Massachusetts beer brewers and distributors are battling on Beacon Hill over how to update an unusual law that locks brewers into what are essentially lifetime contracts with their distributors.

“We’re just asking for a level playing field with those businesses,” said Rob Burns, president of the Massachusetts Brewers’ Guild and cofounder of Night Shift Brewing in Everett.

Distributors buy beer wholesale from the brewers, then sell it to individual stores and bars.

Massachusetts’ franchise laws, which are unique to the beer industry, create permanent contracts between beer brewers and beer distributors.

The franchise law says once a brewer has sold to a particular distributor for six months, the brewer can only terminate that relationship for “good cause,” which is difficult to prove and can take years of litigation.

Craft brewers have long said this law hurts their businesses, because if a craft brewer is not happy with how a distributor is marketing their product, the brewer is not free to find a new distributor.

But beer distributors say if they put time and effort into building up a new brand of beer, it is not fair for that brewer to pick up and leave once the beer starts selling.

The brewers and distributors have been fighting over legislation since 2011, and efforts to reach a compromise have failed.

Competing proposals

This year, competing bills are again up for consideration. The Joint Committee on Consumer Protection and Professional Licensure held a hearing on the bills Monday.

The Beer Distributors of Massachusetts are pushing for legislation introduced by Sen. Marc Pacheco, D-Taunton, and Rep. John Mahoney, D-Worcester, H.3549/S.178.

These bills would allow breweries who manufacture less than 100,000 barrels of beer a year to switch distributors. The brewery would have to give 90 days’ notice and pay the fair market value for its inventory.

The distributors say 99% of Massachusetts brewers make less than 100,000 barrels of beer (around 1.4 million cases), and all but two of the state’s brewers would be allowed to switch distributors under the bill.

The Massachusetts Brewers’ Guild is backing a bill introduced by Rep. Alice Peisch, D-Wellesley, and Sen. Joseph Boncore, D-Winthrop, H.327/S.104.

That bill would create a three-tier system in which all brewers that make less than 6 million barrels of beer (around 82 million cases) would be allowed to terminate their contracts.

The largest tier — which currently would encompass only Boston Beer Company, which makes Sam Adams and distributes 4.5 million barrels annually — would have the strictest requirements for notification and payments. The company would have to provide 60 days’ notice and pay 110% of fair market value.

According to Jim Koch, the founder of Boston Beer Company, fair market value has been interpreted by arbitration decisions to be, generally, the amount of profit a distributor would have made on the beer over five to 10 years.

Smaller brewers would have to give less notice and pay less money to switch distributors.

Business challenges

The brewers say today, they are stuck with the same distributor they signed a contract with when the company first started.

“It’s paralyzing to think a decision I make about my business today will stay with me for the life of our operation,” said Maureen Fabry of CraftRoots Brewing in Milford, a small brewer that opened in 2016.

The brewers note that sometimes a distributor switches business models. For example, Koch said he was stuck with a distributor in Georgia for 15 years as that distributor switched from beer distribution to wine and spirit distribution. Koch said he lost around 15% of his potential sales in Georgia because the distributor would no longer sell to convenience stores.

Burns said a bad relationship with a distributor can kill a business, if the distributor does not effectively market a beer.

But distributors say they put a lot of work into building up brands, and they need some security that they will not lose a major contract.

“Building brands is not easy,” said Jamie Salois, vice president of Atlas Distributors, which distributes Sam Adams, Harpoon and other major brands. “It takes a tremendous amount of teamwork, energy, resources and time.”

William Burke, president of Burke Distributors, said his company had to lay off 72 of its 330 employees after Red Bull, an energy drink company not covered by the franchise laws, terminated its contract with Burke Distributors after nearly 20 years.

Burke said without protection from franchise laws, a large manufacturer like Red Bull has too much leverage and can, for example, threaten to leave if the company distributes a drink made by a competitor.

The distributors say their version of the bill allows emerging breweries to switch distributors as their companies grow, while protecting distributors from losing their largest brewers.

But the brewers say their proposed 6 million barrel standard conforms with tax and industry definitions of a craft brewer.

They say the distributors’ bill would put in place a potentially lengthy process where it could take over a year for a contract to be terminated. During that time, a distributor could kill a brand. “You’ll lose draft handles and shelf space because they know you’re going away,” Koch said.

“We’re trying to get it done in less than half a year, and we’re all willing to pay,” Koch said. “It’s not like we’re going to get out scot free.”