1. (a)

   1. (1) The purpose of this section is to provide guidelines for the business relations between Arkansas wholesalers of alcoholic beverages and distillers, manufacturers, importers, and producers of such alcoholic beverages.

   2. (2) Rule in this area is considered necessary and appropriate for the following reasons:

      1. (A) To prevent unfair business practices, discrimination, and undue control of such wholesalers by distillers, manufacturers, importers, and producers;
      2. (B) To maintain stability and healthy competition in the alcoholic beverage industry;
      3. (C) To promote and maintain a sound and stable system of distribution of alcoholic beverages; and
      4. (D) To promote the public health, safety, and welfare.

2. (b)

   1. (1) Every manufacturer, importer, or producer of spirituous and vinous beverages doing business in the State of Arkansas shall submit to the Alcoholic Beverage Control Division one (1) Alcohol and Tobacco Tax and Trade Bureau Certificate of Label Approval for each brand of spirituous and vinous beverages and the brand label extension of each brand of spirituous and vinous beverages to be shipped for the first time by the shipper into or within the state and shall designate in the application for registration one (1) licensed liquor wholesaler in the state, who shall be the exclusive distributor of such brand or label within the state.
   2. (2) Such designated wholesaler shall be initially approved by the Director of the Alcoholic Beverage Control Division and shall not be changed nor initially disapproved except for good cause, and the director shall determine good cause after a hearing pursuant to the provisions set out in this section.
   3. (3) Any brands or labels previously registered in this state, and which have subsequently been withdrawn from distribution in this state, shall be treated in the same manner as the initial registration of brands or labels and are subject to the provisions hereof.

3. (c)

   1. (1) A brand label and brand label extension shall be registered by the supplier before the first shipment of each brand label and brand label extension into or within the state on or after July 1, 2013.
   2. (2) A copy of the Alcohol Tobacco Tax and Trade Bureau Certificate of Label Approval for each brand label and brand label extension shall be submitted with the registration of each brand label and brand label extension.

4. (d) The registration of a brand label and a brand label extension shall:

   1. (1) Be in writing or electronically submitted;
   2. (2) Be verified if it is submitted in writing; and
   3. (3) Set forth information as the director requires.

5. (e) Each Alcohol and Tobacco Tax and Trade Bureau Certificate of Label Approval submitted for registration shall be accompanied by a registration fee of fifteen dollars ($15.00) payable by:

   1. (1) Check;
   2. (2) Cash;
   3. (3) Money order; or
   4. (4) Electronic payment.

6. (f)

   1. (1) All brand label and brand label extensions shall be renewed annually.
   2. (2) In addition to the label registration process provided above, spirituous liquor beverages classified as ready-to-drink products containing spirituous liquor with a final finished product of no greater than fifteen percent (15%) alcohol by weight may also be registered under Arkansas Code § 3-2-409.

7. (g) Any distiller, manufacturer, importer, or producer desiring to change wholesalers with respect to any brand shall file with the director a Wholesaler Change Request containing such of the following information as is applicable:

   1. (1) The name of each brand involved;
   2. (2) The case volume in Arkansas for each brand for the current year or portion thereof and the two (2) previous calendar years;
   3. (3) The name of the wholesaler currently distributing such brand;
   4. (4) The name of the proposed new wholesaler; and

   5. (5)

      1. (A) A detailed explanation of the specific business reasons for the request to change wholesalers.
      2. (B) Business reasons which may be considered by the director in determining good cause for authorizing a change of wholesalers will include:

8. (i) A wholesaler’s bankruptcy or serious financial instability, including its consistent failure to pay its debts as they fall due or its failure to meet or maintain any objective standards of capitalization expressly agreed to between the wholesaler and the distiller, manufacturer, importer, or producer, provided, such standards are determined by the director to be commercially reasonable;

   1. (ii) A wholesaler’s repeated violations of any provision of federal or state law or rule, whether or not such violations resulted in official action;

      1. (iii) A wholesaler’s failure to maintain reasonable sales volume of the brand, taking into consideration such factors as the:
9. (a) (a) Extent of the distiller’s, manufacturer’s, importer’s, or producer’s advertising and promotion of the particular brand;

10. (b) (b) Prevailing economic conditions affecting sales generally; or

    1. (c) (c) The extent of the wholesaler’s efforts, or lack thereof, to promote a particular brand; and

       1. (iv) Any other factors relevant to such proposed change and which aid the director in determining good cause.

11. (h)

    1. (1) At the same time that the original Wholesaler Change Request is filed with the director, a copy thereof shall be mailed by the distiller, manufacturer, importer, or producer to each wholesaler who may be affected by the proposed changes.
    2. (2) Immediately upon receipt of any Wholesaler Change Request, the director shall notify the currently designated wholesaler of the request by certified mail.
    3. (3) Within fifteen (15) days after receipt of such notice by the affected wholesaler, any such wholesaler or party required to be given notice by this section may interpose written objections thereto.

    4. (4)

       1. (A) Such written objections shall be filed in the office of the division and copies thereof shall be served by the objecting party upon the party proposing the change and upon all wholesalers who may be affected by the proposed change.

       2. (B)

          1. (i) Upon the receipt of an objection from any party, or upon his or her own motion, the director shall hold a hearing after providing due notice to all parties concerned for the purpose of determining the truth of any matters of fact alleged by any party and determining whether the proposed changes are based upon sufficient cause and are otherwise consistent with the policies set out in subsection (a) of this section.
          2. (ii) If it is determined from the evidence deduced at said hearing that the brand or label involved is the same as, or similar to, or is such a modification of, substitution of, upgrade of, or extension of a brand or label which has already been registered by the distiller, manufacturer, importer, or producer so as to render it unjust or inequitable, without cause being shown, to designate the brand or label to a wholesaler different from the wholesaler designated for the brand or label being so modified, substituted, upgraded, or extended, then such request shall be denied, provided, however, that nothing herein shall be construed to prevent the distiller, manufacturer, importer, or producer from treating the matter as a desire to change wholesalers and from proceeding under the provisions of subsection (g) of this section, either before or after such determination.

       3. (C)

          1. (i) No proposed change will be approved by the director which is based upon the failure or refusal of a wholesaler to comply with any demand or request of a distiller, manufacturer, importer, or producer where such demand or request would result in a violation of any provision of federal or state law or rule.
          2. (ii) During such fifteen-day objection period, or until the proposed changes have been finally approved by the director, the party proposing the change shall continue to supply the designated wholesaler, upon commercially reasonable terms, such reasonable quantities of the brand involved as the wholesaler may require.
          3. (iii) If, at any time, the director finds a distiller, manufacturer, importer, or producer is not shipping the wholesaler a reasonable amount of merchandise, he or she may withdraw approval of all brands registered by such parties within the state.
          4. (i)
    5. (1) Any hearing held by the director pursuant to the provisions of subsection (h) of this section shall be held within thirty (30) days after the receipt of any notice of objection to a Wholesaler Change Request.
    6. (2) The findings of the director made after such hearing shall be presented to the Alcoholic Beverage Control Board at its next regularly scheduled meeting.
    7. (3) Any aggrieved party may appeal the decision of the director to the full board to be heard de novo and any such appeal hearing will be scheduled and held pursuant to hearing procedures established for the division by state law and division rules.
12. (j) If no objection is filed to the Wholesaler Change Request as provided in subsection (i) of this section, the proposed changes shall stand automatically approved by the director at the expiration of such fifteen-day period, conditioned upon the manufacturer or importer repurchasing all inventory of the subject brand from the previously designated wholesaler at such wholesaler’s laid-in cost.

13. (k) Any distiller, manufacturer, importer, or producer who obtains or acquires in any manner the right to sell, ship, or distribute any label shall for the purpose of this section stand in place of, and be subject to, all the rights, privileges, and duties and obligations of its predecessor or its predecessors from whom such brands or labels were obtained or acquired.

    1. (l) Every manufacturer or importer of beer or other malt products or light wine doing business in the State of Arkansas shall submit to the division one (1) label for each brand of beer or malt product or light wine to be shipped for the first time into or within the state and shall designate with the application for registration any number of wholesalers in the state, each of whom shall be the exclusive distributor of such brand within the geographical territory assigned by the manufacturer or importer to such wholesaler.

       1. (m)
    2. (1) An unlawful dual distributorship is created when any manufacturer, importer, or other person attempts to designate as its distributor more than one (1) Arkansas liquor wholesaler in the state or wholesale beer permit holder to distribute the same brand of alcoholic beverage in the same geographic area (city, county, counties, state).
    3. (2) Further, no person shall attempt to register any brand or label which is already distributed by a licensed wholesaler holding a brand registration authorization from the manufacturer or importer for a brand or label.
    4. (3) The creation of such dual distributorships is prohibited.
    5. (4) In addition to any remedies to any aggrieved party authorized by law, the director may withdraw approval of any and all brands registered by any manufacturer or importer found to be in violation of this section, such findings to be made after a hearing pursuant to hearing procedures established for the division by state law and this section.
    6. (5) For purposes of this section, “brand” means the same product or substantially the same product, as evidenced by the product label that must be filed with the Alcoholic Beverage Control Division.
    7. (6) Identical or substantially identical labels will be considered and treated as the same brand.

    8. (7)

       1. (A) "Product" means a brewed, fermented, or distilled liquor.
       2. (B) A brand for a product registered with the Alcoholic Beverage Control Division shall include the registered product as well as all derivatives or subcategories of a registered product, without regard to whether such derivative or subcategory is brewed, fermented, or distilled.
       3. (C) "Product" shall not be construed to mean a particular malt, spirituous or vinous liquor, or any variety, category, or subcategory thereof.

14. (n)

    1. (1) The terms, conditions, and requirements of this section are hereby expressly made a part of the terms of and as conditions to the approval granted by the division to distillers, manufacturers, importers, or producers to do business in the state and by the application for, the acceptance of, or the conduct of business under any such approval, a distiller, manufacturer, importer, or producer consents and agrees to comply with the terms, conditions, and requirements of this section.
    2. (2) This section does not apply to manufacturers or wholesalers of small farm wine.

Codification Notes: Subsection (l) as promulgated prior to codification into the Code of Arkansas Rules provided as follows: "(Amended 7-24-87)" Subdivisions (m)(5) and (6) as promulgated prior to codification into the Code of Arkansas Rules provided as follows: "(Amended 8-19-03)" Subsection (n) as promulgated prior to codification into the Code of Arkansas Rules provided as follows: "(Amended 8-21-13)"