Independent Craft Breweries Struggle Under Distribution Laws That Create a Power Imbalance in Favor of Wholesalers

Independent craft breweries are facing historic challenges under the COVID-19 pandemic. To make matters worse, many states prohibit a brewery from terminating a distribution contract with a wholesaler absent statutorily defined "good cause," which typically means fraud, bankruptcy, or other illegal conduct. In this context, lagging sales or poor distribution performance are not grounds for a brewery to terminate a distribution contract. This means that it is nearly impossible, legally or financially, for an independent craft brewery to terminate a distribution contract with an unsatisfactory wholesaler. In essence, states have statutorily tipped the balance of power in favor of distributors over independent craft breweries based on the allegations that large beer manufacturers have too much bargaining power over distributors. One size does not fit all. Indeed, California is currently entertaining a bill to move from a more permissive relationship between breweries and distributors (allowing for termination generally) to a much more strict good cause model that other states have adopted. States must re-evaluate their distribution laws and reject good cause standards that tie a small brewery to a distributor in perpetuity. Stated plainly, good cause distribution statutes harm independent craft breweries, competition, and ultimately consumers