Mass. beer wholesalers propose tweaks to distributor law

Globe Staff/File

A new bill backed by Massachusetts beer distributors would slightly relax the state’s controversial “franchise” law, which effectively binds breweries to their wholesalers in perpetuity.

The current law, which brewers for years have unsuccessfully lobbied to weaken, only allows a brewery to walk away from its distributor if it can prove to state regulators that the wholesaler has met one of several conditions — such as violating the law or failing to “exercise best efforts” in selling its beer to retailers.

In some cases, the law could result in a brewer having to pay its distributor several years’ worth of revenue to leave. As a result, many small breweries self-distribute their beers to avoid being locked into a relationship with a wholesaler.

The proposal filed Friday, by Democratic state Representative John J. Mahoney of Worcester and backed by the Beer Distributors of Massachusetts, would allow smaller breweries — those that produce fewer than 30,000 barrels a year — to refuse to sell to their distributors for any reason.

The proposal represents the first public effort at compromise by beer distributors in a long-running dispute with brewers about Massachusetts’ strict alcohol laws. Last summer, wholesalers successfully fought off a proposal by brewers to eliminate the franchise law.

“For six years, special interests have advocated an unreasonable position that would allow breweries accounting for up to 20 percent of a distributor’s established business to walk out for no reason,” Bill Kelley, the group’s president, said in a statement. “That approach would devastate Massachusetts’s independent distributors, and place over 2,000 jobs — including many good-paying union jobs — at serious risk.”

A trade group representing Massachusetts brewers could not be reached for comment.

The wholesalers’ bill would still require breweries to buy back their remaining inventory and pay distributors “fair market value” for the rights to their brands.

Brewers will probably object to the payout clause and in the past have said most smaller breweries cannot afford to free themselves under a “fair market value” standard.

But Kelley said the proposal is “an equitable solution” for smaller breweries, adding that completely eliminating franchise protections would give large multinational breweries unlimited leverage over distributors.

The franchise law is among the issues set to be debated by an alcohol regulation reform task force assembled by state Treasurer Deborah Goldberg.