Oklahoma 2025 Regular Session

Oklahoma House Bill HB2803 Compare Versions

Version 1 (Old)

Version 2 (New)

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3		-	ENGR. H. B. NO. 2803 Page 1 1
	3	+	HB2803 HFLR Page 1
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28		-	ENGROSSED HOUSE
29		-	BILL NO. 2803 By: Marti of the House
	29	+	HOUSE OF REPRESENTATIVES - FLOOR VERSION
	30	+
	31	+	STATE OF OKLAHOMA
	32	+
	33	+	1st Session of the 60th Legislature (2025)
	34	+
	35	+	COMMITTEE SUBSTITUTE
	36	+	FOR
	37	+	HOUSE BILL NO. 2803 By: Marti of the House
30	38
31	39		and
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33	41		Coleman of the Senate
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	47	+	COMMITTEE SUBSTITUTE
39	48
40	49		An Act relating to alcoholic beverages; amending 37A
41	50		O.S. 2021, Section 3 -111, as amended by Section 7,
42	51		Chapter 338, O.S.L. 2023 (37A O.S. Supp. 2024,
43	52		Section 3-111), which relates to termination of
44	53		distribution agreements; requiring certain things to
45	54		occur before a brewer terminates a distributor;
46	55		modifying timing requirements; updating actions that
47	56		may allow a brewer to immediately terminate a
48	57		distributor agreement; requiring a new distributor to
49	58		purchase any remaining inventory for laid in cost of
50	59		an old distributor in certain instances; requiring
51	60		arbitrators to have certain qualifications; providing
52	61		for when an appeal of a decision of an arbitrator may
53	62		be made; requiring small brewers to purchase any
54	63		remaining inventory for laid in cost when terminating
55	64		a distribution agreement in certain circumstances;
56	65		providing that a penalty for wrongful termination and
57	66		a distribution agreement may include the purchase of
58	67		any remaining inventory for laid in cost; and
59	68		providing an effective date.
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64	73		BE IT ENACTED BY THE PEOP LE OF THE STATE OF OKLAHOMA:
65		-	SECTION 1. AMENDATORY 37A O.S. 2021, Section 3 -111, as
66		-	amended by Section 7, Chapter 338, O.S.L. 2023 (37A O.S. Supp. 2024,
67		-	Section 3-111), is amended to read as follows:
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69		-	ENGR. H. B. NO. 2803 Page 2 1
	75	+	HB2803 HFLR Page 2
	76	+	BOLD FACE denotes Committee Amendments. 1
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	101	+	SECTION 1. AMENDATORY 37A O.S. 2021, Section 3 -111, as
	102	+	amended by Section 7, Chapter 338, O.S.L. 2023 (37A O.S. Supp. 2024,
	103	+	Section 3-111), is amended to read as follows:
94	104		Section 3-111. A. Except as provided in subsection G of this
95	105		section, a small brewer is not subject to the termination provisions
96	106		of this section.
97	107		B. 1. Except as provided in subsection C of this section, no
98	108		brewer shall terminate a distributor agreement with any beer
99	109		distributor without establishing good cause for such termination and
100	110		unless all of the following occur:
101	111		a. the beer distributor receives written notification by
102	112		certified mail, return receipt requested, from the
103	113		brewer of stating with specificity the alleged
104	114		noncompliance with material and reasonable provisions
105	115		of the agreement and is afforded no less than sixty
106	116		(60) days ninety (90) days in which to cure such
107	117		noncompliance. If not capable of being cured within
108	118		the sixty-day period ninety-day period, the beer
109	119		distributor shall begin the cure within the sixty-day
110	120		period ninety-day period and diligently pursue the
111	121		cure as promptly as feasible,
112	122		b. the beer distributor fails to cure such noncompliance
113	123		within the allotted cure period, and
114		-	c. the brewer provides written notice by certified mail,
115		-	return receipt requested, to the beer distributor of
116		-	such continued noncompliance. The notification shall
117		-	contain a statement of the in tention of the brewer to
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119		-	ENGR. H. B. NO. 2803 Page 3 1
	125	+	HB2803 HFLR Page 3
	126	+	BOLD FACE denotes Committee Amendments. 1
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	151	+	c. the brewer provides written notic e by certified mail,
	152	+	return receipt requested, to the beer distributor of
	153	+	such continued noncompliance. The notification shall
	154	+	contain a statement of the intention of the brewer to
144	155		terminate the distributor agreement, the reasons for
145	156		the termination and t he date the termination shall
146	157		take effect.
147	158		2. If a beer distributor cures an alleged noncompliance within
148	159		the cure period provided in subparagraph a of paragraph 1 of this
149	160		subsection, any notice of termination from a brewer to a beer
150	161		distributor shall be null and void.
151	162		C. A brewer may immediately terminate a distributor agreement,
152	163		effective upon furnishing written notification to the beer
153	164		distributor by certified mail, return receipt requested, for any of
154	165		the following reasons:
155	166		1. The beer distributor's failure to pay any account when due
156	167		and upon written demand by the brewer for such payment, in
157	168		accordance with agreed payment terms;
158	169		2. The assignment or attempted assignment by the beer
159	170		distributor for the benefit of creditors, the institution of
160	171		proceedings in bankruptcy by or against the beer distributor, the
161	172		dissolution or liquidation of the beer distributor or the insolvency
162	173		of the beer distributor;
163		-	3. The revocation or suspension of, or the failure to renew for
164		-	a period of more than fourteen (14) days, a beer distributor's
165		-	state, local or federal license or permit to sell beer in this
166		-	state;
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168		-	ENGR. H. B. NO. 2803 Page 4 1
	175	+	HB2803 HFLR Page 4
	176	+	BOLD FACE denotes Committee Amendments. 1
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	201	+	3. The revocation or suspension of, or the failure to renew for
	202	+	a period of more than fourteen (14) da ys, a beer distributor's
	203	+	state, local or federal license or permit to sell beer in this
	204	+	state;
193	205		4. The beer distributor has been convicted of a felony that, in
194	206		the brewer's sole judgment, adversely affects the goodwill of the
195	207		beer distributor or brewer; pr ovided, however, an existing
196	208		stockholder or stockholders, partner or partners, or member or
197	209		members shall have the right to purchase the stock, partnership
198	210		interest, or membership interest of the offending s tockholder,
199	211		partner, or member prior to the convi ction of the offending
200	212		stockholder, partner, or member, subject to brewer's approval, which
201	213		shall not be unreasonably withheld, and if the sale is completed
202	214		prior to conviction, the provisions of this paragraph shall not
203	215		apply;
204	216		5. A beer distributor has b een convicted of, found guilty of or
205	217		pled guilty or nolo contendere to, a charge of violating a law or
206	218		regulation of the United States or of this state if it materially
207	219		and adversely affects the ability of t he beer distributor or brewer
208	220		to continue to sell its beer in this state;
209	221		6. Any attempted transfer or change in beneficial ownership of
210	222		ten percent (10%) or more of the beer distributor, stock of the beer
211	223		distributor or stock of any parent corporation of the beer
212	224		distributor, or any change in the owner ship or control of any entity
213		-	having control of the beer distributor, without obtaining the prior
214		-	written approval of the brewer, which may not be unreasonab ly
215		-	withheld and must be based on reasonable and material objective
216		-	requirements imposed on all other distributors , except as may
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218		-	ENGR. H. B. NO. 2803 Page 5 1
	226	+	HB2803 HFLR Page 5
	227	+	BOLD FACE denotes Committee Amendments. 1
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	252	+	having control of the beer distributor, without obtaining the prior
	253	+	written approval of the brewer, which may not be unreasonably
	254	+	withheld and must be based on reasonable and ma terial objective
	255	+	requirements imposed on all othe r distributors, except as may
243	256		otherwise be permitted pursuant to a written agreement between the
244	257		parties;
245	258		7. Fraudulent conduct, by or on the part of the beer
246	259		distributor or any owner of the beer distributor, or by any employee
247	260		as to which the beer distri butor or any of its owners or its senior
248	261		management knew or reasonably should have known, in the beer
249	262		distributor's dealings with the brewer of beer, including the
250	263		intentional sale of beer outside the brewer 's established quality
251	264		standards, provided howeve r, in the case of fraudulent conduct by a
252	265		beer distributor employee other than the owner or senior management
253	266		and only in the event the beer distributor was unaware or should not
254	267		have been aware of such fraudulent conduct, the beer distributor
255	268		shall be allowed sixty-day ninety-day cure period following written
256	269		notice of such conduct from the brewer, and shall only be terminated
257	270		for failing to cure the same within sixty (60) ninety (90) days
258	271		thereof;
259	272		8. Cessation of the beer distributor to conduct business for
260	273		five (5) consecutive business days, unless conducting the business
261	274		is prevented or rendered impractical due to events beyond the
262	275		distributor's reasonable control as a result of an act of God, an
263		-	insured casualty, war or a condition of national, state or local
264		-	emergency; or
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266		-	ENGR. H. B. NO. 2803 Page 6 1
	277	+	HB2803 HFLR Page 6
	278	+	BOLD FACE denotes Committee Amendments. 1
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	303	+	insured casualty, war or a condition of national, state o r local
	304	+	emergency; or
291	305		9. Any intentional sale of beer, directly or indirectly, to
292	306		customers located outside the territory assigned to the beer
293	307		distributor by the brewer unless expressly authorized by the br ewer.
294	308		D. Any beer distributor terminated by a br ewer under subsection
295	309		B of this section shall have the opportunity to sell the brewer's
296	310		brand rights for one hundred twenty (120) days after termination in
297	311		accordance with the distributor agreement. If no such sale occurs,
298	312		the brewer's newly appointed dis tributor shall pay the beer
299	313		distributor the fair market value of the distribution rights, which
300	314		will be lost or diminished by reason of termination , and purchase
301	315		any remaining non-expired inventory for laid in cost. If the
302	316		parties cannot agree on the fair market value, the parties shall
303	317		follow the same procedures as set forth in paragraphs 2 through 6 of
304	318		subsection G of this section.
305	319		E. The brewer shall have the right to terminate an agreement
306	320		with a beer distributor at any time by giving the beer distrib utor
307	321		at least ninety-days' written notice by certified mail, return
308	322		receipt requested; provided, the brewer shall give a similar notice
309	323		to all beer distributors in all other states with which the brewer
310	324		has a distributor agreement.
311	325		F. 1. If a particular brand of beer is transferred by purchase
312	326		or otherwise from a brewer to a successor brewer, the successor
313		-	brewer shall become obligated to all of the terms an d conditions of
314		-	the agreement in effect on the date of succession. This subsection
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316		-	ENGR. H. B. NO. 2803 Page 7 1
	328	+	HB2803 HFLR Page 7
	329	+	BOLD FACE denotes Committee Amendments. 1
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	354	+	brewer shall become obligated to all of the terms and conditions of
	355	+	the agreement in effect on the date of succession. This subsection
341	356		applies regardless of the character or form of the succession. A
342	357		successor brewer has the right to contractually require its beer
343	358		distributor to comply with operational standards of performance, if
344	359		the standards are unifo rmly established for all of the successor
345	360		brewer's distributors. Provided, however, where the successor
346	361		brewer holds a brewer's license in the state as of January 1, 2023,
347	362		and has an existing distribution agreement with a beer distributor,
348	363		the successor brewer may terminate the distribution agreement, i n
349	364		whole or in part, in order to transfer the brand rights to the
350	365		successor brewer's beer distributor with at least sixty (60) ninety
351	366		(90) days' written notice to the terminated distributor and with
352	367		termination effective upon payment to the terminated beer
353	368		distributor the fair market value of the terminated beer
354	369		distributor's business with respect to the terminated brand or
355	370		brands.
356	371		2. A successor brewer may, upon written notice, terminate its
357	372		agreement, in whole or in part, with a beer distributor of the
358	373		brewer it succeeded, for the purpose of transferring the
359	374		distribution rights in the beer distributor's territory to a new
360	375		beer distributor, provided that the successor beer distributor first
361	376		pays to the existing beer distributor the fair market value of the
362		-	existing distributor's business with respect to the terminated brand
363		-	or brands;
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365		-	ENGR. H. B. NO. 2803 Page 8 1
	378	+	HB2803 HFLR Page 8
	379	+	BOLD FACE denotes Committee Amendments. 1
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	404	+	existing distributor's business with respect to the terminated brand
	405	+	or brands;
390	406		3. If the successor brewer decides to terminate its agreement
391	407		with the existing beer distributor for purposes of transfer, the
392	408		successor brewer shall notify the existing beer distributor in
393	409		writing of the successor brewer's intent not to appoint the existing
394	410		beer distributor for all or part of the existing beer distributor's
395	411		territory. The successor brewer shall mail the notice of
396	412		termination by certified mail, return receipt requested, to the
397	413		existing beer distributor. The successor brewer shall include in
398	414		the notice the names, addresses and telephone numbers of the
399	415		successor beer distributor or distributors;
400	416		4. a. the successor beer distributor shall negotiate with
401	417		the existing beer distributor to determine the fair
402	418		market value of the existing beer distributor's right
403	419		to distribute in the existing beer distributor's
404	420		territory. The successor beer distributor and the
405	421		existing beer distributor shall negotiate the fair
406	422		market value in good faith, and
407	423		b. the existing beer distributor shall continue to
408	424		distribute in good faith until payment of the
409	425		compensation agreed to under subparagraph a of this
410	426		paragraph, or awarded under paragraph 4 of this
411	427		subsection, is received; and
412		-	5. a. if the successor beer distributor and the existing
413		-	beer distributor fail to reach a written agreement on
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415		-	ENGR. H. B. NO. 2803 Page 9 1
	429	+	HB2803 HFLR Page 9
	430	+	BOLD FACE denotes Committee Amendments. 1
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	455	+	5. a. if the successor beer distributor and the existing
	456	+	beer distributor fail to reach a written agreement on
440	457		the fair market value within thirty (30) days after
441	458		the existing beer distributor receives the notic e
442	459		required pursuant to paragraph 2 of this subsec tion,
443	460		the successor beer distributor or the existing beer
444	461		distributor shall send a written notice to the other
445	462		party requesting arbitration pursuant to the Uniform
446	463		Arbitration Act, Part 2 of Article 22 of Title 13,
447	464		C.R.S. Arbitration shall be held for the purpose of
448	465		determining the fair market value of the existing beer
449	466		distributor's right to distribute in the existing beer
450	467		distributor territory,
451	468		b. notice of intent to arbitrate shall be sent, as
452	469		provided in subparagraph a of this paragraph, not
453	470		later than forty (40) days after the existing beer
454	471		distributor receives the notice required pursuant to
455	472		paragraph 2 of this subsection. The arbitration
456	473		proceeding shall conclude not later than sixty (60)
457	474		days after the date the notice of intent to arbitrate
458	475		is mailed to a party, unless this time is extended by
459	476		mutual agreement of the parties and the arbitrator,
460	477		c. any arbitration held pursuant to this subsection shall
461	478		be conducted in a city within this state that:
462		-	(1) is closest to the existing beer distributor, and
463	479
464		-	ENGR. H. B. NO. 2803 Page 10 1
	480	+	HB2803 HFLR Page 10
	481	+	BOLD FACE denotes Committee Amendments. 1
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	506	+	(1) is closest to the existing beer distributor, and
489	507		(2) has a population of more than twenty thousand
490	508		(20,000) people according to the latest Federal
491	509		Decennial Census,
492	510		d. any arbitration held pursuant to this paragraph shall
493	511		be conducted before one impartial arbitrator to be
494	512		selected by the American Arbitra tion Association (AAA)
495	513		or its successor. The arbitration shall be conducted
496	514		in accordance with the rules and procedures of the
497	515		Uniform Arbitration Act, Part 2 of Article 22 of Title
498	516		13, C.R.S. The AAA arbitrator must have no less than
499	517		fifteen (15) years of experience in franchise law and
500	518		is required to use the laws of the state where the
501	519		distributor is located and cannot use other state laws
502		-	in ~~his or her~~ reviews,
	520	+	in their reviews,
503	521		e. an arbitrator's award in any arbitration held pursuant
504	522		to this paragraph shall be monetary onl y and shall not
505	523		enjoin or compel conduct. Any arbitration held
506	524		pursuant to this paragraph shall be in lieu of all
507	525		other remedies and procedures,
508	526		f. the cost of the arbitrator and any other direct costs
509	527		of an arbitration held pursuant to this paragraph
510	528		shall be equally divided by the parties engaged in the
511		-	arbitration. All other costs shall be paid by the
512		-	party incurring them,
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514		-	ENGR. H. B. NO. 2803 Page 11 1
	530	+	HB2803 HFLR Page 11
	531	+	BOLD FACE denotes Committee Amendments. 1
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	556	+	arbitration. All other costs shall be paid by the
	557	+	party incurring them,
539	558		g. the arbitrator in any arbitration held pursuant to
540	559		this paragraph shall render a written decision not
541	560		later than thirty (30) day s after the conclusion of
542	561		the arbitration, unless this time is extended by
543	562		mutual agreement of the parties and the arbitrator.
544	563		The decision of the arbitrator is final and binding on
545	564		the parties, but questions of error of law may be
546	565		appealed by either part y to a state or federal court
547	566		in the state where the distributor is located . The
548	567		arbitrator's award may be enforced by commencing a
549	568		civil action in any court of competent jurisdiction.
550	569		Under no circumstances may the parties appeal the
551	570		decision of the arbitrator,
552	571		h. an existing beer distributor or successor beer
553	572		distributor who fails to participate in the
554	573		arbitration hearings in any arbitration held pursuant
555	574		to this paragraph waives all rights the existing b eer
556	575		distributor or successor beer distributor wou ld have
557	576		had in the arbitration and is considered to have
558	577		consented to the determination of the arbitrator, and
559	578		i. if the existing beer distributor does not receive
560	579		payment from the successor beer distributor of the
561		-	settlement or arbitration award required under
562		-	paragraph 2 or 3 of this subsection within thirty (30)
563	580
564		-	ENGR. H. B. NO. 2803 Page 12 1
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	607	+	settlement or arbitration award required under
	608	+	paragraph 2 or 3 of this subsection within thirty (30)
589	609		days after the date of the settlement or arbitration
590	610		award:
591	611		(1) the existing beer distributor shall remain the
592	612		beer distributor in the existing be er
593	613		distributor's territory to at least the same
594	614		extent that the existing beer distributor
595	615		distributed the beer immediately before the
596	616		successor brewer acquired rights to the brand,
597	617		and
598	618		(2) the existing beer distributor is not entitled to
599	619		the settlement or arbitration award .
600	620		G. 1. In addition to termina tion rights that may be set forth
601	621		in a distributor agreement, a small brewer may terminate a
602	622		distributor agreement with any beer distributor; provided, that
603	623		prior to the effective date of the termination, th e small brewer
604	624		pays the beer distributor the fair market value of the distribution
605	625		rights which will be lost or diminished by reason of the termination
606	626		and purchase any remaining non -expired inventory for laid in cost .
607	627		2. If such small brewer and beer distributor cannot mutually
608	628		agree to the fair market value of the applicable distribution rights
609	629		lost or diminished by reason of the termination, then the brewer
610		-	shall pay the beer distributor a good fai th estimate of the fair
611		-	market value of the applicable distribution r ights.
612	630
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	657	+	shall pay the beer distributor a good faith estimate of the fair
	658	+	market value of the applicable d istribution rights.
638	659		3. If the beer distributor b eing terminated under paragraph 2
639	660		of this subsection disputes that the payment made by the small
640	661		brewer was less than the fair market value of the distribution
641	662		rights, then the beer distributor may within forty -five (45) days of
642	663		termination submit the ques tion of fair market value of the
643	664		applicable distribution rights lost or diminished by reason of the
644	665		termination to binding arbitration before a panel of three neutral
645	666		arbitrators appointed in accordance with the commercial arbitration
646	667		rules of the American Arbitration Association, which panel shall
647	668		determine by majority decision whether the small brewer's payment
648	669		meets the requirements of paragraph 2 of this subsection.
649	670		4. If the arbitration panel rules that the payment made by the
650	671		small brewer to the beer distributor upon termination was less than
651	672		the fair market value of distribution rights lost or diminished by
652	673		reason of the termination, then the small brewer must pay the beer
653	674		distributor the difference be tween the payment made to the beer
654	675		distributor and the determined fair market value plus interest.
655	676		5. If the arbitration panel rules that the payment made by the
656	677		small brewer to the beer distributor upon termination was more than
657	678		the fair market value of distribution rights lost or diminished by
658	679		reason of the termination, then the beer distributor must pay the
659		-	small brewer the difference between the payment made to the beer
660		-	distributor and the determi ned fair market value, plus interest.
661	680
662		-	ENGR. H. B. NO. 2803 Page 14 1
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	707	+	small brewer the difference between the payment made to the beer
	708	+	distributor and the determined fair market value, plus interest.
687	709		6. All arbitration fees and expenses shall be equally divided
688	710		among the parties to the arbitration, except if the arbitration
689	711		panel determines that the small brewer's payment upon termination
690	712		was not a good-faith estimate of the fair market value, then the
691	713		panel may award up to one hundred percent (100%) of the arbitrati on
692	714		costs to the prevailing party.
693	715		H. 1. Any beer distributor or brewer who is aggrieved by a
694	716		violation of any provision of this section shall be entitled to the
695	717		recovery of damages caused by the violation. If a beer distributor
696	718		is not terminated in acco rdance with the provisions of this section,
697	719		damages may additionally include the fair market value of the
698	720		distribution rights and purchase any remaining non -expired inventory
699	721		for laid in cost. Damages shall be sought in a civil action in any
700	722		court of competent jurisdiction.
701	723		2. Any dispute arising under this section may also be settled
702	724		by such dispute resolution procedures as may be provided by a
703	725		written agreement between the parties.
704	726		I. Nothing in this sec tion shall be construed to limit or
705	727		prohibit good-faith settlements voluntarily entered into by the
706	728		parties.
707	729		J. Except as otherwise provided herein, nothing in this section
708	730		shall be construed to give a beer distributor any right to
709		-	compensation if an agreement with the beer distributor is terminated
710		-	by a brewer pursuant to this section.
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	758	+	compensation if an agreement with the beer distributor is terminated
	759	+	by a brewer pursuant to this section.
737	760		K. No brewer shall require any beer distributor to waive
738	761		compliance with any provision of the Oklahoma Alcoholic Beverage
739	762		Control Act and any provisions of the Oklahoma Al coholic Beverage
740	763		Control Act shall supersede any provisions of a distributor
741	764		agreement in conflict in this section.
742	765		L. No brewer shall charge or accept, and no beer distributor
743	766		shall pay or provide, in a material way, any money, property,
744	767		gratuity, rebate, free goods, shipping charges different than tho se
745	768		charged for all beer distributors, allowances, thing of value or
746	769		other inducement, as defined in Section 3 -123 of this title, from a
747	770		beer distributor in exchange for the brewer entering into a
748	771		distributor agreement with the beer distributor. However, a brewer
749	772		who also holds a beer distributor license and desires to sell all or
750	773		a portion of its beer distribution rights and business, or a holder
751	774		of small brewer license who desires to change its election from
752	775		self-distribution to the use of a distributor a greement may accept a
753	776		payment for the fair market value of its existing and established
754	777		distribution business in the subject territory .
755	778		M. This section shall apply to any agreement entered into and
756	779		any renewals, extensions, amendments or conduct constitut ing a
757	780		modification of a distributor agreement by a brewer or cider
758	781		manufacturer.
759		-	N. Where a cider manufacturer distributes cider through a beer
760		-	distributor, the rights and obligations of the cider manufacturer,
761	782
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	809	+	N. Where a cider manufacturer distributes cider through a beer
	810	+	distributor, the rights and obligations of the cider manufacturer,
787	811		the distributor, a successor cider manufactu rer and a successor
788	812		distributor shall be the same as the rights and obligations provided
789	813		in this section for a brewer, beer distributor, successor brewer and
790	814		successor beer distributor.
791	815		SECTION 2. This act shall become effective November 1 , 2025.
792		-	Passed the House of Representatives the 11th day of March, 2025.
793	816
794		-
795		-
796		-
797		-	Presiding Officer of the House
798		-	of Representatives
799		-
800		-
801		-
802		-	Passed the Senate the ___ day of __________, 2025.
803		-
804		-
805		-
806		-
807		-	Presiding Officer of the Senate
	817	+	COMMITTEE REPORT BY: COMMITTEE ON HEALTH AND HUMAN SERVICES
	818	+	OVERSIGHT, dated 02/17/2025 - DO PASS, As Amended and Coauthored.