Things Beer and Wine Brand Owners Can do to Avoid Months of “Good Cause” Hearings in Virginia
With Bloomberg News naming Virginia as one of the next big wine regions, and the Brewer’s Association ranking it as the 13th best state for Craft Breweries, Virginia is quickly becoming one of the top marketplaces for wine and beer. Producers of Wine and beer, and brand owners, wishing to capitalize on the Commonwealth should take the time to understand Virginia’s strict franchise laws before coming into the State in order to avoid headaches, attorney’s fees, and even months of litigation.
What are Franchise Laws?
Franchise laws govern producer-wholesaler relations, as they relate to who may sell alcoholic products. Generally, these laws protect a wholesaler’s right to distribute certain brands in a given territory. In Virginia, once a producer grants a wholesaler the right to distribute a particular beer or wine brand, the only way it can transfer those rights to a different wholesaler (absent the first wholesaler’s consent) is through a lengthy administrative process where the producer must prove “good cause.” What’s more, this rule applies no matter what the distribution agreement says.
Further, Virginia defines a “brand” more broadly than other states. Even if the distribution agreement doesn’t contemplate future brands, it’s likely Virginia will consider the right to distribute future brands as belonging to the wholesaler!
What to Do?
Effectively written distribution agreements, narrow brand definitions and registrations with the Virginia Department of Alcoholic Beverage Control (VABC), and proper geographic designations are all tools that can be used to help prevent months of administrative hearings down the road. Further, conducting a brand audit before moving into Virginia can help identify which brands may present issues, and whether there is “good cause” to transfer those brands to another wholesaler.
If you need any assistance, or would like to speak with an attorney about Virginia franchise laws, brand registration, or good cause issues, please contact Michael Volz, of the State ABC practice group, at 202-449-3739, ext. 707.