SENATE BILL NO. 942

A bill to amend 1998 PA 58, entitled

"Michigan liquor control code of 1998,"

by amending sections 205, 233, 609c, 609d, and 1014 (MCL 436.1205, 436.1233, 436.1609c, 436.1609d, and 436.2014), section 205 as amended by 2015 PA 246, section 609c as added by 2017 PA 130, section 609d as added by 2020 PA 26, and section 1014 as added by 2015 PA 47, and by adding sections 537a, 538, and 551.

the people of the state of michigan enact:

Sec. 205. (1) The commission shall, as provided in section 203(1), by order appoint authorized distribution agents to warehouse and deliver spirits in this state to ensure that all retail licensees are properly serviced with spirits. An authorized distribution agent is subject to uniform requirements, including business operating procedures, that the commission may prescribe by rule, subject to this section.

(2) A person is eligible for appointment by the commission as an authorized distribution agent if all of the following circumstances exist:

(a) The person satisfies all applicable commission rules prescribing qualifications for licensure promulgated under section 215.

(b) The person has entered into a written agreement or contract with a supplier of spirits to warehouse and deliver a brand or brands of spirits of that supplier of spirits.

(c) The person has an adequate warehousing facility located in this state to store spirits from which all delivery of spirits to retail licensees must be made.

(3) An authorized distribution agent shall not have a direct or indirect interest in a supplier of spirits or in a retailer. A supplier of spirits or a retailer shall not have a direct or indirect interest in an authorized distribution agent. An authorized distribution agent shall not hold title to spirits.

(4) An authorized distribution agent shall deliver to each retailer located in its assigned distribution area on at least a weekly basis if the order meets the minimum requirements. Except that in a week that accompanies a state holiday, the commission may order a modified delivery schedule if a retailer will not wait longer than 9 days between deliveries because of the modified delivery schedule. The commission shall provide for an integrated on-line online ordering system for spirits and shall require the continuance of any ordering system in existence on the activation date of the system established under section 206. The commission shall set minimum requirements that must be a sufficient number of bottles to comprise not more than 2 cases. A retailer may pick up the product at the authorized distribution agent's warehouse. To avoid occasional emergency outages of spirits, a retail licensee may make up to 12 special emergency orders to an authorized distribution agent in each calendar year. An authorized distribution agent shall make a special emergency order available to the retail licensee within 18 hours of the placing of the order. An authorized distribution agent shall make a special emergency order placed on Saturday or Sunday available to the retail licensee before noon on the following Monday. An authorized distribution agent may impose a fee of up to $20.00 to deliver a special emergency order to a retail licensee.

(5) In locations inaccessible to a motor vehicle as that term is defined by section 33 of the Michigan vehicle code, 1949 PA 300, MCL 257.1 to 257.923, 257.33, an authorized distribution agent shall arrange that a delivery of spirits to a retailer be in compliance with the following procedures:

(a) After processing an order from a retailer, an authorized distribution agent shall contact a retailer to confirm the quantity of cases or bottles, or both, and the exact dollar total of the order.

(b) The authorized distribution agent shall coordinate with the retailer the date and time a driver is scheduled to deliver the order to a ferry transport dock, shall arrange any ferry, drayage, or other appropriate service, and shall pick up the retailer's payment at that time.

(c) The ferry transport company or company representing any other form of conveyance shall take the retailer's payment to the mainland dock and give that payment to the authorized distribution agent's driver.

(d) The ferry transport company or company representing any other form of conveyance shall transport the order to the drayage or other appropriate company at the island dock for immediate delivery to the retailer.

(e) The drayage or other appropriate company shall deliver the order to the retailer.

(6) An authorized distribution agent is responsible for the payment of all transportation and delivery charges imposed by the ferry, drayage, or other conveyance company and is responsible for all breakage and any shortages, whether attributable to the ferry, drayage, or other conveyance company or any combination of those companies, until the order is delivered to the retailer's establishment. This subsection does not prevent the authorized distribution agent from seeking reimbursement or damages from any company conveying the authorized distribution agent's product.

(7) Except as otherwise provided in subsection (4), an authorized distribution agent shall not charge a delivery fee or a split-case fee for delivery of spirits sold by the commission to a retailer.

(8) An authorized distribution agent or prospective authorized distribution agent shall maintain and make available to the commission or its representatives, on notice, any contract or written agreement it has with a supplier of spirits or other authorized distribution agent for the warehousing and delivering of spirits in this state.

(9) For a violation of this act, a rule promulgated under this act, or the terms of an order appointing an authorized distribution agent, an authorized distribution agent is subject to the suspension, revocation, forfeiture, and penalty provisions of sections 903(1) and 907 in the same manner in which a licensee would be subject to those provisions. An authorized distribution agent aggrieved by a penalty imposed by the commission may invoke the hearing and appeal procedures of section 903(2) and rules promulgated under that section 903.

(10) A Beginning with the effective date of the amendatory act that added this sentence through December 31, 2021, a specially designated distributor may sell to an on-premises licensee an unlimited amount of spirits. After December 31, 2021, a specially designated distributor may sell to an on-premises licensee up to 9 225 liters of spirits during any 1 month 12-month period and an on-premises licensee may purchase, collectively from specially designated distributors, up to 9 225 liters of spirits during any 1 month. 12-month period. Notwithstanding any other provision of this act or rule promulgated under this act, a specially designated distributor is only liable for knowingly violating this section. An on-premises licensee shall maintain and make available to the commission upon on request records verifying the purchases described in this subsection.

(11) In addition to paying a vendor of spirits the acquisition price for purchasing spirits, the commission may pay a vendor of spirits an additional amount of not less than $4.50 and not more than $8.25 for each case of spirits purchased as an offset to the costs being incurred by that vendor of spirits in contracting with an authorized distribution agent for warehousing and delivering spirits to retailers. The payment described in this subsection may not be included in the cost of purchasing spirits by the commission and is not subject to the commission's markup, special taxes, or state sales tax. The per-case offset established by this subsection may be increased by the state administrative board each January to reflect reasonable increases in the authorized distribution agent's cost of warehousing and delivering. As used in this subsection, "case" means a container holding twelve 750 ml bottles of spirits or other containers containing spirits that are standard to the industry.

Sec. 233. (1) The commission shall establish uniform prices for the sale of alcoholic liquor in state liquor stores and by specially designated distributors. The prices shall must return a gross profit to the commission of not less than 51% and not greater than 65%. If alcoholic liquor purchased by the commission has not met sales standards established by the commission for a period of 6 months, the commission may sell the alcoholic liquor at a price to be approved by the state administrative board.

(2) Notwithstanding subsection (1), the commission may establish by rule prices for the sale of alcoholic liquor to hospitals, charitable institutions, and military establishments located in this state.

(3) There shall be allowed a discount of 17% deducted from the sale price established by the commission on the sale of Except as otherwise provided in this subsection, specially designated distributors and on-premises licensees are entitled to a 17% discount from the uniform prices described in subsection (1) on alcoholic liquor made by the purchased from this state. liquor stores to specially designated distributors and establishments licensed to sell for consumption on the premises.Beginning with the effective date of the amendatory act that added this sentence through December 31, 2021, on-premises licensees are entitled to a 30% discount from the uniform prices described in subsection (1) on alcoholic liquor purchased from this state.

Sec. 537a. (1) Notwithstanding anything in this act to the contrary, an on-premises licensee may fill and sell qualified containers with beer, wine, mixed spirit drink, or spirits for consumption off the premises under the following conditions:

(a) The on-premises licensee or his or her agent or employee does not fill a qualified container in advance of the sale.

(b) The on-premises licensee complies with all applicable rules promulgated by the commission.

(2) Notwithstanding anything in this act to the contrary, an on-premises licensee may deliver beer, wine, mixed spirit drink, or spirits to a consumer in this state if the on-premises licensee does all of the following:

(a) Complies with all laws of this state, including, but not limited to, the prohibition on sales to minors.

(b) Stamps, prints, or labels on the outside of the qualified container that the package "Contains Alcohol. Must be delivered to a person 21 years of age or older.". The recipient at the time of the delivery shall provide identification verifying his or her age.

(c) Does not allow a straw hole on the qualified container.

(3) As used in this section:

(a) "Consumer" means that term as defined in section 203.

(b) "Qualified container" means any clean, sealable container that is for the sale of alcoholic liquor for consumption off the premises and that has a liquid capacity that does not exceed 1 gallon.

Sec. 538. (1) Until December 31, 2021, an on-premises licensee that has written approval from the commission to have outdoor service in an outdoor service area under R 436.1419 of the Michigan Administrative Code may add seating to the outdoor service area without the approval of the commission or the governing body of the local unit of government in which the licensed premises is located.

(2) Until December 31, 2021, an on-premises licensee that has written approval from the commission to have outdoor service in an outdoor service area under R 436.1419 of the Michigan Administrative Code may add a bar to the outdoor service area without the approval of the commission or the governing body of the local unit of government in which the licensed premises is located.

Sec. 551. (1) The governing body of a local unit of government may designate a social district that contains a commons area that may be used by on-premises licensees that obtain a social district permit. If the governing body of a local unit of government designates a social district that contains a commons area under this section, the governing body must define and clearly mark the commons area in a manner prescribed by the commission. The governing body may, at any time, revoke the designation if it determines that the commons area threatens the health, safety, or welfare of the public or has become a public nuisance. The governing body shall file the designation or the revocation of the designation with the commission.

(2) The holder of a social district permit may sell alcoholic liquor for consumption on the premises within the confines of a commons area. The consumption of alcoholic liquor in the commons area may only occur during the legal hours for the sale of alcoholic liquor by the permittee. Only the holder of a social district permit or employees of that permittee may sell or dispense alcoholic liquor in the commons area.

(3) The holder of a social district permit may only serve alcoholic liquor to be consumed in the commons area in containers that prominently display the permittee's trade name or logo or some other mark that is unique to the permittee under the permittee's on-premises license. The holder of a social district permit shall not allow alcoholic liquor to leave the commons area or its premises.

(4) An on-premises licensee that is adjacent to a commons area in a social district designated by the governing body of a local unit of government under this section may obtain from the commission an annual social district permit as provided in this section. The social district permit must be issued for the same period and may be renewed in the same manner as the on-premises license held by the applicant. The commission shall develop an application for a social district permit and shall charge a fee of $250.00 for a social district permit. On receipt of a completed application and the fee, the commission shall notify the governing body of the local unit of government and verify the designation of a social district and that the location listed on the application is adjacent to and qualifies for a social district permit under this section. An application for a social district permit must be approved by the governing body of the local unit of government in which the applicant's place of business is located before the permit is granted by the commission. The commission shall provide the governing body of the local unit of government and the local chief of police with the applicant's name, business address, and business telephone number to accomplish the review as required by this subsection.

(5) As used in this section, "commons area" means an area within a social district designated by the governing body of the local unit of government that is shared by and abuts the premises of at least 2 other on-premises licensees.

Sec. 609c. (1) A manufacturer that sells direct to a retailer as provided under section 203(19) or a wholesaler may refund to a retailer the amount the retailer paid for beer or wine, as applicable, or a manufacturer that sells direct to a retailer as provided under section 203(19) or a wholesaler may replace that beer or wine for any of the following reasons:

(a) The beer or wine is outdated.

(b) The beer or wine is defective.

(c) An error in the beer or wine delivered.

(d) The beer or wine may no longer be lawfully sold.

(e) The termination of the retailer's business.

(f) The formula, proof, label, or container of the beer or wine is changed.

(g) The beer or wine is discontinued.

(h) The retailer is only open a portion of the year and the beer or wine is likely to spoil during the off-season.

(2) If beer is within 30 days of its out-of-date code, a manufacturer that sells direct to a retailer as provided under section 203(19) or a wholesaler may refund to a retailer the amount the retailer paid for the beer.

(3) Until the expiration of the state of emergency declared under Executive Order No. 2020-04 or any extension of that order, a wholesaler shall do either of the following:

(a) Refund to an on-premises licensee the amount the on-premises licensee paid for beer or wine, as applicable, if the beer or wine is outdated.

(b) Replace beer or wine, including partially used products, for an on-premises licensee, as applicable, if the beer or wine is outdated. The wholesaler shall replace beer or wine under this subdivision before the outdated beer or wine is picked up by the wholesaler.

(4) (3) A manufacturer that sells direct to a retailer as provided under section 203(19) or a wholesaler may only issue a refund or replacement under this section for beer or wine that the manufacturer or wholesaler sold to the retailer.

Sec. 609d. (1) A specially designated distributor that sells spirits to a special licensee that is authorized by the commission to sell spirits may refund the special licensee for the return of an unopened bottle in the same amount that the special licensee paid for the spirits, less any of the specially designated distributor's credit card transaction fees incurred from the sale, if the bottle is without damage to the exterior that would prevent the salability of the bottle.

(2) The commission shall do either of the following:

(a) Refund to an on-premises licensee the amount the on-premises licensee paid for spirits if the spirits are outdated.

(b) Replace spirits for an on-premises licensee if the spirits are outdated. The commission or its authorized distribution agent shall replace spirits under this subdivision before the outdated spirits are picked up by the commission or its authorized distribution agent.

Sec. 1014. (1) An on-premises licensee shall not sell, offer to sell, or advertise the sale of an unlimited quantity of alcoholic liquor at a specific price unless all of the following conditions are met:

(a) The sale, offer, or advertisement is in connection with a private function.

(b) The on-premises licensee has entered into a written agreement with the organizer of the private function stating all of the following:

(i) The date and time the event will be held.

(ii) The location of the event.

(iii) The terms under which alcohol will be sold and served during the event.

(c) The on-premises licensee makes available to the commission and local law enforcement, on notice, the written agreement described in subdivision (b).

(2) An on-premises licensee shall not sell, offer to sell, or advertise the sale of 2 3 or more identical drinks containing alcoholic liquor to an individual for the individual's consumption for 1 price. If 2 3 or more identical drinks containing alcoholic liquor are served to an individual at 1 time, the price charged for the second third and each additional drink must be the same as the price charged for the first drink.

(3) As used in this section, "private function" means an event that meets all of the following conditions:

(a) It is a prearranged private party, private function, or private event for a specific social or business occasion.

(b) Attendance is only by invitation or reservation.

(c) It is not open to the general public.

(d) The guests are served in an outdoor service area or room that is well-defined and clearly marked and designated and used exclusively for the event.