.A. 82‑783) (from Ch. 43, par. 95.17) 5/5-1

(d) A retailer's license shall allow the licensee to sell and offer for sale at retail, only in the premises specified in such li­cense, alcoholic liquor for use or consumption, but not for resale in any form: Provided that any retail license issued to a man­ufacturer shall only permit such manufacturer to sell beer at retail on the premises actually occupied by such manufacturer. After January 1, 1995, there shall be 2 classes of licenses issued under a retailers license:

(1) "retailers on premise consumption license" shall allow the licensee to sell and offer for sale at retail, only on the premises specified in the license, alcoholic liquor for use or consumption on the premises or on and off the premises, but not for resale in any form.

(1) An "off premise sale license" shall allow the licensee to sell, or offer for sale at retail, al­coholic liquor intended only or off premise consumption and not for resale in any form. Notwithstanding any other provision of this sub­section (d), a retail licensee may sell al­coholic liquors to a spe­cial event retailer li­censee for resale to the extent per­mitted under subsection (e).

5/5-1. Licenses issued by Illinois Liquor Control Commission

(b) A distributor's license shall allow the wholesale pur­chase and storage of alcoholic liquors and sale of alcoholic liquors to licensees in this State and to persons without the State, as may be permitted by law.

5/7A-1.Terms Defined

For the purposes of this Article:

"Warehouse" means any room, house, structure, building, place, yard or protected enclosure wherein personal property belonging to another is stored for compensation.

"Warehouseman" means any person, firm, partnership, associ­ation or corporation owning, controlling, operating, man­aging or leasing any warehouse within this State. "For com­pensation" means any direct or indirect charge for storage. (Source: P.A. 82‑783) (from Ch. 43, par. 157a)

5/7-A6. Violations

Any person who violates any of the provisions of this Article or any of the rules and regulations of the Department [of Revenue] for the ad­ministration and enforcement of the provisions of this Article is guilty of a Class B misdemeanor. In case of a continuing violation each day's continuance thereof shall be a separate and distinct offense. (Source: P.A. 82‑783) (from Ch. 43, par. 157f)

5/2.1 Scope of Act

No person shall manufacture, bottle, blend, sell, barter, transport, deliver, furnish or possess any alcoholic liquor for beverage purposes, except as specifically provided in this Act,. . .” The usual reason for warehousing by a retailer is to take advantage of volume discounts at the time of purchasing.

Retailer warehousing

It is the policy of the Commission that a retailer may not warehouse alcohol on unlicensed business premises.

The following statutory provisions have application to the question of whether retailers are permitted to warehouse products.

A. Definitions

5/1-3.15. Distributor

"Distributor" means any person, other than a manufacturer or non‑resident dealer licensed under this Act, who is engaged in this State in purchasing, storing, possessing or warehousing any alcoholic liquors for resale or reselling at wholesale, whether within or without this State. (Source: P.A. 83‑1254) (from Ch. 43, par. 95.15)

5/1-3.17. Retailer

"Retailer" means a person who sells, or offers for sale, alco­holic liquor for use or consumption and not for resale in any form. (Source: P.A. 82‑783) (from Ch. 43, par. 95.17)

5/5-1

(d) A retailer's license shall allow the licensee to sell and offer for sale at retail, only in the premises specified in such li­cense, alcoholic liquor for use or consumption, but not for resale in any form: Provided that any retail license issued to a man­ufacturer shall only permit such manufacturer to sell beer at retail on the premises actually occupied by such manufacturer. After January 1, 1995, there shall be 2 classes of licenses issued under a retailers license:

(1) A "retailers on premise consumption license" shall allow the licensee to sell and offer for sale at retail, only on the premises specified in the license, alcoholic liquor for use or consumption on the premises or on and off the premises, but not for resale in any form. (2) An "off premise sale license" shall allow the licensee to sell, or offer for sale at retail, al­coholic liquor intended only for off premise consumption and not for resale in any form. Notwithstanding any other provision of this sub­section (d), a retail licensee may sell al­coholic liquors to a spe­cial event retailer li­censee for resale to the extent per­mitted under subsection (e).

5/5-1. Licenses issued by Illinois Liquor Control Commission

(b) A distributor's license shall allow the wholesale pur­chase and storage of alcoholic liquors and sale of alcoholic liquors to licensees in this State and to persons without the State, as may be permitted by law.

5/7A-1.Terms Defined

For the purposes of this Article:

"Warehouse" means any room, house, structure, building, place, yard or protected enclosure wherein personal property belonging to another is stored for compensation.

"Warehouseman" means any person, firm, partnership, associ­ation or corporation owning, controlling, operating, man­aging or leasing any warehouse within this State. "For com­pensation" means any direct or indirect charge for storage. (Source: P.A. 82‑783) (from Ch. 43, par. 157a)

5/7-A6. Violations

Any person who violates any of the provisions of this Article or any of the rules and regulations of the Department [of Revenue) for the ad­ministration and enforcement of the provisions of this Article is guilty of a Class B misdemeanor. In case of a continuing violation each day's continuance thereof shall be a separate and distinct offense. (Source: P.A. 82‑783) (from Ch. 43, par. 157f)

5/2.1 Scope of Act :

No person shall manufacture, bottle, blend, sell, barter, transport, deliver, furnish or possess any alcoholic liquor for beverage purposes, except as specifically provided in this Act,. . .@ The usual reason for warehousing by a retailer is to take advantage of volume discounts at the time of purchasing.

The problems which are created by such warehousing include:

deliveries to non-licensed premises possible sales of alcoholic beverages from such non-licensed premises possible geographic boundary violations additional work necessary by Commission agents to track such alcohol.

Since the definition of a “distributor” states that it may among other activities “warehouse” the Act has made this activity allowable. But the definition of “retailer” does not make any reference to the concept of “warehousing,” so referring to Sec. 5/2.1, below, it cannot warehouse. The argument is that whatever the conduct is, if it is not specifically allowed under the statute, it is prohibited. This is supported by the plain language of Sec. 5/2.1:

5/2.1 Scope of Act

No person shall manufacture, bottle, blend, sell, barter, transport, deliver, furnish or possess any alcoholic liquor for Beverage purposes, except as specifically provided in this Act.

The contrary position, which is being espoused by the proponents of retailer warehousing, is that since the activity of “warehousing” is not a specifically prohibited activity of a retailer, it is allowed. This argument flies in the face of Sec. 5/2.1 above. This also flies in the face of the concept of returning control over the alcohol trade to the States by the adoption of the 21st Amendment. Since the 18th Amendment essentially made the alcohol business illegal and the 21st Amendment by repealing the 18th made the trade legal, and since the States were given the power to control the activity, the statutes which were enacted subsequent thereto, such as the Illinois Liquor Control Act, were making previously illegal activities legitimate.

To say that the enabling statute allows any activity not specifically prohibited does not comport with the “except as specifically provided in this Act,. . .” language. People v. Select Specialties, Ltd., 317 Ill.App.3d 538, 740 N.E.2d 543, 251 Ill.Dec. 462 (4th District, 12/6/00)

The Act provides as follows:

"No person shall manufacture, bottle, blend, sell, barter, transport, deliver, furnish or possess any alcoholic liquor for beverage purposes, except as specially provided in this Act ***." 235 ILCS 5/2‑1 (West 1996).

The cardinal rule in statutory construction is to give effect to legislative intent. Solich v. George & Anna Portes Cancer Prevention Center of Chicago, Inc., 158 Ill. 2d 76, 81, 630 N.E.2d 820, 822 (1994); Central Illinois Public Service Co. v. Illinois Commerce Comm'n, 268 Ill. App. 3d 471, 483, 644 N.E.2d 817, 825‑26 (1994). The primary guide as to intent is the language of the statute. Solich, 158 Ill. 2d at 81, 630 N.E.2d at 822. Words in the statute should be given their popularly understood meaning. International Bureau of Fraud Control, Ltd. v. Clayton, 188 Ill. App. 3d 703, 710, 544 N.E.2d 416, 421 (1989), citing Kozak v. Retirement Board of the Firemen's Annuity & Benefit Fund, 95 Ill. 2d 211, 215, 447 N.E.2d 394, 396 (1983). Where the statutory language is unclear, a court may look beyond it, but where it is clear the court must give it effect. Solich, 158 Ill. 2d at 81, 630 N.E.2d at 822. When the language is unclear, a primary source for construing the statute is the purpose behind the law and the evils the law is designed to remedy. Solich, 158 Ill. 2d at 81, 630 N.E.2d at 822. Courts avoid interpretations that would render part of a statute meaningless or void. Fraud Control, 188 Ill. App. 3d at 710, 544 N.E.2d at 421, citing Harris v. Manor Healthcare Corp., 111 Ill. 2d 350, 362‑63, 489 N.E.2d 1374, 1379 (1986).

The Act is to be liberally construed toward protecting the public health, safety, and welfare and toward promotion of temperance in the consumption of alcohol by careful control and regulation of the manufacture, sale, and distribution of alcoholic liquor. 235 ILCS 5/1‑2 (West 1996).

A strict or technical construction of any of its provisions detrimental to the public interest should be avoided . Carrigan v. Liquor Control Comm'n, 19 Ill. 2d 230, 236, 166 N.E.2d 574, 577‑78 (1960). The business of selling liquor is not favored; no inherent right exists to carry it on and it may be entirely prohibited. Daley v. Berzanskis, 47 Ill. 2d 395, 398, 269 N.E.2d 716, 718 (1971). If the Act is to have any meaning, it must be interpreted as starting from a point of prohibition. The Act then provides exceptions where persons may conduct certain activities involving alcohol as long as they have a valid liquor license. 235 ILCS 5/2‑1, 5‑1 (West 1996). “The State argues the Act prohibits what it does not permit. The Act must expressly permit the actions of the defendants in this case or they are in violation of the Act. There is no express permission for their conduct, and we conclude they violated the Act.” People v. Select Specialties, Ltd., 317 Ill.App.3d 538, 740 N.E.2d 543, 251 Ill. Dec. 462 (4th District, 12/6/00)

9) “Buckets”

The practice of distributors "providing" plastic buckets to retailers, which are used in serving multiple bottles of beer to a proper party, in accordance with Sec. 6-28(c)(6) of the Happy Hour law, is governed by the normal "of value" inquiry as well as reference to Sec. 6-6(iv), which provides that items, such as for example, "coasters, trays, napkins, glassware and cups shall not be deemed to be inside signs or advertising materials and may only be sold to retailers." Since these buckets fall within the general category of non-sign, non-advertising materials above, they may only be sold to retailers.

10) “Coolers”

In 1998 a major brewery submitted a request for approval of the giving away of coolers to retailers. The Commission’s response was that the proposed activity was a violation of the “of value” provisions of the Liquor Control Act. In 1999 a major trade association requested a position on the same or a very similar activity, and was advised of the existence of the 1998 opinion, which remained in effect until such time as the Commission had revisited the issue and announced a modification of its position.

The term “utilitarian” has been applied to these coolers. Illinois does not have an expressed position on the “utility” of “signage and advertising materials,” but it does expressly state that the providing of “any fur­nishing, fixture or equipment on the premises of a place of busi­ness of another licensee authorized under this Act to sell alcoholic liquor at retail” is prohibited activity.

Since these coolers have the attributes of both signage and a trade fixture (therefore equating them with “utility”), they are something of a hybrid, being neither totally signage nor fixture, but at the same time being both. Since signage and advertising materials may be given or sold to retailers, while fixtures may be neither given nor sold to retailers, the subject of these coolers was viewed with an eye toward allowing the advertising while upholding the prohibition against giving or selling equipment, furnishings and fixtures.

In an attempt to strike a balance between allowable activities and activities absolutely prohibited under 5/6-5 and 5/6-6, the Commission has come to the position that these coolers may be “provided” to retailers, however, they must be sold at fair market value. (The Commission is advised that the average fair market value of these coolers usually ranges from $70-150.00, however the Commission will be receptive to additional cost information which will be factored into future discussions.)

Again, the Commission notes that once a program of providing coolers is undertaken, the manufacturer, distributor or importing distributor must stand ready to “provide” the items for all retail licensees who want to purchase them.

11) Retailer storage on the licensed premises of wine purchased by a consumer

The question has been posed whether a retailer of fine wines can store small quantities of wine, which are solely intended for consumption by the purchaser, and family, friends, etc., and not for any possible resale, in a temperature controlled environment, etc., upon the retailer’s licensed premises, for a consumer who has purchased the wine but does not have appropriate storage for it at his/her home.

The usual reasons for storing/warehousing by a retailer, i.e., to take advantage of volume discounts at the time of purchasing, such as we saw when the tax increase took effect on July 1, 1999, does not appear to be relevant to this inquiry. The other usual problems which are created by such warehousing, which include possible deliveries to non-licensed premises; possible sales of alcoholic beverages from such non-licensed premises; possible geographic boundary violations; additional work necessary by Commission agents to track such alcohol, also do not appear to be relevant here. Also, the usual inquiry into such transactions from the “of value” perspective does not apply since this transaction does not involve a relationship between the licensed tiers, but rather between the retail licensee and the ultimate consumer.

The statutory sections which apply to retailers, 5/1-3.17 and 5/5-1(d), and the general “Scope of the Act” section, 5/2-1, have been examined and no prohibition to the approval of this relationship has been found.

It is the Commission’s position, which has been pronounced in connection with the concept of distributor warehousing for retailers, that all “of value” activities between the tiers are prohibited unless specifically allowed, or excepted, and the subject inquiry has also been examined from this perspective to see if the requested activities are otherwise prohibited. We find no such prohibition.

There are potential problems which we may see in this transaction, which involve the concept of consignment sale, which the Commission has found to be an improper transaction between the retailer and consumer, as well as raising possible commercial problems, such as loss or destruction of the property of another during this “bailment” arrangement. The Commission does not have statutory power to inquire into these commercial problems, and expects the parties to the proposed arrangement will adequately deal with them.

Therefore, as long as:

(1) the sale of the product is complete before the storage arrangement is undertaken, and capable of objective documentation, which will negate the possibility of a prohibited consignment sale;

(2) the consumer/purchaser has taken legal title to the property;

(3) the product purchased is of a size which would be appropriate for a consumer, such as the two case limitation imposed upon reciprocal shipments of wine under sec. 5/6-29 of the Liquor Control Act, as opposed to a purchase of product which would be appropriate for resale; and

(4) there is a documented payment from the consumer to the retailer for the “storage” fee, pre-paid or at regular intervals, the Commission does not see other prohibitions against the transaction.

12) The listing of retail liquor licensees carrying the products of a manufacturer or distributor, importing distributor or foreign importer on the manufacturer’s or distributor, importing distributor or foreign importer’s website

The Commission has received requests from certain manufacturers and distributor, importing distributor or foreign importers of alcoholic liquors if the listing of the names and addresses of retail liquor licensees carrying the products of a manufacturer or distributor, importing distributor or foreign importer for sale on the manufacturer’s or distributor, importing distributor or foreign importer’s website is a violation of the “of value” provisions of the Liquor Control Act of 1934.

Sections 5/6-4, 5/6-5 and 5/6-6 of the Liquor Control Act, the so-called “of value” or “tied house” provisions generally prohibit ownership/licensing relationships, the extension of credit and the providing of various types of advertising materials unless excepted in the said sections.

It is the Commission’s considered opinion that the listing of the names and addresses of all retail liquor licensees who carry the products for sale of a manufacturer or distributor, importing distributor or foreign importer may be listed on the manufacturer’s and/or distributor, importing distributor or foreign importer’s websites, subject to the following conditions:

1) The retailer contacts the manufacturer, distributor or importing distributor or foreign importer to have its business information included in the retailer listing.

2) The retailer listing shall include only the business name, business address and telephone number. The inclusion of E-mail or website addresses is prohibited.

3) The retailer listing does not provide specific product information, but rather is a general statement that the retailers listed carry the products of the manufacturer or distributor, importing distributor or foreign importer.

4) The retailer listing shall include all retail licensees carrying the manufacturer’s or distributor, importing distributor or foreign importer’s products, which listing may be on a city, town or village basis, or zip codes, or by any system which assures that all retailers are listed.

5) The listing shall include no retailer information other than referenced in these subsections, and “sales” or “product promotions” or the like are strictly prohibited.

6) The inclusion of any and all retailers on the manufacturer’s or distributor, importing distributor or foreign importer’s website shall be at no direct or indirect cost to the retailer.

7) The manufacturer’s, non-resident dealer’s, distributor’s, importing distributor’s or foreign importer’s website shall not may provide a “link” to a website of any retail licensee, provided such linking is made available to all retailers requesting it. whether listed or not listed on the manufacturer’s or distributor, importing distributor or foreign importer’s website.

The Commission publishes this opinion with the express understanding that the purpose of such retailer listings is to provide truthful, accurate and up-to-date information to the ultimate consumer concerning the availability of alcoholic beverages.

13) “EOM”, “EOY” etc. credits or rebates

Suppliers are paying EOM (Aend of month@) EOY (“end of year”) or other variously identified credits (Arebates@) for purchases at or in excess of agreed upon quantities. Is this an “of value” violation?

Traditionally, the Commission has not involved itself in the pricing of alcoholic beverages, nor has it unduly involved itself in the commercial relationships between manufacturers, distributors and importing distributors, and retailers, other that specifically provided for in Sec. 5/6-5. The use of product credits, such as end of month, quarter, year, etc., credits is viewed as an adjustment of the purchase price based upon volume purchasing, rather than a prohibited Aof value@ payment. So, the general treatment of such payments is that they are allowable, if broadly offered to similarly situated retailers.

Does the payment of the credit, which would otherwise be allowable, directly to the home office of a chain retailer cause this practice to become a violation? Since the multiple outlets of the chain retailer are all owned by the same corporation, there is a unity of owner and licensees, so payments to the corporation or the individual retail outlet has the same legal effect.

It is the opinion of the Legal Division that this practice is not a violation of Sec. 5/6-5.

14. CARBON DIOXIDE FILTERS

A Manufacturer, Importing Distributor, or Distributor may sell, supply, furnish, give or pay for, or otherwise provide to and install for a licensee authorized to sell alcoholic beverages at retail, carbon dioxide filters provided that the following applies:

1. The cost to the manufacturer importing distributor or distributor for such filters, including labor and installation costs, does not exceed Fifty Dollars($50.00).

2. The filters are installed in such a manner that it protects and cleans the CO2 supply for all the draft beer in the retailer’s delivery system and not just the products carried by the manufacturer, importing distributor or distributor supplying the filter.

3. The filters must be made available to all retailers that sell draft beer.

4. The manufacturer, importing distributor, or distributor may not limit the availability of the filter to only the retailers that carry the brands of the supplying manufacturer, importing distributor or distributor.

It is the determination of the Commission that CO2 filters may provide consumer protection and aid in providing a safe and healthy product delivered to consumers. Therefore, the Commission has determined that providing such items under the above standards, would not constitute a “thing of value” or otherwise be prohibited within the meaning of Sections 5/6-4, 5/6-5 o5 5/6-6, of the Illinois Liquor Control Act(235 ILCS 5/1 et seq.)

This Trade Practice Policy shall expire and be repealed on October 1, 2006 unless readopted by the Illinois Liquor Control Commission.

TPP-3 Manufacturer, Distributor And Importing Distributor sponsorship of events at retail premises

I. Purpose

To set the policy of the Illinois Liquor Control Commission (ILCC) and establish the procedures whereby manufacturers, distributors and importing distributors may sponsor events at retail premises.

II. Policy

It is the policy of this Commission that manufacturers, non-resident dealers, distributors, and importing distributors or foreign importers may sponsor events at licensed retail premises under the following terms and conditions.

III. Background

Sections 5/6-4, 5/6-5 and 5/6-6 of the Illinois Liquor Control Act (235 ILCS 5/6-4, 5/6-5 & 5/6-6) deal with things “of value” in dealings between manufacturers, non-resident dealers, distributors , and importing distributors, or foreign importers and retailers. This Commission’s Trade Practices concerning things “Of Value” (TPP-1) is incorporated herein by reference.

Section 100.330, titled “Advertising,” provides:

1. Pursuant to Sections 6-4, 6-5, and 6-5 of the Act (235 ILCS 5/6-4, 6-5, and 6-6), no retail licensee or entity having more than a 5% interest in a retail licensee shall have any, direct or indirect, interest in or control of any advertising or promotional company which receives funds, directly or indirectly from, or for the account of, any manufacturer, non-resident dealer, broker, distributor, importing distributor or foreign importer of alcoholic beverages; nor shall any manufacturer, non-resident dealer, broker, distributor, importing distributor or foreign importer make any payment, direct or indirect, to any retailer or any other entity which provides advertising, promotional or display services for retailers in consideration of any advertising or promotional efforts of any kind not allowed under the Illinois Liquor Control Act or the rules and regulations of the Commission.

2. Nothing herein shall prohibit any manufacturer, non-resident dealer, distributor, importing distributor, or foreign importer from sponsoring an event at a venue which sole purpose is to host live entertainment, provided that no indirect or direct payment is made to the retailer and that any reference to the retailer in any advertising is incidental to the event itself.

3. Subsections (1) and (2) above do not apply to a person holding a special event retailer’s license. (Source: Amended at 20 Ill. Reg. 834, effective January 2, 1996)

IV. Procedure

Manufacturers, non-resident dealers, distributors , and importing distributors or foreign importers may sponsor events on behalf the premises of retailers under the following terms and conditions:

A. The manufacturer, non-resident dealers, distributor, or importing distributor or foreign importers must provide all advertising and promotional items costs, without cost, or make payment directly to a third-party promoter (e.g., a non-licensed entity participating in the creation of the event.)provided any payment made to a third party promoter shall be solely for advertising and promotional costs. A copy of the signed paid receipt itemizing the advertising and promotional costs shall be maintained by the manufacturer, non-resident dealer, distributor, importing distributor, or foreign importer furnishing such advertising and promotional costs.

B. Except as limited by Paragraph A above, The manufacturer, non-resident dealer, distributor, or importing distributor, foreign importer or third party promoter shall not give any financial remuneration directly or indirectly to the retailer;

C. Third-party promoters cannot be affiliated with or under the control of, either directly or indirectly, the retailer, distributor or manufacturer, non-resident dealer, distributor, or importing distributor or foreign importer, in any manner;

D. The focus of all advertising of the event must give primary emphasis to the event itself, the charitable, philanthropic reason therefore, etc., and therefore any reference to the retailer in any advertising materials must be strictly incidental to the event (e.g., stating the location of the event);

E. The “sponsoring” retailer may not restrict the availability of any other alcoholic liquor, nor may it exclude or require the sale of any other manufacturer’s, non-resident dealer’s, or distributor’s, importing distributor’s or foreign importer’s product during the event; and

F. Manufacturers, non-resident dealers, distributors, and importing distributors or foreign importers must make all reasonable attempts to conduct events only at retail locations which can accommodate such events (e.g. all venues that are geared to concert presentations must be given equal opportunities to host concerts).

G. Manufacturers, non-resident dealers, distributors and importing distributors or foreign importers may not repeatedly sponsor events for one retailer or group of retailers to the exclusion of all other retailers. H. Manufacturers, distributors and importing distributors must, prior to the event, obtain from the third party promoter a signed affidavit containing the information requested in the form set forth hereafter. Such affidavit shall be filed with the Commission prior to the event and a copy retained by the manufacturer, distributor and importing distributor furnishing the advertising and promotional items in accordance with Section 5/6-10 (235 ILCS 5/6-10).

Prior to holding the event, the manufacturer, non-resident dealer, distributor, importing distributor or foreign importer furnishing the advertising or promotional costs or making payment to the Third Party Promoter shall receive from the retailer a sworn statement executed by the Third Party Promoter containing the information in the form provided hereafter. The Commission shall be furnished a copy of the sworn statement by the retailer and the Commission shall receive a copy of the sworn statement at least two (2) business days prior to the event. The retailer may furnish to the Commission a copy of the sworn statement by facsimile, delivery in person the Commission’s Office in Chicago or Springfield or by Certified Mail, postage prepaid.

V. Third-Party Promotion Company Affidavit Statement

All retail liquor licensees utilizing the services of a so-called “third-party promotion” company, shall file with the Commission, before any services are provided it by the third-party promotion company, an affidavit from the owner of the third-party promotion company and an affidavit from the retailer, in substantially the following formats:

STATE OF ILLINOIS

LIQUOR CONTROL COMMISSION

In the Matter of:

Re: Nature of sponsored Event or Services provided by Third-Party Company:

Date of event:

Retailer:

Supplier or Wholesaler:

Third-party company:

THIRD-PARTY COMPANY AFFIDAVIT

[RETAILER LICENSEE FORM]

The undersigned, being first duly sworn, on oath deposes and states:

1. I am the (title/capacity) of the above Retailer licensee, located at

2. I have full legal capacity to execute this Affidavit on behalf of the retailer licensee.

3. The retailer licensee presently holds Illinois Retailer Liquor License No. ,which expires on.

4. The retailer has retained the services of the above Third-party company in connection with the above specified sponsored event or services to be conducted on the retailer=s licensed premises.

5. That neither the retailer licensee, nor any officer, director, shareholder, employee or representative of the retail licensee has any interest, direct or indirect, in the third-party company.

6. That all funds paid to the third-party company shall represent the fair market value of such services rendered by it to or on behalf of the above supplier or wholesaler.

7. That no funds paid to the third-party company for services rendered to or on behalf of the above supplier or wholesaler will be paid to the retailer liquor licensee or any person affiliated with the retailer liquor licensee, including but not limited to payments for merchandising and promotional services, scan-backs, undocumented coupon redemptions, etc.

8. Complete the following subparagraphs which are applicable to the specific sponsored event or services:

a) The following is a detailed description of the “sponsored event” that will be held at the retailer licensee=s business premises:

The cost of sponsorship shall be: (Dollars), covering the following expenses:

b) I hereby represent that the sole purpose of the venue where the event is to be held is to host live entertainment in conformity with Regulation 100.330(b).

c) The following is a detailed description of the merchandising and promotional services that will be furnished to or installed on the retailer licensed premises, including the name of the company which retained the third-party company, the cost of each item furnished to the retailer licensee plus the normal and customary cost of labor, erection and installation, and the person to whom the payment shall be made.

Dated: Affiant:

Title

State of Illinois )

)ss.

County of )

Subscribed and sworn to before me this day of

, 20

Notary Public (SEAL)

This completed form shall be filed with the Illinois Liquor Control Commission, 100 West Randolph Street, Suite 5-300, Chicago, Illinois 60601; fax 312-814-2241.

and:

STATE OF ILLINOIS

LIQUOR CONTROL COMMISSION

In the Matter of:

Re: Nature of sponsored Event or Services provided by Third-Party Company:

Date of event: Retailer: Supplier or Wholesaler: Third-party company:

THIRD-PARTY COMPANY AFFIDAVIT

[THIRD-PARTY COMPANY FORM]

The undersigned, being first duly sworn, on oath deposes and states:

1. I am the (title or capacity) of (hereafter referred to as Athird-party company@).

2. I have full legal capacity to execute this Affidavit on behalf of the third-party company.

3. The above referenced retailer licensee has retained the services of the third-party company in connection with the above referenced sponsored event or services to be conducted on the retailer=s licensed premises.

4. That neither the retailer licensee, nor any officer, director, shareholder, employee or representative of the retail licensee has any interest, direct or indirect, in the third-party company.

5. That all funds paid to the third-party company shall represent the fair market value of such sponsored event or services rendered by it to or on behalf of the above supplier or wholesaler.

6. That no funds paid to the third-party company for sponsorship or services rendered to or on behalf of the referenced supplier or wholesaler will be paid to the retailer liquor licensee or any person affiliated with the retailer liquor licensee, including but not limited to payments for merchandising and promotional services, scan-backs, undocumented coupon redemptions, etc.

7. Complete the following subparagraphs which are applicable to the specific sponsored event or services:

a) The following is a detailed description of the A sponsored event@ that will be held at the retailer licensee=s business premises:

The cost of sponsorship shall be: (Dollars), covering the following expenses:

b) I hereby represent that the sole purpose of the venue where the event is to be held is to host live entertainment in conformity with Regulation 100.330(b).

c) The following is a detailed description of the merchandising and promotional services that will be furnished to or installed on the retailer licensed premises, including the name of the company which retained the third-party company, the cost of each item furnished to the retailer licensee plus the normal and customary cost of labor, erection and installation, and the person to whom the payment shall be made.

Dated:

Affiant:

Title:

State of Illinois )

)ss.

County of

Subscribed and sworn to before

me this day of

, 20

Notary Public (SEAL)

This completed form shall be filed with the Illinois Liquor Control Commission, 100 West Randolph Street, Suite 5-300, Chicago, Illinois 60601; fax 312-814-2241.

I. In the event a manufacturer, non-resident dealer, distributor, importing distributor or foreign importer furnishes advertising and promotional costs or makes payment to the Third Party Promoter for such advertising and promotional costs in an amount in excess of $500.00 for each location, such manufacturer, non-resident dealer, distributor, importing distributor or foreign importer shall secure prior approval from the Commission by identifying the proposed advertising and promotional costs, which total costs cannot exceed $2,500.00 for each location associated therewith to be furnished to the Third Party Promoter, such request to the Commission shall be furnished prior to scheduling the event at the location of the retail premises.

VI. Exceptions

The limitations under Section V above do not apply to units of government holding retailer’s liquor licenses; however, such limitation under Paragraph V will apply if the retail license is held in the name of a concessionaire which is not a public body.

TPP-4 Donations Of Products And Services To Organizations

I. Purpose

To set the policy of the Illinois Liquor Control Commission and establish the procedures whereby manufacturers, distributors, importing distributors, and retailers may make donations of cash, alcoholic and non-alcoholic products and services to not-for-profit organizations and Special Event Retailer Licensees.

II. Policy

It is the policy of this Commission that donations of cash, non-alcoholic products and services only may be made by manufacturers, distributors and importing distributors to not-for-profit organizations and Special Event Retailer Licensees. Donations of alcoholic liquor products from a manufacturer, distributor or importing distributor may not be made for a commercial purpose. Donations of cash, alcoholic and non-alcoholic products, and services may be made by a retailer to not-for-profit organizations and Special Event Retailer Licensees. The proof of a donation not being made for a commercial purpose is on the manufacturer, distributor or importing distributor.

III. Background, Statute, Regulations

235 ILCS 5/6-5 generally states that no retail liquor licensee may accept, receive or borrow money, or anything else of value, or accept or receive credit of greater than 30 days (for wine and spirits), directly or indirectly, from any manufacturer, distributor or importing distributor. Likewise, no manufacturer, distributor or importing distributor may give or lend money or anything of value, or extend credit for greater than 30 days (for wine and spirits), directly or indirectly to any retail liquor licensee.

235 ILCS 5/6-6 provides that no manufacturer, distributor or importing distributor shall, directly or indirectly: (a) sell, supply, furnish, give, pay for, or loan or lease any furnishing, fixture or equipment to a retail liquor licensee; (b) pay for or advance, furnish, lend or give money to a licensee for payment of a license; (c) purchase or become owner of a note, mortgage, or other indebtedness of a retail licensee; (d) be interested in the ownership, conduct, or operation of a retail licensee; (e) be interested as the owner of a premises upon which a retail licensee is operating.

Section 5/6-6 further generally allows manufacturers, distributors or importing distributors to supply retailers with one outside permanent and temporary sign, inside signage, and other advertising materials, all as enumerated in the statute, all within designated dollar limits.

Regulation 100.210 deals with courtesy wagon and/or coil box and pump limitations upon distributors supplying such items free of charge for picnics of retail liquor licensees. It generally states that the providing of free beer or wine to the retail licensee is not allowed (Subsection (b)). Courtesy wagons and/or coil boxes and pumps may be supplied by distributors for picnics, carnivals or social events that are given by or under the auspices or sponsorship of an educational, fraternal, political, civic, religious, charitable, or non-profit organization, i.e., a Special Event Retailer Licensee. These regulations differentiate between retail licensees receiving Special Use Permits and the Special Event Retailer Licensee. Under Subsection (b), Special Use Permit licensees may receive donations of products only one time a year, while under Subsection (c) Special Event Retailer Licensees may receive donations of products at any time.

Regulation 100.280 provides that (a) no individual, partnership or corporation shall give away any alcoholic liquor for commercial purposes or in conjunction with the sale of non-alcoholic products or to promote the sale of non-alcoholic products; (b) no licensee shall give or offer to give away alcoholic liquor in connection with the sale of non-alcoholic products or to promote the sale of non-alcoholic products; and (c) no individual, partnership, corporation, or licensee shall advertise or promote in any way, whether on or off premises, either of the practices under Subsection (a) or (b). The regulation further delineates the “giving away of alcohol” to be impermissible if done for “commercial purposes” or in connection with the “sale of non-alcoholic products or to promote the sale of non-alcoholic products.”

The Special Event Retailer’s License (Not-for-Profit), as defined in Section 5/5-1(e), allows such licensee to sell and offer for sale, at retail, alcoholic liquors for use or consumption, but not for resale in any form and only at the location and on the specific dates designated for the special event in the license. This Commission has taken the view that such a license is “special” since (a) the profits of such licensee inure to the benefit of a charitable, fraternal, etc., organization; and (b) the license is limited to a short term. This Commission believes that contributions to such organizations, made with a clear charitable or donative purpose, are in the best interest of the alcoholic liquor industry.

When Regulations 100.210 and 100.280 are read together, it is this Commission’s position that the giving away of alcoholic product by a manufacturer, distributor or importing distributor may not be done for a commercial purpose or in connection with the sale of non-alcoholic products or to promote the sale of non-alcoholic products.

IV. Procedures

A. Manufacturers, Distributors and Importing Distributors

Manufacturers, distributors and importing distributors may make contributions of cash, non-alcoholic product, services, equipment or signs to a not-for-profit organization, as defined in the Illinois Liquor Control Act, and a Special Event Retailer Licensee subject to the following:

(1) Alcoholic products may not be given for a commercial purpose or in connection with the sale of non-alcoholic products or to promote the sale of non-alcoholic products.

(2) The Special Event Retailer must be allowed to sell other brands at its discretion. Although exclusivity agreements are generally considered to be a violation of the non-discrimination provisions of Trade Practice Policy 1, in order to allow Special Event Retailer Licensees to take advantage of potential contribution opportunities, this Commission shall allow Special Event Retailer Licensees to enter into exclusivity agreements which include the receipt of non-alcoholic product, services or cash from manufacturers, distributors or importing distributors.

(3) Signage dollar limitations contained in Section 5/6-6 do not apply to signs donated to a Special Event Retailer Licensee.

B. Retailers

Retail licensees may make donations of cash, alcoholic and non-alcoholic product and services to not-for-Profit organizations and Special Event Retail Licensees.

TPP-5 Retailer Payments To Manufacturers, Importing Distributors And Distributors

I. Purpose

It is the purpose of this Policy to make the industry aware of the permissible methods of payment for alcoholic liquor between retailers and manufacturers, distributors and importing distributors.

II. Policy

It is the policy of the State of Illinois to allow manufacturers, distributors and importing distributors to extend credit for no more than 30 days to retailers for the purchase of wine and spirits; to allow for various payment methods which are considered cash equivalents; and to allow for finance and banking charges which are standard in the course of business if such charges are properly disclosed to retailers.

III. Background, Statute, Regulation

235 ILCS 5/6-5 provides in relevant part that a retail liquor licensee shall not accept or receive credit (other than merchandising credit in the ordinary course of business for a period not to exceed 30 days) directly or indirectly from any manufacturer, importing distributor or distributor of alcoholic liquor, and any manufacturer, distributor or importing distributor may not loan or extend credit (except such merchandising credit) directly or

indirectly to any retail liquor licensee. Retail liquor licensees delinquent beyond the 30 day period specified in the Section shall not solicit, accept or receive credit, purchase or acquire alcoholic liquors, directly or indirectly from any other licensee, and no manufacturer, distributor or importing distributor shall knowingly grant or extend credit, sell, furnish or supply alcoholic liquors to any such delinquent retail liquor licensee. The Section also provides that the purchase price of all beer sold to a retail liquor licensee shall be paid by the retail liquor licensee in “cash” on or before delivery of the beer.

The 30 day merchandising credit period allowed by Section 5/6-5 commences the day immediately following the date of invoice and includes all successive days including Sundays and holidays to and including the 30th successive day (Regulation 100.90(b)). Note that the question of whether the invoice date or the actual date of delivery of the product is not addressed in the statute or rule. It is the opinion of the Commission that the date for computation of the credit period will be based upon the date of the invoice if that date and delivery are the same, and on the delivery date of the invoice is dated before the date of delivery.

Section 5/6-5 further provides that every manufacturer, importing distributor and distributor shall submit to this Commission, by Thursday of each week, a verified written list of the names and addresses of each retail liquor licensee purchasing spirits or wine from such entity which, on the first business day of that calendar week, was delinquent beyond the permissible merchandising credit period of 30 days. A verified written statement that no such retail liquor licensee was then delinquent beyond such permissible merchandising credit period should also be filed. Such entities shall also submit to the State Commission a verified written list of the names and respective addresses of each previously reported delinquent retail liquor licensee which has cured such delinquency by payment, not later than the second full business day following the day such delinquency was cured.

Such written reports shall be posted by the Commission in each of its offices, available for public inspection, not later than the day following receipt, and such reports constitute notice to every manufacturer, importing distributor and distributor of the information contained therein. Actual notice to such entities of the information contained in the posted reports, shall also constitute notice of the information.

In addition to other methods allowed by law, payment by check during the period for which merchandising credit may be extended shall be considered payment. All checks received in payment for alcoholic liquor shall be promptly deposited for collection (Regulation 100.90(c)). A post-dated check or a check dishonored on presentation for payment is not deemed to be payment.

Regulation 100.90 further states in relevant part that:

(e) where a bona fide dispute exists between the retailer and the wholesaler as to the fact of payment of a given sale, the sale itself shall not be sufficient grounds for considering the retailer delinquent;

(f) where a retailer pays a salesman, or other agent of the wholesaler, such payment is effective upon receipt of the money or check by the salesman or agent;

(g) even though a retailer is delinquent and not able to purchase any alcoholic liquors for cash, or otherwise, the retailer may purchase beer for cash;

(h) payment from a delinquent retailer after the first business day of the week and before a verified written statement of delinquency has been submitted entitles the manufacturer, importing distributor or distributor submitting to delete that retailer’s name from the list;

(i) determinations of delinquency shall be made by the Chairman, Executive Director or any individual authorized by them on the basis of the verified report of delinquency and any affidavits or counter-affidavits submitted, and any licensee objecting to the determination may make a written request for a hearing at the next regularly scheduled meeting of the Commission; and

(j) a copy of any verified written list of delinquencies shall be simultaneously forwarded to the licensees listed therein by the manufacturer, importing distributor or distributor submitting such list.

Regulation 100.240 deals with transactions involving the use of checks and their equivalent and specifically prohibits the selling or furnishing of alcoholic liquor at retail to any person on credit or on a passbook, or order on a store, or in exchange for any goods, wares or merchandise, or in payment for any services rendered. But the use of money orders, traveler’s checks, drafts or checks or the equivalent of any of them not be considered the extension of credit so long as same are not postdated, and promptly deposited and collected in due course. “funds, provided the transfer is initiated by an irrevocable payment order on or before delivery of the alcoholic liquor.

IV. Procedures

A. Extension Of Credit

Distributors may extend credit to retailers for the purchase of alcoholic liquors for a period of time not to exceed 30 days, except that payment for beer purchases by the retailer be made in cash or its equivalent, on or before the delivery of the beer.

B. Methods Of Payment

A retailer has not been discharged from its obligation to the distributor until the distributor has been paid in cash or its equivalent. The following are considered as cash equivalents:

(1) Checks, including money orders, traveler’s checks, drafts, certified checks, cashier’s checks or teller’s checks so long as they are not post-dated, and if honored by the retailer’s bank in the ordinary course of business. The distributor’s obligation is to promptly deposit checks for collection.

(1) Electronic fund transfers provided the transfer of funds is initiated by an irrevocable payment order on or before delivery of the alcoholic liquor. In computing the 30-day period, if the funds are withdrawn from the retailer’s account on the 30th day, the fact that the funds are not deposited into the distributor’s account until the 31st day is immaterial.

(3) Credit cards may be used to purchase wine and spirit products. Any widely recognized credit card, including but not limited to Visa, MasterCard, American Express, Discovery and Diners Club, may be utilized. [Sec. 5/6-19, Sales on Credit – Exceptions as to Clubs and Motels, which controlled credit relationships between retailers and consumers was repealed by P.A. 90-432, eff. 1/1/98. The final sentence of Sec. 5/6-19 stated, “(T)hat nothing herein shall be construed to prevent payment by credit card or other credit device for the purchase of liquor in the original package or container for consumption off the premises.]

C. Calculation of Payment Period

The first day of calculation begins with the day after the date of delivery (invoice date) and includes each successive date subsequent, including Sundays and holidays, to the 30 day limit. In the event that the delivery of the product is subsequent to the invoice date, the actual delivery date will be the first day for the purpose of calculation. The date of delinquency shall be the first day after the 30 day period, or the 31st day. Receipt of any cash equivalent by a salesman or other agent of the distributor, is considered as being effective immediately upon receipt. For purchases of wine and spirits, a post-dated check which is cleared prior to the end of the 30 day credit period, including any properly disclosed finance charges, is considered to be a valid payment. Also, an “NSF,” void, or stop payment check, for purchases of wine and spirits, which is properly replaced with cash or cash equivalent before the end of the 30 day period, including any properly disclosed finance and bank charges, is considered to be valid payment.

D. Additional Finance and Bank Charges

Finance charges on credit issued and bank charges for NSF, void, or stop-payment checks are considered to be standard business practices. Distributors may include finance charges, other usual and customary charges in the industry and bank charges provided:

(1) A statement is printed on the original invoice which is delivered to the retailer at the time the merchandise is received indicating such finance and bank charges shall be assessed, with a statement specifying the terms and amounts of charges imposed.

(2) Finance and bank charges must be within prescribed legal limits. Any such finance or bank charges which have been properly disclosed to the retailer are considered to be part of the cost of the merchandise as of the invoice date, and therefore the entire amount, including any finance or bank charges, must be paid before the retailer can be considered to be non-delinquent.

(3) If a distributor engages in the practice of adding a finance or bank charge, such charges must be added to all accounts, and may not be waived for any customer.

(4) All provisions of Section 5/6-5 remain effective whether or not the distributor chooses to impose finance or bank charges.

A retailer making payments via electronic transfer of funds may not charge the distributor for the costs of such transfer, nor may a distributor charge the retailer for the distributor’s bank charges for electronic transfer. Such transfers are considered to be for the benefit of each, and therefore as other acceptable payment methods are available, each party need not bear the other party’s burden of such transfers.

E. Delinquency List

Section 5/6-5 of the Illinois Liquor Control Act and Regulation 100.90 provide for the existence and maintenance of the delinquency list. The general parameters of the list are stated above, and the Statute and Regulation should be consulted for additional information.

Although being listed as delinquent is not a violation of the Liquor Control Act, purchasing while delinquent is. For this reason, particular attention will be paid to those licensees who have been delinquent for an extended period of time, and the Commission will conduct investigations into