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Virginia Law Impacts Wineries’ Ability to Establish Wholesaler Sales Territories

Despite opposition from Wine Institute and a coalition of industry stakeholders, a new law making a subtle but significant change to how wineries set sales territories for wholesalers takes effect in Virginia July 1, 2018. Existing law allows wholesalers to sell outside their assigned territories, into unassigned or otherwise-assigned territories. The new law will allow wholesalers to firm up territory boundaries expanded under current law and potentially permit them to lay claim to territories that may not have been assigned to them. Wineries may face franchise claims in disputes between wholesalers, forcing them to choose which wholesaler has superior rights to brands that may have been sold by multiple wholesalers in the same territory under unwritten or course-of-conduct agreements.

Wine Institute and other organizations sent a letter to Virginia’s governor opposing the change. Wine Institute encourages all wineries to review their existing Virginia territory assignments prior to July 1 at the redesigned Virginia ABC web site. This site shows wholesaler territory assignments currently understood by Virginia ABC. Members are encouraged to consult their legal counsel if their Virginia wholesalers request changes to existing agreements or if conflicts arise.

Additionally, wine wholesalers requested that the Franchise Designation Form filed with new brand registrations require a brand owner to obtain wholesaler consent to territory designations prior to filing. Wine Institute successfully convinced ABC to require notice rather than consent; wineries will only be required to provide notice to a wholesaler of the filing when the new form takes effect later in May.