BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1798|
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CONSENT
Bill No: AB 1798
Author: Evans (D)
Amended: 4/5/10 in Assembly
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE : 9-0, 6/22/10
AYES: Wright, Harman, Calderon, Denham, Florez, Negrete
McLeod, Padilla, Price, Yee
NO VOTE RECORDED: Oropeza, Wyland
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 76-0, 5/13/10 (Consent) - See last page
for vote
SUBJECT : Alcoholic Beverage Control Appeals Board:
tied-house
restrictions
SOURCE : Author
DIGEST : This bill increases from 60 to 75 days, the
length of time that the Alcoholic Beverage Control Appeals
Board has to enter an order after an appeal is filed. This
bill also makes a minor clarifying change, as well as code
maintenance changes, to existing provisions of the
Alcoholic Beverage Control Act in order to reduce paperwork
requirements of the Department of Alcoholic Beverage
Control.
CONTINUED
AB 1798
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ANALYSIS : Existing law establishes the Department of
Alcoholic Beverage Control (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.
Existing law, known as the "tied-house" law, separates the
alcoholic beverage industry into three component parts, or
tiers, of manufacturer (including breweries, wineries and
distilleries), wholesaler, and retailer (both on-sale and
off-sale).
Tied house refers to a practice in this country prior to
Prohibition and still occurring in England today where a
bar or public house, from whence comes the "house" of tied
house, is tied to the products of a particular
manufacturer, either because the manufacturer owns the
house, or the house is contractually obligated to carry
only a particular manufacturer's products.
Existing law establishes in state government an Alcoholic
Beverage Control Appeals Board, of which the members are
appointed and serve as provided in the Constitution, and
receive an annual salary.
Existing law provides that an appeal must be filed at the
Appeals Board office within 40 days from the date of the
ABC decision. However, if ABC's decision states it is to
be "effective immediately," an appeal must be filed within
10 days after the date of ABC's decision. Documents not
filed within the time limits are untimely and cannot be
accepted by the Appeals Board.
Existing law specifies that no decision of the ABC shall
become effective during the period in which an appeal may
be filed and the filing of an appeal shall stay the effect
of the decision until such time as a final order is made by
the Appeals Board.
Existing law provides that the review by the Appeals Board
of a decision by ABC shall be limited to specified
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questions. The Appeals Board is also required to enter its
order within 60 days after the filing of an appeal.
Alcoholic Beverage Control Appeals Board . The Appeals
Board provides quasi-judicial administrative review of
decisions of the ABC. The questions that may be considered
by the Appeals Board are limited by the California
Constitution and by statute.
The Appeals Board is made up of three members appointed by
the Governor. Funding for the Appeals Board comes entirely
from a surcharge on all ABC license renewals. All Appeals
Board activities, staff functions, and budget expenditures
are directed toward the review and finalization of appeals.
The Appeals Board conducts 10 hearings throughout the year
in both Northern and Southern California.
The Appeals Board determines appeals solely on the record
of ABC and any briefs filed by the parties. No additional
evidence may be received by the Appeals Board. However,
the parties to an appeal may present oral argument during
the Board's monthly hearings. The Appeals Board issues
written decisions with orders affirming, reversing, and/or
remanding ABC decisions. Judicial review of the Board's
order may be obtained by filing a petition for writ of
review with the California Supreme Court or the Court of
Appeal.
The timely issuance of orders by the Appeals Board is a
critical part of the state's regulation of the alcoholic
beverage industry and enforcement of the ABC Act. When an
appeal is filed, any action by the ABC on its decision is
stayed until the appeal is concluded by a final order of
the Appeals Board. During the appeal period, a license
that is subject to the appeal may not be suspended or
revoked; in the case of an application for a license, the
ABC may not issue or transfer the license while the process
is in effect.
The number of new appeals filed with the Appeals Board on
average is around 200 cases per year. A majority of the
cases reviewed by the Appeals Board relate to alcohol sales
to minors. According to the Appeals Board, approximately
three percent of the sales to minor cases or approximately
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17 percent of the overall cases are reversed or partially
reversed.
Issue #1 . According to the author's office, this bill is
intended to address a growing concern by the alcohol
industry, law enforcement, and citizens of California
relating to the time frame upon which an appeal is rendered
by the Appeals Board. The Appeals Board has been faced
with a substantial increase in caseload, which has resulted
in a backlog of appeals. ABC's enforcement activities have
increased in response to legislative mandates to curtail
underage drinking, which has lead to more rulings and, in
turn, the number of appeals to the Appeals Board has
increased. The author's office is concerned with the
length of time it is taking to process the appeals. In
many cases, it has been reported that it is taking up to 12
to 18 months before the Appeals Board renders a final
order. The author's office is concerned with the current
appeals time frame because while the case is being reviewed
the "bad apples" continue to operate which troubles law
enforcement and residents within the community. The
author's office believes that it is essential that the
Appeals Board be held to better accountability relating to
meeting specific timelines specified in current law.
The author's office further adds that with the increase in
industry license fees, established by AB 1298 (Wesson and
Oropeza), Chapter 488, Statues of 2001, there should be
sufficient funds within the Appeals Board budget to
maintain the staffing levels necessary to expedite appeals
in a more diligent manner. This bill is necessary to
ensure that the principles of the appeals process within
the ABC Act are preserved and upheld as they relate to a
licensee's right of due process.
Tied-House Restrictions . Existing law, known as the
"tied-house" law, separates the alcoholic beverage industry
into three component parts, or tiers, of manufacturer,
wholesaler, and retailer. The original policy rationale
for this body of law was to: (a) promote the state's
interest in an orderly market; (b) prohibit the vertical
integration and dominance by a single producer in the
marketplace; (c) prohibit commercial bribery and protect
the public from predatory marketing practices; and, (d)
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discourage and/or prevent the intemperate use of alcoholic
beverages. Generally, other than exceptions granted by the
Legislature, the holder of one type of license is not
permitted to do business as another type of licensee within
the "three-tier" system.
Issue #2 . Current law provides as an exception to
tied-house restrictions that a winegrower who deals in wine
only may hold an ownership interest in any on-sale license,
provided that the winegrower has entered into an
"undertaking" approved by the Department of ABC not to sell
or furnish his or her wine to the holder of the license for
as long as the winegrower's ownership interest in the
license continues, or to enter into any collusive scheme to
unfairly sell or promote the wine of another winegrower in
his or her retail businesses in return for the same
treatment in the retail businesses of the other winegrower.
Current law also provides that a licensed winegrower may
hold an ownership interest in an on-sale license, if
certain conditions are met, including that the licensed
on-sale premises are operated as a bona fide eating place
or a bona fide bed and breakfast inn; any alcoholic
beverage sold and served at the on-sale licensed premises
is purchased only from a California wholesale licensee,
except as specified; the winegrower and any officer,
director, or agent of that person, whether individually or
in the aggregate, do not sell and serve wine products
produced or bottled under any brand or trade name owned by
that winegrower through more than 2 on-sale licensed
premises in which any of them holds an ownership interest;
and, in the case of a bona fide public eating place, wine
produced by the winegrower does not exceed a specified
percentage of the wine items offered for sale in the
on-sale premises.
This bill retains the requirement that the winegrower meet
the specified conditions regarding the sale or furnishing
of wine under the circumstances described above, but
eliminates the requirement that statements describing these
conditions be made pursuant to an "undertaking approved by
the Department of ABC." Additionally, this bill makes
other minor technical changes to this section of law and is
intended to streamline, simplify and provide for a more
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conforming tied-house exception without materially
impacting its effect.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall,
Bill Berryhill, Tom Berryhill, Blakeslee, Block,
Blumenfield, Bradford, Brownley, Buchanan, Charles
Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De
La Torre, De Leon, DeVore, Emmerson, Eng, Evans, Feuer,
Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines,
Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey,
Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries,
Jones, Knight, Lieu, Logue, Bonnie Lowenthal, Ma,
Mendoza, Miller, Monning, Nava, Nestande, Niello,
Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas,
Saldana, Silva, Smyth, Solorio, Audra Strickland,
Swanson, Torlakson, Torres, Torrico, Tran, Villines,
Yamada, John A. Perez
NO VOTE RECORDED: Caballero, Norby, Skinner, Vacancy
TSM:do 8/3/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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