Franchisor 101: Don’t Interfere With Beer

Lewitt HackmanThe Mississippi Supreme Court ruled that a beer manufacturer’s “match and redirect” provision in an agreement with a wholesaler violated the state’s Beer Industry Fair Dealing Act (BIFDA). Anheuser-Busch’s contract said if the wholesaler tried to sell its business, Anheuser-Busch had a “match and redirect” right. This meant Anheuser Busch could assign the sale to a third party if it matched the price and terms of the sale agreement.

Anheuser-Busch asked its Mississippi distributors not to do business with a competitor, Yuengling and Son. The wholesaler did not comply and only one distributor complied, Mitchell Distributing Company (Mitchell). Later, the wholesaler tried to sell its company to a distributor that did business with Yuengling. Anheuser-Busch exercised its right and directed the wholesaler to sell to Mitchell.

The wholesaler claimed Anheuser-Busch interfered with its sale as punishment for refusing to stop dealing with Yuengling. The wholesaler claimed the match and redirect provision violated BIFDA, was a conspiracy by Anheuser-Busch and Mitchell and that Mitchell interfered with the sale to the wholesaler’s proposed buyer.

BIFDA says a supplier must not “interfere with, prevent or unreasonably delay the transfer of the wholesaler’s business” if the transferee meets “nondiscriminatory, material and reasonable qualifications and standards.” The supplier can veto a transfer “in good faith and for good cause related to the reasonable qualifications” of the transferee. Anheuser-Busch claimed that interference could not exist because a party cannot be found to have interfered with its own contract. The court rejected this argument as it would defeat the purpose of BIFDA. BIFDA’s purpose is to create separation between manufacturers and distributors. Anheuser-Bush’s view would take away protection for distributors against manufacturers choosing the distributor’s new owner. Thus, the agreement’s “match and redirect” provision was void and the court allowed the wholesaler’s conspiracy and interference claims to proceed.

Franchisors and suppliers should be aware of state franchise and distribution laws that govern their business and industries and consult counsel when exercising rights that affect relationship rights of franchisees and distributors. This is especially true when exercising such rights can be perceived as having ulterior motives that benefit the franchisor, a supplier or a third party, to the detriment of the existing franchisee or distributor.

See: Rex Distrib. Co., Inc. v. Anheuser-busch, LLC, 271 So. 3d 445 (Miss. 2019)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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