State Distribution Laws
Michigan
License Needed to Self-Distribute: Yes
Statute: MCLS § 436.1401
In Michigan, beer manufacturers who produce 60,000 or fewer barrels per year can obtain a microbrewer’s license which allows them to self-distribute up to 2,000 barrels per year.
Michigan also has laws governing the relationships between wholesalers and brewers. First, brewers must give their wholesalers a written distribution agreement with an exclusive territory. Additionally, brewers cannot:
- require a wholesaler to accept product they haven’t ordered, although brewers can impose reasonable inventory requirements on their wholesalers
- restrict a wholesaler from selling other brands, unless it would materially impair their ability to sell the brewer’s brand
- require a wholesaler to purchase one product as a condition of purchasing another
- require a wholesaler to submit financial statements as a condition of renewing the distribution agreement
- require a wholesaler to contribute to an advertising fund
- set resale prices for their wholesalers
- require or prohibit a change in wholesaler management unless the manager doesn’t meet reasonable standards
- restrict free association among wholesalers or
- amend their distribution agreements unless it is done in good faith
Brewers are also restricted from terminating or not renewing a distribution agreement except in specific circumstances. In order to do so, a brewer must have good cause for terminating or not renewing the agreement and provide the wholesaler with at least 15 days’ written notice of their decision. In order for a brewer to have “good cause” the wholesaler must have failed to comply with a reasonable and material provision of the distribution agreement, the brewer must have learned of this failure within the past 2 years, and the brewer must give the wholesaler 30 days to submit a plan of corrective action and another 90 days to take the corrective action. Brewers who breach these rules must pay the wholesaler reasonable compensation for the diminished value of the wholesaler’s business.
In certain situations, a brewer doesn’t need to give the wholesaler a chance to fix the problem before terminating the distribution agreement. For example, a brewer can terminate the agreement upon 15 days’ written notice if the wholesaler sells outside of their designated territory. Brewers can also terminate an agreement immediately upon written notice of the wholesaler becomes insolvent or declares bankruptcy, loses its license for more than 60 days, or one of its owners with more than 10% interest is convicted of a felony and is not bought out by the other owners.
