The December 20, 2019, copy of the Illinois Register contains an end-of-year present for some Illinois beer, wine and liquor retailers in the form of a proposed rule from the Illinois Liquor Control Commission addressing the circumstances and manner in which Illinois’s alcoholic liquor (beer, wine, and spirits) retailers can accomplish certain forms of quantity discounting (cooperative purchasing, coupons, rebates) in their purchasing from wholesalers and manufacturers.
The proposed rulemaking will amend Illinois’s new-ish “of value” rules for interactions between retailers, distributors, and manufacturers which can be found at Title 11, Section 100.500 of the Illinois Administrative Code.
With regard to the substantive changes:
- Quantity Discounting: The new Quantity Discounting section found at 100.500(d)(5) allows discounted sales under certain circumstances from a “distributor” or manufacturer that self-distributes based on “agreement” for a “predetermined” number of products in return for receiving a discount on the goods purchased. The program allows for the discount to be applied as either a price reduction at the time of sale, or as a rebate/credit following the sale. The program must be offered to similarly situated alcohol retailers in the same geographic area. The discount is a sales incentive that must be temporary and based on volume and properly documented.
- Cooperative Purchasing: The Quantity Discounting provision allows retailers of common ownership or retailers of non-common ownership to enter cooperative purchasing agreements requiring:
- An agreement in writing containing the licensing information of all parties to the agreement;
- Parties can only be members of one cooperative;
- There are specific terms the cooperative agreements must contain regarding individual parties’ obligations to crediting requirements and the Liquor Control Act, and record keeping requirements;
- An agent for placing orders must be designated and the agent cannot be compensated directly for the activity, but can be compensated for costs incurred or as an employee of one of the group’s members, the agent cannot have an interest in a manufacturer or distributor, cannot be compensated by such; and
- Non-complying agreements are void (but how will a distributor or manufacturer know if an agreement between the parties is void?)
- Records/Invoicing: The invoices issued will be “master invoices” to the agent for the cooperative and each licensee and must contain information regarding the sold beverages, the price per unit and the quantity per participating retailer. Then, each retailer gets an itemized invoice for their particular purchase with required information (see the reg., liquor purchased, price per unit, quantity discount, etc.).
- Credits/Rebates: Distributors and Self-Distributing Manufacturers can adjust previous purchases with “end of month” or “end of year” or “end of period” or other discounts. These must be made pursuant to a written agreement, entered into at the time of sale, for a specific period of time, calculated based on documented sales to a retailer/cooperative.
Comments can be sent to the Illinois Liquor Control Commission’s General Counsel on or before February 3, 2020:
Pamela Paziotopoulos
General Counsel
Illinois Liquor Control Commission
100 W. Randolph St., Suite 7-801
ChicagoIL 60601