HOUSE BILL No. 4454 March 6, 1997, Introduced by Rep. Varga and referred to the Committee on Regulatory Affairs. A bill to create a commission for the control of the alco- holic beverage traffic within this state, and to prescribe its powers, duties, and limitations; to provide for powers and duties for certain state departments and agencies; to impose certain taxes for certain purposes; to provide for the control of the alcoholic liquor traffic within this state and to provide for the power to establish state liquor stores; to provide for the care and treatment of alcoholics; to provide for the incorporation of farmer cooperative wineries and the granting of certain rights and privileges to those cooperatives; to provide for the licens- ing and taxation of activities regulated under this act and the disposition of the money received under this act; to prescribe liability for retail licensees under certain circumstances and to require security for that liability; to provide procedures, defenses, and remedies regarding violations of this act; to 02244'97 LBO 2 provide for the enforcement and to prescribe penalties for violations of this act; to provide for allocation of certain funds for certain purposes; to provide for the confiscation and disposition of property seized under this act; to provide refer- enda under certain circumstances; and to repeal acts and parts of acts. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 CHAPTER 1 2 Sec. 101. This act shall be known and may be cited as the 3 "Michigan liquor control code of 1997". 4 Sec. 103. For the purposes of this act, the words and 5 phrases defined in this chapter have the meanings ascribed to 6 them in this chapter, unless the context requires otherwise. 7 Sec. 105. (1) "Alcohol" means the product of distillation 8 of fermented liquid, whether or not rectified or diluted with 9 water, but does not mean ethyl or industrial alcohol, diluted or 10 not, that has been denatured or otherwise rendered unfit for bev- 11 erage purposes. 12 (2) "Alcoholic liquor" means any spirituous, vinous, malt, 13 or fermented liquor, liquids and compounds, whether or not medi- 14 cated, proprietary, patented, and by whatever name called, con- 15 taining 1/2 of 1% or more of alcohol by volume which are fit for 16 use for beverage purposes as defined and classified by the com- 17 mission according to alcoholic content as belonging to 1 of the 18 varieties defined in this chapter. 19 (3) "Authorized distribution agent" means a person approved 20 by the commission to do 1 or more of the following: 02244'97 3 1 (a) To store spirits owned by a supplier of spirits or the 2 commission. 3 (b) To deliver spirits sold by the commission to retail 4 licensees. 5 (c) To perform any function needed to store spirits owned by 6 a supplier of spirits or by the commission or to deliver spirits 7 sold by the commission to retail licensees. 8 (4) "Bar" means a barrier or counter at which alcoholic 9 liquor is sold to, served to, or consumed by customers. 10 (5) "Beer" means any beverage obtained by alcoholic fermen- 11 tation of an infusion or decoction of barley, malt, hops, or 12 other cereal in potable water. 13 (6) "Brand" means any word, name, group of letters, symbol, 14 trademark, or combination thereof adopted and used by a supplier 15 to identify a specific beer, malt beverage, wine, mixed wine 16 drink, or mixed spirit drink product and to distinguish that pro- 17 duct from another beer, malt beverage, wine, mixed wine drink, or 18 mixed spirit drink product that is produced or marketed by that 19 or another supplier. As used in this section and notwithstanding 20 sections 305(2)(j) and 403(2)(j), "supplier" means a brewer, an 21 outstate seller of beer, a wine maker, a small wine maker, an 22 outstate seller of wine, a manufacturer of mixed wine drink, an 23 outstate seller of a mixed wine drink, a mixed spirit drink manu- 24 facturer, or an outstate seller of mixed spirit drink. 25 (7) "Brand extension" means any brand which incorporates all 26 or a substantial part of the unique features of a preexisting 27 brand of the same supplier. As used in this section and 02244'97 4 1 notwithstanding sections 305(2)(j) and 403(2)(j), "supplier" 2 means a brewer, an outstate seller of beer, a wine maker, a small 3 wine maker, an outstate seller of wine, a manufacturer of mixed 4 wine drink, an outstate seller of a mixed wine drink, a mixed 5 spirit drink manufacturer, or an outstate seller of mixed spirit 6 drink. 7 (8) "Brandy" means an alcoholic liquor as defined in 8 27 C.F.R. 5.22(d) (1980). 9 (9) "Brandy manufacturer" means a person licensed under this 10 act to engage in the manufacturing, rectifying or blending, or 11 both, of brandy only and no other distilled spirit. Only a 12 licensed wine maker or a small wine maker is eligible to be a 13 brandy manufacturer. The commission may approve a brandy manu- 14 facturer to sell at retail brandy which it manufactures, blends 15 or rectifies, or both, at its licensed premises or at other 16 premises authorized in this act. 17 (10) "Brewer" means a person located in this state that is 18 licensed to manufacture and sell to licensed wholesalers beer 19 produced by it. 20 (11) "Brewpub" means a license issued in conjunction with a 21 class "C", tavern, class "A" hotel, or class "B" hotel license 22 that authorizes the person licensed with the class "C", tavern, 23 class "A" hotel, or class "B" hotel to manufacture and brew not 24 more than 5,000 barrels of beer per calendar year in Michigan and 25 sell at those licensed premises the beer produced for consumption 26 on or off the licensed brewery premises in the manner provided 27 for in sections 405 and 407. 02244'97 5 1 Sec. 107. (1) "Cash" means money in hand, bank notes, 2 demand deposits at a bank, or legal tender, which a creditor must 3 accept according to law. Cash does not include call loans, post- 4 dated checks, or promissory notes. 5 (2) "Class C license" means a place licensed to sell at 6 retail beer, wine, mixed spirit drink, and spirits for consump- 7 tion on the premises. 8 (3) "Club" means an association, whether incorporated or 9 unincorporated, the majority of whose members are citizens for 10 the promotion of some common object not including associations 11 organized for a commercial or business purpose, the object of 12 which is money profit, owning, hiring, or leasing a building, or 13 space in a building, of an extent and character as in the judg- 14 ment of the commission may be suitable and adequate for the rea- 15 sonable and comfortable use and accommodation of its members and 16 their guests, and which shall have been in existence for a period 17 of not less than 2 years before application for license under 18 this act. A club that is a chapter of a national organization 19 which has had a license for 10 years may apply for a license 20 without a waiting period. Public notice of the intent of the 21 commission to issue the club license shall be given by publica- 22 tion in some newspaper published or in general circulation within 23 the municipality at least 10 days before the license shall 24 issue. Public notice of the commission's intent to renew the 25 license of a club is not required. The club shall file with the 26 commission annually, within 10 days after February 1, a list of 27 the names and residences of its members, and similarly file, 02244'97 6 1 within 10 days after the election of an additional member, his or 2 her name and address, and that its aggregate annual membership 3 fees or dues and other income, exclusive of the proceeds from the 4 sale of alcoholic liquor, are sufficient to defray the annual 5 rental of its leased or rented premises or, if the premises are 6 owned by the club, are sufficient to meet the taxes, insurance, 7 repairs, and the interest on a mortgage on the premises. The 8 list of members and additional members is not required of a club 9 paying the maximum fee. The affairs and management of the club 10 shall be conducted by a board of directors, executive committee, 11 or similar body chosen by the members. A member, officer, agent, 12 or employee of the club shall not be paid, or directly or indi- 13 rectly receive in the form of salary or other compensation, prof- 14 its from the disposition or sale of alcoholic liquor to the club 15 or to the members of the club, beyond the amount of salary fixed 16 and voted at meetings by the members or by its directors or other 17 governing body and as reported by the club to the commission, 18 within 3 months after the meeting. 19 (4) "Commission" means the liquor control commission pro- 20 vided for and created in section 209. 21 (5) "Church" means an entire house or structure set apart 22 primarily for use for purposes of public worship, and which is 23 tax exempt under the laws of this state, and in which religious 24 services are held and with which a clergyman is associated, and 25 the entire structure of which is kept for that use and not put to 26 any other use inconsistent with that use. 02244'97 7 1 (6) "Distiller" means any person licensed to manufacture and 2 sell spirits or alcohol, or both, of any kind. 3 (7) "Hotel" means a building or group of buildings located 4 on the same or adjoining pieces of real property, which provide 5 lodging to travelers and temporary residents and which may also 6 provide food service and other goods and services to registered 7 guests and to the public. 8 (8) "Class A hotel" means a hotel licensed by the commission 9 to sell beer and wine for consumption on the premises only, which 10 provides for the rental of, and maintains the availability for 11 rental of, not less than 25 bedrooms if located in a local gov- 12 ernmental unit with a population of less than 175,000 or not less 13 than 50 bedrooms if located in a local governmental unit with a 14 population of 175,000 or more. 15 (9) "Class B hotel" means a hotel licensed by the commission 16 to sell beer, wine, mixed spirit drink, and spirits for consump- 17 tion on the premises only, which provides for the rental of, and 18 maintains the availability for rental of, not less than 25 bed- 19 rooms if located in a local governmental unit with a population 20 of less than 175,000 or not less than 50 bedrooms if located in a 21 local governmental unit with a population of 175,000 or more. 22 (10) "License" means a contract between the commission and 23 the licensee granting authority to that licensee to manufacture 24 and sell, or sell, or warehouse alcoholic liquor in the manner 25 provided by this act. 02244'97 8 1 Sec. 109. (1) "Manufacturer" means a person engaged in the 2 manufacture of alcoholic liquor, including, but not limited to, a 3 distiller, a rectifier, a wine maker, and a brewer. 4 (2) "Micro brewer" means a brewer that produces in total 5 less than 30,000 barrels of beer per year and that may sell the 6 beer produced to consumers at the licensed brewery premises for 7 consumption on or off the licensed brewery premises. In deter- 8 mining the 30,000-barrel threshold, all brands and labels of a 9 brewer, whether brewed in this state or outside this state, shall 10 be combined and all facilities for the production of beer that 11 are owned or controlled by the same person shall be treated as a 12 single facility. 13 (3) "Minor" means a person less than 21 years of age. 14 (4) "Mixed spirit drink" means a drink produced and packaged 15 or sold by a mixed spirit drink manufacturer or an outstate 16 seller of mixed spirit drink which contains 10% or less alcohol 17 by volume consisting of distilled spirits mixed with nonalcoholic 18 beverages or flavoring or coloring materials and which may also 19 contain 1 or more of the following: 20 (a) Water. 21 (b) Fruit juices. 22 (c) Fruit adjuncts. 23 (d) Sugar. 24 (e) Carbon dioxide. 25 (f) Preservatives. 26 (5) "Mixed spirit drink manufacturer" means any person 27 licensed under this act to manufacture mixed spirit drink in this 02244'97 9 1 state and to sell mixed spirit drink to a wholesaler. For 2 purposes of rules promulgated by the commission, a mixed spirit 3 drink manufacturer shall be treated as a wine manufacturer but is 4 subject to the rules applicable to spirits for purposes of manu- 5 facturing and labeling. 6 (6) "Mixed wine drink" means a drink or similar product 7 marketed as a wine cooler and containing less than 7% alcohol by 8 volume, consisting of wine and plain, sparkling, or carbonated 9 water, and containing any 1 or more of the following: 10 (a) Nonalcoholic beverages. 11 (b) Flavoring. 12 (c) Coloring materials. 13 (d) Fruit juices. 14 (e) Fruit adjuncts. 15 (f) Sugar. 16 (g) Carbon dioxide. 17 (h) Preservatives. 18 (7) "Outstate seller of beer" means a person licensed by the 19 commission to sell beer which has not been manufactured in this 20 state to a wholesaler in this state in accordance with rules 21 promulgated by the commission. 22 (8) "Outstate seller of mixed spirit drink" means a person 23 licensed by the commission to sell mixed spirit drink which has 24 not been manufactured in this state to a wholesaler in this state 25 in accordance with rules promulgated by the commission. For pur- 26 poses of rules promulgated by the commission, an outstate seller 27 of mixed spirit drink shall be treated as an outstate seller of 02244'97 10 1 wine but is subject to the rules applicable to spirits for 2 purposes of manufacturing and labeling. 3 (9) "Outstate seller of wine" means a person licensed by the 4 commission to sell wine which has not been manufactured in this 5 state to a wholesaler in this state in accordance with rules 6 promulgated by the commission and to sell sacramental wine as 7 provided in section 301. 8 Sec. 111. (1) "Person" means an individual, firm, partner- 9 ship, limited partnership, association, limited liability com- 10 pany, or corporation. 11 (2) "Primary source of supply" means, in the case of domes- 12 tic spirits, the distiller, producer, owner of the commodity at 13 the time it becomes a marketable product, or bottler, or the 14 exclusive agent of any such person and, in the case of spirits 15 imported into the United States, either the foreign distiller, 16 producer, owner of the bottler, or the prime importer for, or the 17 exclusive agent in the United States of, the foreign distiller, 18 producer, owner, or the bottler. 19 (3) "Professional account" means an account established for 20 a person by a class C licensee or tavern licensee whose major 21 business is the sale of food, by which the licensee extends 22 credit to the person for not more than 30 days. 23 (4) "Residence" means the premises in which a person resides 24 permanently. 25 (5) "Retailer" means a person licensed by the commission who 26 sells to the consumer in accordance with rules promulgated by the 27 commission. 02244'97 11 1 (6) "Sacramental wine" means wine containing not more than 2 24% of alcohol by volume which is used for sacramental purposes. 3 (7) "Sale" includes the exchange, barter, traffic, furnish- 4 ing, or giving away of alcoholic liquor. In the case of a sale 5 in which a shipment or delivery of alcoholic liquor is made by a 6 common or other carrier, the sale of the alcoholic liquor is con- 7 sidered to be made in the county within which the delivery of the 8 alcoholic liquor is made by that carrier to the consignee or his 9 or her agent or employee, and venue for the prosecution for that 10 sale may be in the county or city where the seller resides or 11 from which the shipment is made or at the place of delivery. 12 (8) "School" includes buildings used for school purposes to 13 provide instruction to children in grades kindergarten through 14 12, when that instruction is provided by a public, private, 15 denominational, or parochial school, except those buildings used 16 primarily for adult education or college extension courses. 17 School does not include a proprietary trade or occupational 18 school. 19 (9) "Small wine maker" means a wine maker manufacturing or 20 bottling not more than 50,000 gallons of wine in 1 calendar 21 year. 22 (10) "Special license" means a contract between the commis- 23 sion and the special licensee granting authority to that licensee 24 to sell beer, wine, mixed spirit drink, or spirits. The license 25 shall be granted only to such persons and such organization and 26 for such period of time as the commission shall determine so long 27 as the person or organization is able to demonstrate an existence 02244'97 12 1 separate from an affiliated umbrella organization. If such an 2 existence is demonstrated, the commission shall not deny a spe- 3 cial license solely by the applicant's affiliation with an organ- 4 ization that is also eligible for a special license. 5 (11) "Specially designated distributor" means a person 6 engaged in an established business licensed by the commission to 7 distribute spirits and mixed spirit drink in the original package 8 for the commission for consumption off the premises. 9 (12) "Specially designated merchant" means a person to whom 10 the commission grants a license to sell beer or wine, or both, at 11 retail for consumption off the licensed premises. 12 (13) "Spirits" means a beverage that contains alcohol 13 obtained by distillation, mixed with potable water or other sub- 14 stances, or both, in solution, and includes wine containing an 15 alcoholic content of more than 21% by volume, except sacramental 16 wine and mixed spirit drink. 17 (14) "State liquor store" means a store established by the 18 commission under this act for the sale of spirits in the original 19 package for consumption off the premises. 20 (15) "Supplier of spirits" means a vendor of spirits, a man- 21 ufacturer of spirits, or a primary source of supply. 22 Sec. 113. (1) "Tavern" means any place licensed to sell at 23 retail beer and wine for consumption on the premises only. 24 (2) "Vehicle" means any means of transportation by land, by 25 water, or by air. 26 (3) "Vendor" means a person licensed by the commission to 27 sell alcoholic liquor. 02244'97 13 1 (4) "Vendor of spirits" means a person selling spirits to 2 the commission. 3 (5) "Warehouse" means a premises or place primarily con- 4 structed, used, or provided with facilities for the storage in 5 transit or other temporary storage of perishable goods or for the 6 conduct of a warehousing business, or for both. 7 (6) "Warehouser" means a licensee authorized by the commis- 8 sion to store alcoholic beverages, but prohibited from making 9 sales or deliveries to retailers unless the licensee is also the 10 holder of a wholesaler or manufacturer license issued by the 11 commission. 12 (7) "Wholesaler" means a person who sells beer, wine, or 13 mixed spirit drink only to retailers or other licensees, and who 14 sells sacramental wine as provided in section 301. 15 (8) "Wine" means the product made by the normal alcoholic 16 fermentation of the juice of sound, ripe grapes, or any other 17 fruit with the usual cellar treatment, and containing not more 18 than 21% of alcohol by volume, including fermented fruit juices 19 other than grapes and mixed wine drinks. 20 (9) "Wine maker" means any person licensed by the commission 21 to manufacture wine and sell, at wholesale or retail, wine manu- 22 factured by that person. 23 CHAPTER 2 24 Sec. 201. (1) On and after December 15, 1933, it shall be 25 lawful to manufacture for sale, sell, offer for sale, keep for 26 sale, possess, or transport alcoholic liquor, as defined in this 27 act, including alcoholic liquor used for medicinal, mechanical, 02244'97 14 1 chemical, or scientific purposes and wine used for sacramental 2 purposes, subject to the terms, conditions, limitations, and 3 restrictions contained in this act, and only as provided for in 4 this act. 5 (2) Except as otherwise provided in this act, the commission 6 shall have the sole right, power, and duty to control the alco- 7 holic beverage traffic and traffic in other alcoholic liquor 8 within this state, including the manufacture, importation, pos- 9 session, transportation and sale thereof. 10 (3) A rule, regulation, or order made by the commission 11 shall not unreasonably discriminate against Michigan manufactur- 12 ers of alcoholic liquor. 13 (4) County sheriffs and their deputies; village or township 14 marshals; constables, officers, or members of the village, city, 15 or township police; members of the department of state police; 16 and inspectors of the commission are empowered, and it is their 17 duty, to see that the provisions of this act and the rules and 18 regulations made or authorized by the commission are enforced 19 within their respective jurisdictions. It is their special duty 20 to use their utmost efforts to repress and prevent crime and the 21 violation of any of the provisions of this act. An officer enu- 22 merated in this section who willfully neglects or refuses to per- 23 form the duties imposed upon him or her by this section is guilty 24 of a misdemeanor and upon conviction shall be fined not more than 25 $500.00 or imprisoned for not more than 90 days, or both. 26 Sec. 203. (1) Except as provided in this section and 27 section 301, a sale, delivery, or importation of alcoholic 02244'97 15 1 liquor, including alcoholic liquor for personal use, shall not be 2 made in this state unless the sale, delivery, or importation is 3 made by the commission, the commission's authorized agent or dis- 4 tributor, an authorized distribution agent approved by order of 5 the commission, a person licensed by the commission, or by prior 6 written order of the commission. All spirits for sale, use, 7 storage, or distribution in this state, shall originally be pur- 8 chased by and imported into the state by the commission, or by 9 prior written authority of the commission. This section shall 10 not apply in the case of an alcoholic liquor brought into this 11 state for personal or household use in an amount permitted by 12 federal law by a person of legal age to purchase alcoholic liquor 13 at the time of reentry into this state from without the territo- 14 rial limits of the United States if the person has been outside 15 the territorial limits of the United States for more than 48 16 hours and has not brought alcoholic liquor into the United States 17 during the preceding 30 days. 18 (2) Notwithstanding subsection (1), a person who is of legal 19 age to purchase alcoholic liquor may import from another state 20 for that person's personal use not more than 288 ounces of alco- 21 holic liquor that contains less than 21% alcohol by volume. 22 Sec. 205. (1) If the commission privatizes any portion of 23 the system existing on the effective date of the amendatory act 24 that added this section under which spirits are warehoused or 25 distributed, the commission shall, as provided in section 203(1), 26 by order appoint authorized distribution agents to engage in the 27 warehousing and delivery of spirits in this state so as to ensure 02244'97 16 1 that all retail licensees continue to be properly serviced with 2 spirits. An authorized distribution agent is subject to uniform 3 requirements, including business operating procedures, which the 4 commission may prescribe by rule, subject to this section. 5 (2) A person is eligible for appointment by the commission 6 as an authorized distribution agent if the following circum- 7 stances exist: 8 (a) The person satisfies all applicable commission rules 9 prescribing qualifications for licensure promulgated under sec- 10 tion 215. 11 (b) The person has entered into a written agreement or con- 12 tract with a supplier of spirits for the purposes of warehousing 13 and delivering a brand or brands of spirits of that supplier of 14 spirits. 15 (c) The person has an adequate warehousing facility located 16 in this state for the storing of spirits from which all delivery 17 of spirits to retail licensees shall be made. 18 (3) An authorized distribution agent shall not have a direct 19 or indirect interest in a supplier of spirits or in a retailer. 20 A supplier of spirits or a retailer shall not have a direct or 21 indirect interest in an authorized distribution agent. An autho- 22 rized distribution agent shall not hold title to spirits. After 23 September 24, 1996, an authorized distribution agent or an appli- 24 cant to become an authorized distribution agent who directly or 25 indirectly becomes licensed subsequently as a wholesaler shall 26 not be appointed or authorized to sell or distribute a brand of 27 wine in an area for which a wholesaler has been assigned or 02244'97 17 1 authorized to sell or distribute that brand under an agreement 2 required by this act. A wholesaler who directly or indirectly 3 becomes an authorized distribution agent shall not be appointed 4 or authorized to sell or distribute a brand of wine to a retailer 5 in an area for which another wholesaler has been assigned or 6 authorized to sell or distribute that brand under an agreement 7 required by this act, if the wholesaler was not selling or dis- 8 tributing that brand to retailers in that area on or before 9 September 24, 1996. 10 (4) An authorized distribution agent shall deliver to each 11 retailer located in its assigned distribution area on at least a 12 weekly basis if the order meets the minimum requirements. The 13 minimum requirements shall be set by the commission and shall be 14 a sufficient number of bottles to comprise not more than 2 cases 15 and not less than 1 case. A retailer may pick up the product at 16 the authorized distribution agent's warehouse. To avoid occa- 17 sional emergency outages of spirits, a retail licensee may make 18 up to 12 special emergency orders to an authorized distribution 19 agent per calendar year which order shall be made available to 20 the retail licensee within 18 hours of the placing of the order. 21 A special emergency order placed on Saturday or Sunday shall be 22 made available to the retail licensee before noon on the follow- 23 ing Monday. An authorized distribution agent may impose a fee of 24 up to $20.00 to deliver a special emergency order to a retail 25 licensee. 26 (5) Except as otherwise provided in subsection (4), an 27 authorized distribution agent shall not charge a delivery fee or 02244'97 18 1 a split-case fee for delivery of spirits sold by the commission 2 to a retailer. 3 (6) An authorized distribution agent or prospective autho- 4 rized distribution agent shall maintain and make available to the 5 commission or its representatives, upon notice, any contract or 6 written agreement it may have with a supplier of spirits or other 7 authorized distribution agent for the warehousing and delivery of 8 spirits in this state. 9 (7) For any violation of this act, rules promulgated under 10 this act, or the terms of an order appointing an authorized dis- 11 tribution agent, an authorized distribution agent shall be 12 subject to the suspension, revocation, forfeiture, and penalty 13 provisions of sections 903(1) and 907 in the same manner in which 14 a licensee would be subject to those provisions. An authorized 15 distribution agent aggrieved by a penalty imposed by the commis- 16 sion may invoke the hearing and appeal procedures of section 17 903(2) and rules promulgated under that section. 18 (8) A specially designated distributor may sell to an 19 on-premises licensee up to 9 liters of spirits during any 1-month 20 period and an on-premises licensee may purchase up to that amount 21 during any 1-month period. Notwithstanding any other provision 22 of this act or rule promulgated under this act, a specially des- 23 ignated distributor is only liable for knowingly violating this 24 section. Records verifying these purchases shall be maintained 25 by the on-premises licensee and be available to the commission 26 upon request. 02244'97 19 1 (9) An authorized distribution agent shall demonstrate that 2 it has made a good faith effort to provide employment to those 3 former state employees who were terminated due to the privatiza- 4 tion of the liquor distribution system. A good faith effort is 5 demonstrated by the authorized distribution agent performing at 6 least the following actions: 7 (a) Seeking from the commission a list of names and resumes 8 of all such former state employees who have indicated a desire 9 for continued employment in the distribution of liquor in 10 Michigan. 11 (b) Providing a list of employment opportunities created by 12 the authorized distribution agent in the distribution of liquor 13 in Michigan to each individual whose name and resume is transmit- 14 ted from the commission. 15 (c) Providing an opportunity for application and interview 16 to any terminated state worker who indicates an interest in pur- 17 suing a job opportunity with the authorized distribution agent. 18 (d) Providing a priority in hiring for those individuals who 19 apply and interview under this process. 20 (10) Any former state employees terminated due to privatiza- 21 tion who have reason to believe that an authorized distribution 22 agent has not made a good faith effort to provide him or her with 23 employment opportunities as described in subsection (9) may file 24 a complaint with the commission who shall hear the complaint and 25 make a determination on its validity. If the commission deter- 26 mines that the complaint is valid, the violation may be treated 27 as a violation of this act and the authorized distribution agent 02244'97 20 1 may be subject to the suspension, revocation, forfeiture, and 2 penalty provisions of sections 903(1) and 907. 3 (11) In addition to paying a vendor of spirits the acquisi- 4 tion price for purchasing spirits, the commission may pay a 5 vendor of spirits an additional amount of not less than $4.50 and 6 not more than $7.50 for each case of spirits purchased as an 7 offset to the costs being incurred by that vendor of spirits in 8 contracting with an authorized distribution agent for the ware- 9 housing and delivery of spirits to retailers. The payment 10 described in this subsection shall not be included in the cost of 11 purchasing spirits by the commission and shall not be subject to 12 the commission's markup, special taxes, or state sales tax. The 13 per-case offset established by this subsection may be increased 14 by the state administrative board each January to reflect reason- 15 able increases in the authorized distribution agent's cost of 16 warehousing and delivery. As used in this subsection, "case" 17 means a container holding twelve 750 ml bottles of spirits or 18 other containers containing spirits which are standard to the 19 industry. 20 Sec. 207. The provisions of this act shall not be construed 21 to prevent the manufacture of cider from fruit, for the purpose 22 of making vinegar, and non-intoxicating cider and fruit juice for 23 use and sale, and cider and fruit juice shall be deemed 24 non-intoxicating within the meaning of this act when used and/or 25 sold within 30 days after the manufacture thereof; and this act 26 shall not apply to wine or cider of any alcoholic content made on 27 the premises by the owner or lessee of such premises provided 02244'97 21 1 such premises are used and occupied by such owner or lessee as a 2 dwelling and such wine or cider is made for family use and home 3 consumption; or to prevent the sale or gift, or keeping and stor- 4 ing for sale by druggists and general merchants and others of any 5 of the medicinal preparations manufactured in accordance with the 6 formulas prescribed by the United States pharmacopoeia and 7 national formulary, patent or proprietary preparations, and other 8 bona fide medicinal and technical preparations, which contain no 9 more alcohol than is necessary to extract the medicinal proper- 10 ties of the drugs contained in such preparations; and no more 11 alcohol than is necessary to hold the medicinal agents in solu- 12 tion and to preserve the same, which are manufactured and sold as 13 medicine and not as beverages, are unfit for use for beverage 14 purposes, and the sale of which does not now require the payment 15 of a United States liquor dealer's tax; or to prevent the manu- 16 facture and sale of tinctures or of toilet, medicinal and anti- 17 septic preparations and solutions not intended for internal human 18 use nor to be sold as beverages, and which are unfit for beverage 19 purposes, and upon the outside of each bottle, box or package of 20 which is printed in the English language, conspicuously and legi- 21 bly, the quantity by volume of alcohol in such preparations; or 22 to prevent the manufacture and keeping for sale of the food pro- 23 duct known as flavoring extracts which shall be so manufactured 24 and sold for cooking, culinary or flavoring purposes, and are 25 unfit for use as a beverage or for beverage purposes: Provided, 26 That it shall not be lawful to manufacture or sell any toilet, 27 medicinal or antiseptic preparations or solutions, or any 02244'97 22 1 flavoring extracts or patent or proprietary medicines or 2 preparations, the manufacture and sale of which now requires the 3 payment of a United States liquor dealer's tax, except as herein 4 provided: Provided further, That nothing in this act shall apply 5 to the manufacture and/or sale of ethyl, mechanical or industrial 6 alcohol, not used for or made unfit for beverage purposes: And 7 provided further, That this act shall not apply to the purchase 8 of alcoholic liquor as defined in this act, for use in the manu- 9 facture of toilet, medicinal or antiseptic preparations or solu- 10 tions, or any flavoring extract or patent or proprietary medi- 11 cines or preparations, by a manufacturer using such alcoholic 12 liquor exclusively for such manufacturing purposes and duly 13 licensed therefor by the commission; said license to expire on 14 May first following the date of issuance, issued on the payment 15 of an annual fee of $10.00 and the furnishing of such bond or 16 bonds as the commission may require running to the people of the 17 state of Michigan, for the faithful performance of the conditions 18 of the license and compliance with the provisions of this act. 19 Sec. 209. (1) A commission to be known as the liquor con- 20 trol commission is created. 21 (2) The commission shall consist of 5 members, not more than 22 3 of whom shall be members of the same political party, to be 23 appointed by the governor with the advice and consent of the 24 senate. Two of these members, 1 from each political party, shall 25 be designated by the chairperson as hearing commissioners to hear 26 violation cases and to perform such other functions and duties as 27 are assigned to them by the chairperson. The remaining 3 02244'97 23 1 commissioners shall be designated as administrative commissioners 2 and shall have the responsibility for administering the provi- 3 sions of this act relating to licensing, purchasing, enforcement, 4 merchandising, and distribution. The administrative commission- 5 ers shall also act as an appeal board to the decisions rendered 6 by the hearing commissioners. 7 (3) The responsibilities of the 5-member commission shall be 8 the administration of the provisions of this act that have not 9 been specifically delegated to either the hearing commissioners 10 or the administrative commissioners in this section. 11 (4) Each member of the commission shall devote that member's 12 entire time to the performance of the duties of that office. 13 (5) The terms of the commissioners shall be 4 years each. 14 Each member of the commission shall qualify by taking and filing 15 the constitutional oath of office and shall hold office until the 16 appointment and qualification of a successor. The members of the 17 commission shall not be removed from office by the governor 18 except for malfeasance, misfeasance, or neglect in office. 19 (6) In the event of a vacancy or vacancies in the membership 20 of the commission the governor shall appoint in like manner a 21 successor or successors to fill the unexpired term. 22 (7) A quorum for the transaction of business of the adminis- 23 trative commissioners shall consist of 2 administrative 24 commissioners. A quorum for the transaction of business of the 25 5-member commission shall be 3 members. 26 (8) Each member of the commission shall receive an annual 27 salary as appropriated by the legislature, shall be entitled to 02244'97 24 1 actual and necessary expenses while on the business of the 2 commission, and shall have a work station designated by the 3 chairperson. 4 (9) The commission shall annually designate 1 of its members 5 to act as chairperson of the commission. 6 Sec. 211. (1) The powers of the commission, enumerated in 7 this act, which are not specifically and exclusively reserved to 8 the commission by the act, shall be vested in, and exercised and 9 administered by a liquor control business manager, who shall be 10 selected by and responsible to the commission, and whose position 11 shall be in the state classified civil service. The powers of 12 the commission enumerated in, and provided for by this act, shall 13 be exercised in conformity with the provisions of the act per- 14 taining to the duties of the liquor control manager, except that 15 the commission shall exclusively exercise the power to make rules 16 and regulations under the act to regulate the control of the 17 alcoholic beverage traffic within the state; to hear and decide 18 all cases of violation of the provisions of the act and regula- 19 tions thereunder; to employ a liquor control business manager as 20 provided for by the act; and to hear and decide all public 21 appeals from the administrative decisions of the liquor control 22 business manager. 23 (2) The liquor control business manager shall be and shall 24 serve as the business manager of the commission, and, as such, it 25 shall be his or her duty and responsibility to manage the busi- 26 ness affairs of the commission relative to purchasing, 27 merchandising, warehousing, rationing, distributing, inspecting, 02244'97 25 1 investigating, licensing, and accounting, in accordance with 2 policies established by the commission and in compliance with the 3 provisions of this act and with the rules and regulations adopted 4 thereunder. In addition to the foregoing, the business manager 5 shall be exclusively responsible for the assigning, training, and 6 supervision of all commission classified employees. 7 Sec. 213. (1) The commission may employ assistants, clerks, 8 stenographers, employees, and experts as it considers necessary, 9 and fix their compensation, and incur such other expenses as are 10 necessary to carry out the provisions of this act, subject to 11 appropriations provided by the legislature. Assistants and 12 employees of the commission are entitled to actual and necessary 13 travel and other expenses while on the business of the commis- 14 sion, if those expenses are authorized and approved by the 15 commission. 16 (2) The commission shall secure from all members and employ- 17 ees of the commission who handle money a bond or bonds executed 18 by any surety company or companies authorized to do business in 19 this state or, in the discretion of the commission, by approved 20 personal surety adequate to guarantee to the state the proper 21 handling and accounting of that money. 22 Sec. 215. (1) The commission shall adopt rules and regula- 23 tions governing the carrying out of this act and the duties and 24 responsibilities of licensees in the proper conduct and manage- 25 ment of their licensed places. Rules shall be promulgated under 26 the administrative procedures act of 1969, 1969 PA 306, MCL 27 24.201 to 24.328. 02244'97 26 1 (2) The commission shall hold public hearings twice each 2 calendar year for the purpose of hearing complaints and receiving 3 the views of the public with respect to the administration of 4 this act. 5 (3) The hearings shall be kept and transcribed as a part of 6 the records of the commission. 7 Sec. 217. (1) The commission may make investigations that 8 it considers proper in the administration of this act and the 9 rules promulgated under this act concerning alcoholic liquor, or 10 the manufacture, distribution, or sale of alcoholic liquor, or 11 the collection of taxes on alcoholic liquor. 12 (2) A licensee shall make the licensed premises available 13 for inspection and search by a commission investigator or law 14 enforcement officer empowered to enforce the commission's rules 15 and this act during regular business hours or when the licensed 16 premises are occupied by the licensee or a clerk, servant, agent, 17 or employee of the licensee. Evidence of a violation of this act 18 or rules promulgated under this act discovered under this subsec- 19 tion may be seized and used in an administrative or court 20 proceeding. 21 (3) The commission or a duly authorized agent of the commis- 22 sion may examine or copy the books, records, or papers of a 23 person relative to a requirement pertaining to this act access to 24 which has been obtained pursuant to this section. 25 (4) A member of the commission or a duly authorized agent of 26 the commission may issue a subpoena requiring a person to appear 27 before the commission or its duly authorized agent at any 02244'97 27 1 reasonable time and place, to be examined with reference to any 2 matter within the scope of the inquiry or investigation being 3 conducted by the commission, and to produce any books, records, 4 or papers pertaining to the question involved. 5 (5) A member of the commission or a duly authorized agent of 6 the commission may administer an oath or affirmation to a witness 7 in any matter before the commission, certify to official acts, 8 and take depositions. 9 (6) In case of disobedience of a subpoena, the commission or 10 its duly authorized agent may invoke the aid of any circuit court 11 of the state to compel the attendance and testimony of witnesses 12 and the production of books, records, and papers pertaining to 13 the question involved. A circuit court of this state within the 14 jurisdiction of which the inquiry is conducted may, in case of 15 contumacy or refusal to obey a subpoena, issue an order requiring 16 the person to appear before the commission or its duly authorized 17 agent, to produce books, records, and papers if so ordered, and 18 to give evidence regarding the matter in question. Failure to 19 obey the order of the court may be punished by the court as a 20 contempt of court. 21 (7) The fees of witnesses required to appear before the com- 22 mission shall be the same as those allowed to witnesses in the 23 circuit courts and shall be paid by the commission. 24 (8) A sheriff's department or police department shall, upon 25 request of the commission, cause to be served a subpoena that is 26 directed to a person located within the jurisdiction of the 27 sheriff's department or police department. A fee shall not be 02244'97 28 1 charged for this service by the sheriff's department or police 2 department. Subpoenas may also be served by an investigator of 3 the commission. 4 (9) The commission shall adopt a suitable seal, of which all 5 courts of the state shall take judicial notice, and all proceed- 6 ings, orders, licenses, and official acts of the commission shall 7 be authenticated by that seal. Certified copies of the orders 8 and records of the commission shall be prima facie evidence of 9 the acts of the commission in any court of this state. 10 Sec. 219. The commission shall be authorized to establish 11 throughout the state of Michigan 4 branch offices. The expense 12 of the branch offices shall be paid by the commission in the 13 manner provided in this act. 14 Sec. 221. (1) The commission is authorized to maintain a 15 revolving fund, which fund is to be derived from the money depos- 16 ited to the credit of the commission with the state treasurer. 17 From time to time, amounts shall be transferred from the revolv- 18 ing fund to the general fund in accordance with 1941 PA 259, MCL 19 21.121 to 21.130. The fund provided for in this section is to be 20 exclusively used for replenishing, maintaining, warehousing, and 21 transporting the liquor stock into the various state liquor 22 stores throughout the state. A monthly report of the fund shall 23 be made to the state treasurer and to the budget director and 24 shall contain an itemized account of all money received and all 25 expenditures made by the commission during the month covered in 26 the report. 02244'97 29 1 (2) All money received by the commission under this act 2 shall be turned over monthly to the state treasurer. 3 (3) All money deposited by the commission with the state 4 treasurer shall be credited to the general fund and shall be 5 available for the purposes for which the general fund is 6 available. 7 Sec. 223. A member or employee of the commission shall not 8 be pecuniarily interested, directly or indirectly, in the manu- 9 facture, warehousing, sale, distribution or transportation, or 10 selling or furnishing of any equipment, furnishings, or refriger- 11 ation used in the manufacture or sale of alcoholic liquor within 12 this state. 13 Sec. 225. The commission or a member of the commission 14 shall not be personally liable for any action at law for damages 15 sustained by a person because of an action performed or done by 16 the commission or a member of the commission in the performance 17 of their respective duties in the administration and implementa- 18 tion of this act. 19 Sec. 227. The commission may establish state liquor stores 20 throughout this state. In counties with a population of less 21 than 40,000 according to the most recent federal census, there 22 shall not be more than 1 store in that county, and in counties 23 with a population of 40,000 or more according to the most recent 24 federal census, there shall not be more than 1 store located in 25 that county for each 40,000 population or major fraction thereof 26 according to the most recent federal census. However, the 27 commission may in its discretion establish a state liquor store 02244'97 30 1 in any village or city with a population of 3,000 or more 2 according to the most recent federal census. 3 Sec. 229. The commission may license a hotel or merchant, 4 in places that the commission may designate, to sell spirits for 5 consumption off the premises. If alcoholic liquor is sold by a 6 specially designated distributor pursuant to a license issued 7 under this section it shall be sold at a price fixed by the com- 8 mission and pursuant to rules promulgated by the commission. 9 Sec. 231. The commission may buy, possess, and sell in its 10 own name all alcoholic liquor for distribution as provided in 11 sections 227 and 229. The commission shall supply such types of 12 alcoholic liquor as are demanded by the public. However, if a 13 brand so demanded is not manufactured within the United States or 14 is not readily obtainable within the United States, then an order 15 for that brand shall be filled by the commission at the entire 16 expense of the person placing that order, plus not less than 46% 17 gross profit, subject to any discounts provided for in section 18 233. The commission may lease or occupy any building or land 19 required for its operation, and may purchase any warehouse 20 required for its operation, subject to the approval of the state 21 administrative board. 22 Sec. 233. (1) The commission shall establish uniform prices 23 for the sale of alcoholic liquor in state liquor stores and by 24 specially designated distributors. The prices shall return a 25 gross profit to the commission of not less than 51% and not 26 greater than 65%. If alcoholic liquor purchased by the 27 commission has not met sales standards established by the 02244'97 31 1 commission for a period of 6 months, the commission may sell the 2 alcoholic liquor at a price to be approved by the state adminis- 3 trative board. 4 (2) Notwithstanding subsection (1), the commission may 5 establish by rule prices for the sale of alcoholic liquor to hos- 6 pitals, charitable institutions, and military establishments 7 located in this state. 8 (3) There shall be allowed a discount of 17% deducted from 9 the sale price established by the commission on the sale of alco- 10 holic liquor made by the state liquor stores to specially desig- 11 nated distributors and establishments licensed to sell for con- 12 sumption on the premises. 13 CHAPTER 3 14 Sec. 301. (1) The commission shall levy and collect on all 15 wines containing 16% or less of alcohol by volume sold in this 16 state a tax at the rate of 13.5 cents per liter if sold in bulk 17 and in a like ratio if sold in smaller quantities. 18 (2) The commission shall levy and collect on all wines con- 19 taining more than 16% of alcohol by volume sold in this state a 20 tax at the rate of 20 cents per liter if sold in bulk and in a 21 like ratio if sold in smaller quantities. 22 (3) All sacramental wines are nontaxable when used by 23 churches. Sacramental wines may be imported. The commission 24 shall not impose restrictions on importations of wine for sacra- 25 mental purposes but may promulgate rules as will prevent any 26 abuses which result from the importations. A wholesaler or an 02244'97 32 1 outstate seller of wine may sell sacramental wine directly to a 2 church for sacramental purposes. 3 (4) The commission shall levy and collect on all mixed 4 spirit drink sold in this state a tax at the rate of 48 cents per 5 liter if sold in bulk or a like ratio if sold in smaller 6 quantities. 7 (5) On approval by the commission, the corporation and 8 securities bureau shall incorporate a limited number of farm 9 mutual cooperative wineries as the commission determines to be 10 beneficial to the Michigan grape and fruit industry. These win- 11 eries shall be licensed under this act and the payment of 1 12 license fee annually by the corporation shall authorize wine 13 making on the premises of the corporation and also on the 14 premises of the grape and fruit growing farmers who are members 15 of or stockholders in the corporation. Upon incorporation of a 16 farmers' cooperative corporation as provided for in this section, 17 the members of or the stockholders in the corporation shall be 18 certified to be Michigan grape and fruit growing farmers. Wine 19 making by cooperative corporations on farm premises is allowed, 20 but all sales of the wine shall be made by the corporation and 21 from the corporation premises. 22 Sec. 303. (1) The grape and wine industry council is cre- 23 ated in the department of agriculture. The council shall consist 24 of all of the following: 25 (a) Three wine makers. 26 (b) A wine grape grower. 02244'97 33 1 (c) The director of commerce or his or her designee. 2 (d) The director of the department of agriculture or his or 3 her designee. 4 (e) A staff member of Michigan state university appointed 5 by, and serving at the pleasure of, the dean of the college of 6 agriculture and natural resources of Michigan state university. 7 (f) The chairperson of the commission or his or her desig- 8 nee, as an ex officio member. 9 (g) A person who operates a retail food establishment that 10 holds a specially designated merchant license and sells Michigan 11 wines or a person who operates a restaurant that holds a class C 12 license and serves Michigan wines. 13 (h) A beer and wine wholesaler who markets Michigan wine. 14 (i) Not more than 2 additional members appointed as pre- 15 scribed in subsection (3). 16 (2) The members of the council described in subsection 17 (1)(a), (b), (g), and (h) shall be appointed by the governor. 18 The council members appointed under subsection (1)(g) and (h) 19 shall be appointed for 2-year terms beginning on October 1, 20 1991. Of the council members appointed for terms beginning 21 October 1, 1991, 1 shall be appointed for a 1-year term, and 3 22 shall be appointed for terms of 2 years each. All appointments 23 for terms beginning on or after October 1, 1992 shall be for 2 24 years each. A member shall continue to serve until a qualified 25 successor has been appointed. A member shall not serve more than 26 2 consecutive terms. A vacancy on the board shall be filled in 27 the same manner as the original appointment. The director of the 02244'97 34 1 department of agriculture shall act as chairperson of the 2 council. 3 (3) The governor may appoint not more than 2 additional mem- 4 bers to the council who shall assist the council in performing 5 its duties, but who shall not have the power to vote. The per- 6 sons appointed under this subsection shall not be members of the 7 classified state civil service, shall serve at the pleasure of 8 the governor, and shall receive salaries and benefits determined 9 and paid by the department of agriculture. 10 (4) The council may employ personnel and incur such expenses 11 as are necessary to carry out the purposes of the council under 12 this act. All such expenses shall be paid from fees credited to 13 the wine industry council under section 543(2). A member of the 14 council or an employee or agent of the council shall not be per- 15 sonally liable on the contracts of the council. 16 (5) A nongovernmental member of the council shall receive 17 $50.00 per day for each day spent in actual attendance at meet- 18 ings of the council and traveling expenses while on council busi- 19 ness in accordance with standard travel regulations of the 20 department of management and budget. 21 (6) The council shall maintain accurate books and records, 22 and all funds received by the council shall be used to implement 23 and enforce this section. 24 (7) The council shall do all of the following: 25 (a) Provide for research on wine grapes and wines, includ- 26 ing, but not limited to, methods of planting, growing, 27 controlling insects and diseases, charting microclimates and 02244'97 35 1 locations for growing desirable varieties of wine grapes, 2 marketing, processing, distribution, advertising, sales produc- 3 tion, and product development. 4 (b) Provide the wine industry, including growers, wineries, 5 distributors, and retailers, with information relative to proper 6 methods of handling and selling wine grapes and wines. 7 (c) Provide for market surveys and analyses for purposes of 8 expanding existing markets and creating new and larger markets 9 for wine grapes and wines. 10 (d) Provide for the promotion of the sale of Michigan wine 11 grapes and wines for the purpose of maintaining or expanding 12 present markets and creating new and larger domestic and foreign 13 markets. 14 (e) Develop and administer financial aid programs to wine 15 grape growers to encourage the increased planting in this state 16 of desirable grape varieties in microclimates determined to pro- 17 vide the best conditions for producing quality wines. 18 (8) The council may promulgate rules pursuant to the admin- 19 istrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 20 24.328, for the purposes of implementing and enforcing this 21 section. However, a rule shall not be promulgated that conflicts 22 with a rule promulgated by the commission pursuant to 23 section 215. 24 (9) As used in this section, "council" means the grape and 25 wine industry council created in subsection (1). 26 Sec. 305. (1) The purpose of this section is to provide a 27 structure for the business relations between a wholesaler of wine 02244'97 36 1 and a supplier of wine. Regulation in this area is considered 2 necessary for the following reasons: 3 (a) To maintain stability and healthy competition in the 4 wine industry in this state. 5 (b) To promote and maintain a sound, stable, and viable 6 3-tier distribution system of wine to the public. 7 (c) To recognize the marketing distinctions between beer and 8 wine. 9 (d) To promote the public health, safety, and welfare. 10 (2) As used in this section, unless the context requires 11 otherwise: 12 (a) "Agreement" means any agreement between a wholesaler and 13 a supplier, whether oral or written, whereby a wholesaler is 14 granted the right to offer and sell a brand or brands of wine 15 sold by a supplier. 16 (b) "Ancillary business" means a business owned by a whole- 17 saler, a stockholder of a wholesaler, or a partner of a whole- 18 saler the primary purpose of which is directly related to the 19 transporting, storing, or marketing of the brand or brands of 20 wine of a supplier with whom the wholesaler has an agreement; or 21 a business owned by a wholesaler, a stockholder of a wholesaler, 22 or a partner of a wholesaler which recycles empty returnable bev- 23 erage containers. 24 (c) "Designated member" means the spouse, child, grandchild, 25 parent, brother, or sister of a deceased individual who owned an 26 interest in a wholesaler, who is entitled to inherit the deceased 27 individual's ownership interest in the wholesaler under the terms 02244'97 37 1 of the deceased individual's will, or who has otherwise been 2 designated in writing by the deceased individual to succeed the 3 deceased individual in the wholesaler's business, or is entitled 4 to inherit such ownership interest under the laws of intestate 5 succession of this state. With respect to an incapacitated indi- 6 vidual owning an ownership interest in a wholesaler, the term 7 means the person appointed by a court as the conservator of such 8 individual's property. The term also includes the appointed and 9 qualified personal representative and the testamentary trustee of 10 a deceased individual owning an ownership interest in a 11 wholesaler. 12 (d) "Good faith" means honesty in fact and the observance of 13 reasonable commercial standards of fair dealing in the trade, as 14 defined and interpreted under section 2103 of the uniform commer- 15 cial code, 1962 PA 174, MCL 440.2103. 16 (e) "Master distributor" means a wholesaler who acts in the 17 same or similar capacity as a wine maker or an outstate seller of 18 wine for a brand or brands of wine to other wholesalers on a reg- 19 ular basis in the normal course of business. 20 (f) "Reasonable qualifications" means the average standard 21 of the criteria used by the respective supplier for wholesalers 22 that entered into or renewed an agreement with the suppliers 23 during a period of 24 months prior to the proposed transfer of 24