State Distribution Laws

License Needed to Self-Distribute: Yes
Statute: A.C.A. § 3-5-1405

Arkansas Statute Completed_2020_RuleBook

Brewers with a small brewery license in Arkansas are permitted to self-distribute up to 15,000 barrels of beer per year to retailers.

Arkansas also regulates provisions of the distribution agreements between wholesalers and suppliers. Those rules require all distribution agreements to be made in writing and require brewers to designate an exclusive territory for each wholesaler. Brewers are also permitted to impose reasonable inventory requirements on their wholesalers. However, the laws prevent brewers from:

• determining the price wholesalers must sell their beer at
• requiring wholesalers to accept beer they haven’t ordered
• prohibiting the wholesaler from selling other brands of beer, unless selling those other brands will materially impair the wholesaler’s ability to sell the brewer’s beers
• requiring wholesalers purchase certain beers as a condition of buying other beer
• requiring the wholesaler to provide them with audited financial statements as a condition of continuing or renewing the distribution agreement
• withholding delivery of beer ordered by the wholesaler or changing the quota in bad faith
• taking retaliatory actions against the wholesaler for filing a good faith complaint
• requiring wholesalers to participate in an advertising fund
• requiring OR prohibiting a change in the manager or successor of a wholesaler unless it is done in good faith
• preventing a wholesaler from transferring its business to another licensed wholesaler, or another transferee unless that transferee does not meet the brewer’s reasonable standard or
• restricting free association among wholesalers

Brewers that violate any of those restrictions are required to pay the wholesaler reasonable compensation for the damage done to their business. If the brewer and wholesaler cannot agree on reasonable compensation, the dispute may go to arbitration, where an arbitrator will decide how much the brewer owes the wholesaler.

On the flip side, Arkansas’ laws prevent wholesalers from:

• failing to devote reasonable effort to distributing the brewer’s brands
• selling outside their territory, and
• failing to give a brewer written notice of their intent to transfer business or change in ownership (of greater than 10%) and get brewer’s prior written approval

Brewers are also not permitted to change the distribution agreement, unless theygive the wholesaler proper notice, act in good faith, and have good cause. Notice must be given at least 30 days before the change by certified mail and contain a statement of what the change is, the reason for the change, and the date the change will take effect. Arkansas considers good cause to be the wholesaler’s failure to comply with a reasonable and material provision of the distribution agreement. The brewer also needs to have learned about such failure within the last 24 months, give the wholesaler 30 days to come up with a plan to fix the problem, and 90 days after that to actually fix it.

Brewers can immediately terminate a distribution agreement upon written notice when:

• the wholesaler becomes insolvent, declares bankruptcy, or assigns enough interest to creditors that affects its ability to remain in business
• the wholesaler loses a state or federal license which prevents them from operating for more than 31 days
• a 10% or more owner of the wholesaler is convicted of a felony which affects the good will of the wholesaler or brewer
• the wholesaler engages in fraudulent conduct in its relationship with the brewer
• the wholesaler fails to pay for beer ordered and delivered within 2 days of receiving a notice of delinquency from the brewer and demand for payment
• the wholesaler intentionally transfers its business without notice to the brewer; or
• the wholesaler ceases business

Brewers can also terminate or change the distribution agreement on 30 days’ notice if the brewer discontinues its brands in the state. You should also be aware that none of these restrictions on the brewer/wholesaler agreement and relationship apply to small breweries who produce less than 15,000 barrels of beer per year.