BILL ANALYSIS                                                                                                                                                                                                    



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        CONCURRENCE IN SENATE AMENDMENTS
        AB 813 (John A. Perez)
        As Amended  September 10, 2009
        2/3 vote.  Urgency

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        |ASSEMBLY: |     |(May 28, 2009)  |SENATE: |31-3 |(October 14, 2009)   |
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                                 (vote not relevant)


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        |COMMITTEE VOTE:  |13-1 |(October 26, 2009)  |RECOMMENDATION: |Concur    |
        |                 |     |                    |                |          |
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        Original Committee Reference:    G.O.  

        SUMMARY:  Delete the prior version of the bill that made changes to  
        the Gambling Control Act.  Assembly member John A. Perez now  
        authors AB 813.  The bill creates a new tied-house exception to the  
        Alcoholic Beverage Control Act (ABC Act) that authorizes the owner  
        of a venue (Club Nokia) in Los Angeles to engage in a sponsorship  
        agreement with an a beer manufacturer, holder of winegrower's  
        license, California winegrower's agent, distilled spirits  
        manufacturer, holder of a distilled spirits rectifiers general  
        license, or a distilled spirits manufacturer's agent for the  
        privilege of placing advertising in the on-sale licensee's  
        premises.  The bill contains an urgency clause. 

         The Senate amendments  delete the prior version of the bill, and  
        instead:

        1)Authorize a beer manufacturer, holder of a winegrower's license,  
          a California winegrower's agent, a holder of a distilled spirits  
          rectifiers general license, distilled spirits manufacturer, or a  
          distilled spirits manufacturer's agent (these entities will  
          hereafter be referred to as "alcoholic beverage suppliers") to  
          purchase indoor advertising, at Club Nokia in Los Angeles,  
          subject to the following conditions: 

           a)   The indoor advertising is purchased exclusively at the Club  
             Nokia venue;

           b)   The purchase of indoor advertising is conducted pursuant to  








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             a written agreement entered into by the alcoholic beverage  
             supplier and the owner of the Club Nokia venue;

           c)   The agreement shall not be conditioned directly or  
             indirectly, in any way, on the purchase, sale, or distribution  
             of any alcoholic beverage manufactured or distributed by the  
             advertising alcoholic beverage supplier by any on-sale retail  
             licensee; 

           d)   The on-sale retail licensee operating at Club Nokia must  
             serve other brands of beer, wine, or distilled spirits  
             distributed by competing beer, wine or distilled spirits  
             wholesalers in addition to the brands manufactured or marketed  
             by the advertising beer, wine or distilled spirits  
             manufacturer, or a holder of a distilled spirits rectifiers  
             general license; and,

           e)   No more than 15% of the retail licensee's purchases of  
             distilled spirits and wine for sale on its licensed premises  
             shall be manufactured, produced, or distributed by the holder  
             of a winegrower's license, California winegrower's agent,  
             distilled spirits manufacturer, holder of a distilled spirits  
             rectifiers general license, or a distilled spirits  
             manufacturer's agent that has purchased indoor advertising  
             space.

        1)Require the Department of Alcoholic Beverage Control (ABC) to  
          prepare, as part of its annual legislative report, a listing of  
          the number of certifications made pursuant to this bill or the  
          absence of any certifications.  Where there have been no  
          certifications for two consecutive years, that information shall  
          be included in the report. 

        2)Make it a misdemeanor (punishable by imprisonment or by a fine)  
          for an alcoholic beverage supplier to coerce or induce, directly  
          or indirectly, a licensed wholesaler to fulfill the contractual  
          obligations entered into pursuant to the above provisions.  The  
          wholesaler (licensee) would also be subject to license  
          revocation.

        3)Make it a misdemeanor (punishable by imprisonment or by a fine)  
          for the on-sale retail licensee to solicit or coerce, directly or  
          indirectly, an alcoholic beverage supplier to purchase indoor  
          advertising.  The on-sale licensee would also be subject to  
          license revocation.








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        4)Contain "boiler plate" language (legislative findings and  
          declarations) relative to the necessity of requiring a separation  
          among manufacturing interests, wholesale interests and retail  
          interests.

        5)Add an urgency clause, allowing this bill to take effect  
          immediately upon enactment.

         EXISTING LAW  :

        1)Establishes the ABC and grants it exclusive authority to  
          administer the provisions of the ABC Act in accordance with laws  
          enacted by the Legislature.  This involves licensing individuals  
          and businesses associated with the        manufacture,  
          importation and sale of alcoholic beverages in this state and the  
          collection of license fees or occupation taxes for this purpose.

        2)States that the "Tied-house" Law or "three-tier" system separates  
          the alcoholic beverage industry into three component parts of  
          manufacturer (first tier), wholesaler (second tier), and retailer  
          (third tier). The original policy rationale for this body of law  
          was to prohibit the vertical integration of the alcohol industry  
          and to protect the public from predatory marketing practices. 

        3)Prohibits, in general, an alcohol manufacturer, wholesaler, or  
          any officer, director, or agent of any such person from owning,  
          directly, or indirectly, any interest in any on-sale license, or  
          from providing anything of value to retailers, be it free goods,  
          services, or advertising (Tied-House Law). 

        4)Allows an alcohol manufacturer, winegrower's agent, holder of an  
          importer's general license, distilled spirits manufacturer's  
          agent, distilled spirits rectifiers general license to sponsor  
          events promoted by, and may purchase advertising space and time  
          from, or on behalf of, a live entertainment marketing company, as  
          specified.

        5)Defines an "On-Sale" license as authorizing the sale of all types  
          of alcoholic beverages namely, beer, wine and distilled spirits,  
          for consumption on the premises (such as at a restaurant or bar).

         AS PASSED BY THE ASSEMBLY  , this bill amended the Gambling Control  
        Act to require the Department of Justice (DOJ) to examine documents  
        requested in a routine audit at a gambling establishment between  








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        the normal business hours of 8 A.M. to 6 P.M. within a five-day  
        workweek schedule.

         FISCAL EFFECT  :  According to the Senate Appropriations Committee,  
        pursuant to Senate Rule 28.8, negligible state costs.

         COMMENTS  :  This bill was substantially amended in the Senate and  
        the Assembly-approved provisions of this bill were deleted.  This  
        bill, as amended in the Senate is inconsistent with the Assembly  
        actions.  
         
        Background  .  As noted above, the ABC Act prohibits an alcoholic  
        beverage manufacturer, importer or wholesaler (alcoholic beverage  
        supplier), or any officer, director or agent of an alcoholic  
        beverage supplier, from giving any money or other thing of value,  
        directly or indirectly, to any on-sale retail licensee.    
        Historically, this prohibition has not applied where the owner of a  
        venue is not the alcoholic beverage licensee.

        The position of ABC on this issue has recently changed as a result  
        of Business and Professions Code Section 25503(h) and a holding in  
        Schieffelin & Somerset.  ABC's position is that an alcoholic  
        beverage supplier cannot pay anyone, even an unrelated third party,  
        for the privilege of placing an advertisement in on-sale retail  
        premises, even if that payment does not amount to a payment or  
        thing of value paid to or received by the alcoholic beverage  
        licensee.

        According to the author's office, the position of ABC has  
        prohibited the Anschutz Entertainment Group (AEG) from engaging in  
        a sponsorship agreement with Club Nokia at LA Live in Los Angeles.   


        AEG, a wholly owned subsidiary of the Anschutz Company, controls a  
        collection of companies worldwide, including sports franchises and  
        facilities such as the Staples Center in Los Angeles and the Home  
        Depot Center in Carson, California.  Club Nokia is a fully enclosed  
        venue, which          accommodates over 2,000 guests with box  
        office sales and attendance by the public on a ticketed basis.   
        Club Nokia is located in Los Angeles County within the area subject  
        to the Los Angeles Sports and Entertainment District Specific Plan  
        adopted by the City of Los Angeles pursuant to an ordinance  
        approved on September 6, 2001.

        AEG and its subsidiaries constructed Club Nokia and are responsible  








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        for the booking and presentation of events at the venue.  AEG has  
        contracted out the food and beverage operation to Wolfgang Puck who  
        is the alcoholic beverage licensee at the venue (Club Nokia).

        This bill creates a new tied-house exception in the ABC Act  
        applicable to AEG, the venue owner, and not the on-sale retail  
        licensee (Wolfgang Puck), thus enabling AEG to enter into a  
        contractual agreement with an alcoholic beverage supplier  
        interested in purchasing indoor advertising space at Club Nokia.   
        This bill, among other things, requires the on-sale licensee to  
        serve other brands of beer, wine, and distilled spirits distributed  
        by a competing beer, wine or distilled spirits wholesaler in  
        addition to the brands manufactured or marketed by the advertising  
        beer, wine or distilled spirits manufacturer.

        This bill states that no more than 15% of the retail licensee's  
        purchases of distilled spirits and wine for sale on its licensed  
        premises shall be manufactured, produced, or distributed by the  
        holder of a winegrower's license, California winegrower's agent,  
        distilled spirits manufacturer, holder of a distilled spirits  
        rectifiers general license, or a distilled spirits manufacturer's  
        agent that has purchased indoor advertising space.

        ABC will be required to include in its annual report to the  
        Legislature a listing of the number of certifications made pursuant  
        to this new body of law or the absence of any certifications.  If  
        no certifications have been made for two consecutive years, ABC  
        must also make a notation of this in its annual report to the  
        Legislature.  

         In opposition  :  Family Winemakers of California opposes AB 813.  It  
        argues that, "Our opposition is based on the inclusion of a 15%  
        limitation on alcoholic beverage purchases except for beer.  
        Traditional tied-house advertising exemptions do not include a  
        limitation, nor do they exclude specific beverages from statutory  
        requirements."  Advertising exemptions often contain provisions  
        that balance the competitive forces in the marketplace, such as  
        requiring the on sale retailer to offer competing brands. The 15%  
        limitation of purchases by the retailer during the period of the  
        advertising partnership between a supplier and AEG goes well beyond  
        the traditional requirement to offer competing brands of beer, wine  
        or spirits. 

         
          Analysis Prepared by  :    Eric Johnson / G. O. / (916) 319-2531








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