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  The ILCC Legal Division

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TPP-36:
Consignment Sales

1) The following sections of the Liquor Control Act relate to definitions of “sale” and “to sell” and on the power of retail licensees to sell their products.

The term “consignment” does not appear anywhere in the Act.

5/5-1. Licenses issued by Illinois Liquor Control Commission

Licenses issued by the Illinois Liquor Control Commission shall be of the following classes:

(d) A retailer's license shall allow the licensee to sell and offer for sale at retail, only in the premises specified in such license, alcoholic liquor for use or consumption, but not for resale in any form: Provided that an y retail license issued to a man­ufacturer shall only permit such manufacturer to sell beer at retail on the premises actually occupied by such manufacturer. After January 1, 1995, there shall be 2 classes of licenses issued under a retailers license:

  1. A "retailers on premise consumption license" shall allow the licensee to sell and offer for sale at retail, only on the premises specified in the license, alcoholic liquor for use or consumption on the premises or on and off the premises, but not for resale in any form.
  2. An "off premise sale license" shall allow the licensee to sell, or offer for sale at retail, alcoholic liquor intended only for off premise consumption and not for resale in any form. Notwithstanding any other provision of this sub-section (d), a retail licensee may sell alcoholic liquors to a special event retailer licensee for resale to the extent permitted under subsection (e).

5/1-3.17. Retailer

"Retailer" means a person who sells, or offers for sale, alcoholic liquor for use or consumption and not for resale in any form. (Source: P.A. 82-783) (from Ch. 43, par. 95.17)

5/1-3.18. Sell at retail

"Sell at retail" and "sale at retail" refer to and mean sales for use or consumption and not for resale in any form. (Source: P.A. 82-783) (from Ch. 43, par. 95.18)

5/1-3.21. Sale

"Sale" means any transfer, exchange or barter in any manner, or by any means whatsoever, including the transfer of alcoholic liquors by and through the transfer or negotiation of warehouse receipts or certificates, and includes and means all sales made by any person, whether principal, proprietor, agent, servant or em­ployee. The term "sale" includes any transfer of alcoholic liquor from a foreign importer's license to an importing distributor's license even if both licenses are held by the same person. (Source: P.A. 82-783) (from Ch. 43, par. 95.21)

5/1-3.22. To sell

"To sell" includes to keep or expose for sale and to keep with intent to sell. (Source: P.A. 82-783) (from Ch. 43, par. 95.22)

5/6-5. Receiving Money or Credit from Manufacturer or Distributor B Report of Delinquent Retail Licenses B Cure of Delinquency B Revocation of License

Except as otherwise provided in this Section, it is unlawful for any person having a retailer's license or any officer, associate, member, representative or agent of such licensee to accept, receive or borrow money, or anything else of value, or accept or receive credit (other than merchandising credit in the ordinary course of business for a period not to exceed 30 days) directly or indirectly from any manufacturer, importing distributor or distributor of alcoholic liquor, or from any person connected with or in any way representing, or from any member of the family of, such manufacturer, importing distributor, distributor or whole­saler, or from any stockholders in any corporation engaged in manufacturing, distributing or wholesaling of such liquor, or from any officer, manager, agent or representative of said ma­ufacturer. Except as provided below, it is unlawful for any manufacturer or distributor or importing distributor to give or lend money or anything of value, or otherwise loan or extend credit (except such merchandising credit) directly or indirectly to any retail licensee or to the manager, representative, agent, officer or director of such licensee. A manufacturer, distributor or importing distributor may furnish free advertising, posters, signs, brochures, hand-outs, or other promotional devices or materials to any unit of government owning or operating any auditorium, exhibition hall, recreation facility or other similar facility holding a retailer's license, provided that the primary purpose of such promotional devices or materials is to promote public events being held at such facility. A unit of government owning or operating such a facility holding a retailer's license may accept such promotional devices or materials designed primarily to promote public events held at the facility. No retail licensee delinquent beyond the 30 day period specified in this Section shall solicit, accept or receive credit, purchase or acquire alcoholic liquors, directly or indirectly from any other licensee, and no manufacturer, distributor or importing distributor shall knowingly grant or extend credit, sell, furnish or supply alcoholic liquors to any such delinquent retail licensee; provided that the purchase price of all beer sold to a retail licensee shall be paid by the retail licensee in cash on or before delivery of the beer, and unless the purchase price payable by a retail licensee for beer sold to him in returnable bottles shall expressly include a charge for the bottles and cases, the retail licensee shall, on or before delivery of such beer, pay the seller in cash a deposit in an amount not less than the deposit required to be paid by the distributor to the brewer; but where the brewer sells direct to the retailer, the deposit shall be an amount no less than that required by the brewer from his own distributors; and provided further, that in no instance shall this deposit be less than 50 cents for each case of beer in pint or smaller bottles and 60 cents for each case of beer in quart or half-gallon bottles; and provided further, that the purchase price of all beer sold to an importing distributor or distributor shall be paid by such importing distributor or distributor in cash on or before the 15th day (Sundays and holidays excepted) after delivery of such beer to such purchaser; and unless the purchase price payable by such importing distributor or distributor for beer sold in returnable bottles and cases shall expressly include a charge for the bottles and cases, such importing distributor or distributor shall, on or before the 15th day (Sundays and holidays excepted) after delivery of such beer to such purchaser, pay the seller in cash a required amount as a deposit to assure the return of such bottles and cases. Nothing herein contained shall prohibit any licensee from crediting or refunding to a purchaser the actual amount of money paid for bottles, cases, kegs or barrels returned by the purchaser to the seller or paid by the purchaser as a deposit on bottles, cases, kegs or barrels, when such containers or packages are returned to the seller. Nothing herein contained shall prohibit any manufacturer, importing distributor or distributor from extending usual and customary credit for alcoholic liquor sold to customers or purchasers who live in or maintain places of business outside of this State when such alcoholic liquor is actually transported and delivered to such points outside of this State.

No right of action shall exist for the collection of any claim based upon credit extended to a distributor, importing distributor or retail licensee contrary to the provisions of this Section.

Every manufacturer, importing distributor and distributor shall submit or cause to be submitted, to the State Commission, in triplicate, not later than Thursday of each calendar week, a verified written list of the names and respective addresses of each retail licensee purchasing spirits or wine from such manufacturer, importing distributor or distributor who, on the first business day of that calendar week, was delinquent beyond the above mentioned permissible merchandising credit period of 30 days; or, if such is the fact, a verified written statement that no retail licensee purchasing spirits or wine was then delinquent beyond such per­missible merchandising credit period of 30 days.

Every manufacturer, importing distributor and distributor shall submit or cause to be submitted, to the State Commission, in triplicate, a verified written list of the names and respective addresses of each previously reported delinquent retail licensee who has cured such delinquency by payment, which list shall be submitted not later than the close of the second full business day following the day such delinquency was so cured.

Such written verified reports required to be submitted by this Section shall be posted by the State Commission in each of its offices in places available for public inspection not later than the day following receipt thereof by the Commission. The reports so posted shall constitute notice to every manufacturer, importing distributor and distributor of the information contained therein. Actual notice to manufacturers, importing distributors and distributors of the information contained in any such posted reports, however received, shall also constitute notice of such information.

The 30 day merchandising credit period allowed by this Section shall commence with the day immediately following the date of invoice and shall include all successive days including Sundays and holidays to and including the 30th successive day.

In addition to other methods allowed by law, payment by check during the period for which merchandising credit may be extended under the provisions of this Section shall be considered payment. All checks received in payment for alcoholic liquor shall be promptly deposited for collection. A post dated check or a check dishonored on presentation for payment shall not be deemed payment.

A retail licensee shall not be deemed to be delinquent in payment for any alleged sale to him of alcoholic liquor when there exists a bona fide dispute between such retailer and a manufacturer, importing distributor or distributor with respect to the amount of indebtedness existing because of such alleged sale.

A delinquent retail licensee who engages in the retail liquor business at 2 or more locations shall be deemed to be delinquent with respect to each such location. The license of any person who violates any provision of this Section shall be subject to suspension or revocation in the manner provided by this Act.

If any part or provision of this Article or the application thereof to any person or circumstances shall be adjudged invalid by a court of competent jurisdiction, such judgment shall be confined by its operation to the controversy in which it was mentioned and shall not affect or invalidate the remainder of this Article or the application thereof to any other person or circumstance and to this and the provisions of this Article are declared severable.

2) Since we do not find direct reference to “consignment sales” in our Act, we look to other sources of authority. The Code of Federal Regulations makes reference to “consignments” in the following section:

[Code of Federal Regulations]
[Title 27, Volume 1, Parts 1 to 199]
[Revised as of April 1, 1999]
From the U.S. Government Printing Office via GPO Access
[CITE: 27CFR11]
[Page 226-230]

TITLE 27--ALCOHOL, TOBACCO PRODUCTS AND FIREARMS

CHAPTER I--BUREAU OF ALCOHOL, TOBACCO AND FIREARMS, DEPARTMENT OF THE TREASURY

PART 11--CONSIGNMENT SALES

Subpart A--Scope of Regulations

Sec.
11.1 General.
11.2 Territorial extent.
11.3 Application.
11.4 Jurisdictional limits.
11.5 Administrative provisions.

Subpart B--Definitions
11.11 Meaning of terms.

Subpart C--Unlawful Sales Arrangements
11.21 General.
11.22 Consignment sales.
11.23 Sales conditioned on the acquisition of other products.
11.24 Other than a bona fide sale.

Subpart D--Rules for the Return of Distilled Spirits, Wine, and Malt Beverages

11.31 General. Exchanges and Returns for Ordinary and Usual Commercial Reasons
11.32 Defective products.
11.33 Error in products delivered.
11.34 Products which may no longer be lawfully sold.
11.35 Termination of business.
11.36 Termination of franchise.
11.37 Change in product.
11.38 Discontinued products.
11.39 Seasonal dealers. Exchanges and Returns for Reasons Not Considered
Ordinary and Usual
11.45 Overstocked and slow-moving products.
11.46 Seasonal products.

Authority: 15 U.S.C. 49-50; 27 U.S.C. 202 and 205.

Source: T.D. ATF-74, 45 FR 63258, Sept. 23, 1980, unless otherwise noted.

Subpart A--Scope of Regulations

Sec. 11.1 General.

The regulations in this part, issued pursuant to section 105 of the Federal Alcohol Administration Act (27 U.S.C. 205), specify arrangements which are consignment sales under section 105(d) of the Act and contain guidelines concerning return of distilled spirits, wine and malt beverages from a trade buyer. This part does not attempt to enumerate all of the practices prohibited by section 105(d) of the Act. Nothing in this part shall operate to exempt any person from the requirements of any State law or regulation. [T.D. ATF-364, 60 FR 20427, Apr. 26, 1995]

Sec. 11.2 Territorial extent.

This part applies to the several States of the United States, the District of Columbia, and Puerto Rico.

Sec. 11.3 Application.

  1. General. The regulations in this part apply to transactions between industry members and trade buyers.
  2. Transactions involving State agencies. The regulations in this part apply to transactions involving State agencies operating as retailers or wholesalers.

Sec. 11.4 Jurisdictional limits.

  1. General. The regulations in this part apply where:
    1. The industry member sells, offers for sale, or contracts to sell to a trade buyer engaged in the sale of distilled spirits, wines, or malt beverages, or for any such trade buyer to purchase, offer to purchase, or contract to purchase, any such products on consignment or under conditional sale or with the privilege of return or on any basis other than a bona fide sale, or where any part of such transaction involves, directly or indirectly, the acquisition by such person from the trade buyer or the agreement to acquire from the trade buyer other distilled spirits, wine, or malt beverages; and,
    2. If: (i) The sale, purchase, offer or contract is made in the course of interstate or foreign commerce; or (ii) The industry member engages in using the practice to such an extent as substantially to restrain or prevent transactions in interstate or foreign commerce in any such products; or (iii) The direct effect of the sale, purchase, offer or contract is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such trade buyer in interstate or foreign commerce.
  2. Malt beverages. In the case of malt beverages, this part applies to transactions between a retailer in any State and a brewer, importer, or wholesaler of malt beverages inside or outside such State only to the extent that the law of such State imposes requirements similar to the requirements of section 5(d) of the Federal Alcohol Administration Act [27 U.S.C. 205(d)], with respect to similar transactions between a retailer in such State and a brewer, importer, or wholesaler of malt beverages in such State.

Sec. 11.5 Administrative provisions.

  1. General. The Act makes applicable the provisions including penalties of sections 49 and 50 of Title 15, United States Code, to the jurisdiction, powers and duties of the Director under this Act, and to any person (whether or not a corporation) subject to the provisions of law administered by the Director under this Act.
  2. Examination and subpoena. The Director or any authorized ATF officers shall at all reasonable times have access to, for the purpose of examination, and the right to copy any documentary evidence of any person, partnership, or corporation being investigated or proceeded against; and the Director shall have the power to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence relating to any matter under investigation, upon a satisfactory showing that the requested evidence may reasonably be expected to yield information relevant to any matter being investigated under the Act.

[T.D. ATF-364, 60 FR 20427, Apr. 26, 1995]

Subpart B--Definitions

Sec. 11.11 Meaning of terms.

As used in this part, unless the context otherwise requires, terms have the meanings given in this section. Any other term defined in the Federal Alcohol Administration Act and used in this part shall have the meaning assigned to it by that Act.

Act. The Federal Alcohol Administration Act.

ATF officer. An officer or employee of the Bureau of Alcohol, Tobacco and Firearms (ATF) authorized to perform any function relating to the administration or enforcement of this part.

Director. The Director, Bureau of Alcohol, Tobacco and Firearms, the Department of the Treasury, Washington, DC.

Exchange. The transfer of distilled spirits, wine, or malt beverages from a trade buyer to an industry member with other products taken as a replacement.

Industry member. Any person engaged in business as a distiller, brewer, rectifier, blender, or other producer, or as an importer or wholesaler of distilled spirits, wine or malt beverages, or as a bottler or warehouseman and bottler, of distilled spirits.

Product. Distilled spirits, wine or malt beverages, as defined in the Federal Alcohol Administration Act.

Retailer. Any person engaged in the sale of distilled spirits, wine or malt beverages to consumers. A wholesaler who makes incidental retail sales representing less than five percent of the wholesaler's total sales volume for the preceding two-month period shall not be considered a retailer with respect to such incidental sales.

Return. The transfer of distilled spirits, wine, or malt beverages from a trade buyer to the industry member from whom purchased, for cash or credit. Trade buyer. Any person who is a wholesaler or retailer of distilled spirits, wine or malt beverages.

[T.D. ATF-74, 45 FR 63258, Sept. 23, 1980, as amended by T.D. ATF-364, 60 FR 20427, Apr. 26, 1995]

Subpart C--Unlawful Sales Arrangements

Sec. 11.21 General.

It is unlawful for an industry member to sell, offer for sale, or contract to sell to any trade buyer, or for any such trade buyer to purchase, offer to purchase, or contract to purchase any products (a) on consignment; or (b) under conditional sale; or (c) with the privilege of return; or (d) on any basis other than a bona fide sale; or (e) if any part of the sale involves, directly or indirectly, the acquisition by such person of other products from the trade buyer or the agreement to acquire other products from the trade buyer. Transactions involving the bona fide return of products for ordinary and usual commercial reasons arising after the product has been sold are not prohibited.

Sec. 11.22 Consignment sales.

Consignment sales are arrangements wherein the trade buyer is under no obligation to pay for distilled spirits, wine, or malt beverages until they are sold by the trade buyer. [Page 229]

Sec. 11.23 Sales conditioned on the acquisition of other products.

  1. General. A sale in which any part of the sale involves, directly or indirectly, the acquisition by the industry member from the trade buyer, or the agreement, as a condition to present or future sales, to accept other products from the trade buyer is prohibited.
  2. Exchange. The exchange of one product for another is prohibited as a sales transaction conditioned on the acquisition of other products. However, the exchange of a product for equal quantities (case for case) of the same type and brand of product, in containers of another size is not considered an acquisition of "other" products and is not prohibited if there was no direct or implied privilege of return extended when the product was originally sold. Industry members may make price adjustments on products eligible for exchange under this paragraph.

Sec. 11.24 Other than a bona fide sale.

"Other than a bona fide sale" includes, but is not limited to, sales in connection with which the industry member purchases or rents the display, shelf, storage or warehouse space to be occupied by such products at premises owned or controlled by the retailer. [T.D. ATF-364, 60 FR 20427, Apr. 26, 1995]

Subpart D--Rules for the Return of Distilled Spirits, Wine, and Malt Beverages

Sec. 11.31 General.

  1. Section 5(d) of the Act provides, in part, that it is unlawful to sell, offer to sell, or contract to sell products with the privileges of return for any reason, other than those considered to be ``ordinary and usual commercial reasons'' arising after the product has been sold. Sections 11.32 through 11.39 specify what are considered "ordinary and usual commercial reasons" for the return of products, and outline the conditions and limitations for such returns.
  2. An industry member is under no obligation to accept the return of products for the reasons listed in Secs. 11.32 through 11.39.

Exchanges and Returns for Ordinary and Usual Commercial Reasons

Sec. 11.32 Defective products.

Products which are unmarketable because of product deterioration, leaking containers, damaged labels or missing or mutilated tamper evident closures may be exchanged for an equal quantity of identical products or may be returned for cash or credit against outstanding indebtedness. [T.D. ATF-364, 60 FR 20427, Apr. 26, 1995]

Sec. 11.33 Error in products delivered.

Any discrepancy between products ordered and products delivered may be corrected, within a reasonable period after delivery, by exchange of the products delivered for those which were ordered, or by a return for cash or credit against outstanding indebtedness.

Sec. 11.34 Products which may no longer be lawfully sold.

Products which may no longer be lawfully sold may be returned for cash or credit against outstanding indebtedness. This would include situations where, due to a change in regulation or administrative procedure over which the trade buyer or an affiliate of the trade buyer has no control, a particular size or brand is no longer permitted to be sold. [T.D. ATF-364, 60 FR 20428, Apr. 26, 1995]

Sec. 11.35 Termination of business.

Products on hand at the time a trade buyer terminates operations may be returned for cash or credit against outstanding indebtedness. This does not include a temporary seasonal shutdown (see Sec. 11.39). [T.D. ATF-364, 60 FR 20428, Apr. 26, 1995]

Sec. 11.36 Termination of franchise.

When an industry member has sold products for cash or credit to one of its wholesalers and the distributorship arrangement is subsequently terminated, stocks of the product on hand may be returned for cash or credit against outstanding indebtedness. [Page 230]

Sec. 11.37 Change in product.

A trade buyer's inventory of a product which has been changed in formula, proof, label or container (subject to Sec. 11.46) may be exchanged for equal quantities of the new version of that product.

Sec. 11.38 Discontinued products.

When a producer or importer discontinues the production or importation of a product, a trade buyer's inventory of that product may be returned for cash or credit against outstanding indebtedness.

Sec. 11.39 Seasonal dealers.

Industry members may accept the return of products from retail dealers who are only open a portion of the year, if the products are likely to spoil during the off season. These returns will be for cash or for credit against outstanding indebtedness.

Exchanges and Returns for Reasons Not Considered Ordinary and Usual

Sec. 11.45 Overstocked and slow-moving products.

The return or exchange of a product because it is overstocked or slow-moving does not constitute a return for "ordinary and usual commercial reasons."

Sec. 11.46 Seasonal products.

The return or exchange of products for which there is only a limited or seasonal demand, such as holiday decanters and certain distinctive bottles, does not constitute a return for "ordinary and usual commercial reasons."

[This was last updated on September 17, 1999]

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