BILL ANALYSIS                                                                                                                                                                                                    



                                                                            
         AB 1798
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        CONCURRENCE IN SENATE AMENDMENTS
        AB 1798 (Evans)
        As Amended  August 18, 2010
        Majority vote
         
         
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        |ASSEMBLY: |     |(May 13, 2010)  |SENATE: |33-0 |(August 5, 2010)     |
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                              (vote not relevant)  
         

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        |COMMITTEE VOTE:  |18-0 |(August 26, 2010)   |RECOMMENDATION: |concur    |
        |                 |     |                    |                |          |
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        Original Committee Reference:    G.O.  

         SUMMARY  :   Establishes a "conjunctive labeling" provision in the  
        Alcoholic Beverage Control Act (Act) for all wines made from grapes  
        grown within recognized winegrowing areas, or American Viticultural  
        Areas, in Sonoma County.  This provision mirrors existing  
        conjunctive labeling provisions for Napa, Lodi and Paso Robles.   
        Specifically,  this bill  :

        1)Requires, beginning on or after January 1, 2014, that any wine  
          labeled with an AVA located entirely within a County of the 19th  
          class (Sonoma County) must display the designation "Sonoma  
          County" on the label, as specified.  

        2)Makes it explicit that this provision shall not apply to any wine  
          labeled with a viticultural area appellation of origin when the  
          name of the appellation includes the term "Sonoma County."

         The Senate amendments  :

        1)Deletes provision which would have retained the requirement that  
          the winegrower, or the officer, director, or agent of the  
          winegrower meet the specified conditions regarding the sale or  
          furnishing of wine under the circumstances described above, but  
          would eliminate the requirement that statements describing these  
          conditions be made pursuant to an undertaking approved by ABC.









                                                                            
         AB 1798
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        2)Deletes a provision which would have increased 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.

        3)Requires, beginning on or after January 1, 2014, that any wine  
          labeled with an AVA located entirely within a County of the 19th  
          class (Sonoma County) must display the designation "Sonoma  
          County" on the label, as specified.

        4)Makes it explicit that this provision shall not apply to any wine  
          labeled with a viticultural area appellation of origin when the  
          name of the appellation includes the term "Sonoma County."

        5)Provides that the ABC may suspend or revoke the license of any  
          person who violates this requirement.

         EXISTING LAW  :

        1)Existing provisions of the Act, known as "tied-house"  
          restrictions, generally prohibit a winegrower from having an  
          ownership interest in an on-sale alcoholic beverage license, with  
          limited exceptions. Among other exemptions, existing law exempts  
          from the tied-house restrictions any licensed winegrower who  
          meets specified conditions, including that the winegrower, or his  
          or her officer, director, or agent, enters into an undertaking,  
          approved by the Department of Alcoholic Beverage Control, that  
          makes specified statements regarding the sale or furnishing of  
          wine by the winegrower, or any officer, director, or agent of the  
          winegrower.

        2)Requires that, when the word "Napa" (or any federally recognized  
          viticultural region within Napa County) appears on a brand label,  
          at least 75 percent of the grapes used to make that wine must be  
          from Napa County.

        3)Requires wines produced within the "Napa Valley" to be labeled as  
          being derived from that valley, if the wine label indicates that  
          they are produced within a separate viticultural area within the  
          Napa Valley, in order to preserve consumer identification and  
          understanding.

        4)Prohibits the sale of wine produced, bottled, or labeled after  
          December 31, 2008, in this state that identifies, in a brand name  
          or otherwise, on any label, packaging material, or advertising,  








                                                                            
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          the name "Sonoma," unless at least 75 percent of the grapes used  
          to make the wine are from Sonoma County, as specified.

        5)Requires all wines produced or bottled within the current Paso  
          Robles appellation to be labeled with the designation "Paso  
          Robles."

        6)Requires all wines produced or bottled within the current Lodi  
          appellation to be labeled with the designation "Lodi."

        7)Stipulates that every person who, with intent to defraud, either  
          falsely makes, alters, forges, or counterfeits the label for any  
          wine or uses the label or bottle of any wine belonging to  
          another, without his or her consent, is guilty of a misdemeanor.   


         FISCAL EFFECT  :   Unknown.

         COMMENTS  :  

         Purpose of this bill:   This bill establishes a "conjunctive  
        labeling" provision in the Alcoholic Beverage Control Act for all  
        wines made from grapes grown within recognized winegrowing areas,  
        or American Viticultural Areas, in Sonoma County.  This provision  
        mirrors existing conjunctive labeling provisions for Napa, Lodi and  
        Paso Robles.

        According to the author's office, the Sonoma County Vintners along  
        with the Sonoma County Winegrape Commission (representing over 170  
        wineries and 1,800 growers combined) recently reached consensus on  
        a framework to standardize regional wine product labeling (the wine  
        industry term is conjunctive labeling) for all wines made from  
        grapes grown within recognized AVAs in Sonoma County.  There are 13  
        AVAs located in Sonoma County (e.g., Dry Creek Valley, Russian  
        River Valley, and Sonoma Valley).  The purpose of conjunctive  
        labeling is to build an association of quality in an increasingly  
        competitive global wine market for the delivery of Sonoma County  
        wines.  The proposed language provides a three-year phase-in period  
        to enable wineries to redesign their labels and get regulatory  
        approval to use the new labels.

         Background  :  The Federal Alcohol Administration Act establishes  
        broad federal regulatory authority over the interstate trade in  
        alcohol beverage products.  The Secretary of the Treasury, through  








                                                                            
         AB 1798
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        the Alcohol and Tobacco Tax and Trade Bureau (TTB), administers an  
        extensive code of regulations governing, among other things, the  
        contents of wine labels, including brand names, the name and  
        address of the bottling winery, and indications of the wine's  
        origin, as well as the use of such information in advertising.

        Under federal regulations, an "appellation of origin" is a  
        geographic designation referring to the place where the grapes used  
        to make a specified percentage of the wine were grown.  For  
        American wines, an appellation of origin includes the names of  
        states (e.g., "California") and       counties identified with the  
        word "county" (e.g., "Napa County," "Monterey County," "Sonoma  
        County," "Eldorado County," etc.) as well as all designated  
        American "viticultural areas."  An American Viticultural Area (AVA)  
        is a grape growing region distinguishable by geographical           
        area features, as recognized by the TTB pursuant to specified  
        criteria and procedures.  

        These criteria and procedures, and a complete list of AVAs, are set  
        forth in Part 9 of Title 27 of the Code of Federal Regulations.  In  
        brief, TTB may recognize an AVA area if it is locally or nationally  
        known for grape-growing, has particular and definable boundaries,  
        and has geographic         features distinguishing it as a  
        grape-growing area.  As of 2007, there were 190 recognized AVAs  
        nationwide - 107 of which are located in California.  The 107  
        California viticultural areas recognized by the TTB include, among  
        others, Alexander Valley, Anderson Valley, Chalk Hill, Clarksburg,  
        Fair Play, Howell Mountain, Lodi, Los Carneros, Napa Valley, Paso  
        Robles, Rockpile, Russian River Valley, Santa Lucia Highlands,  
        Sonoma Valley, Spring Mountain, Stags Leap, and Wild Horse Valley. 

        The regulations specify the conditions for use of each type of  
        appellation of origin.  A wine qualifies for a state or county  
        appellation of origin if at least 75 percent of the volume derives  
        from grapes grown in the area indicated by the appellation of  
        origin.  Thus, under TTB regulations the appellation of origin  
        "California" signifies that at least 75 percent of the wine in the  
        bottle was made from grapes grown anywhere in the state of  
        California.  Similarly, the   appellation of origin "Napa County"  
        or "Sonoma County" or "Mendocino County" signifies that at least 75  
        percent of the wine in the bottle was made from grapes grown  
        anywhere in that particular County.  To qualify for an appellation  
        of origin consisting of an AVA, at least 85 percent of the wine  
        must derive from grapes grown in the indicated area.   Thus, the  








                                                                            
         AB 1798
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        appellation of origin "Napa Valley" signifies that at least 85  
        percent of the wine in the bottle was made         from grapes  
        grown anywhere in Napa Valley.  The regulations do not require  
        disclosure of the place of origin of the remaining portion of the  
        wine.

        Federal regulations require the wine label to bear a "brand name."   
        The regulations provide that, in general, "a brand name of  
        viticultural significance may not be used unless the wine meets the  
        appellation of origin requirements for the geographic area named."   
        This prohibition is subject to        an exception.  If a brand  
        name was in use before July 7, 1986, it is considered  
        grandfathered.  Grandfathered brand names of viticultural  
        significance may be used for wines that do not meet the appellation  
        of origin requirements for the geographic area named, provided the  
        wine is labeled with a true appellation of origin consisting of a  
        county or viticultural area (if the brand name refers to a  
        geographic area smaller than a state) or a state or lesser  
        appellation (if the brand name refers to a state).

        Federal regulations require that the name and address of the  
        "bottling winery" appear on the wine label, accompanied, in certain  
        circumstances, by a phrase such as "bottled by."  There is no  
        requirement that the bottling winery is located in the geographic  
        area where the wine was made or the grapes were grown.

        Federal law also provides that wine may not be sold or shipped in  
        interstate commerce unless it bears a label that TTB has previously  
        approved.  A certificate of label approval ("COLA") is obtained by  
        submitting an application to the TTB.  The application must include  
        an exact replica         of the label as well as other information  
        regarding the wine covered by the label.
         
         Prior legislation  :  AB 87 (Blakeslee), Chapter 674, Statutes of  
        2007, requires all wines produced or bottled from any  
        sub-appellation located within the current Paso Robles appellation  
        to carry the designation Paso Robles" on the label.  

        SB 1380 (Chesbro) Chapter 879, Statutes of 2006, prohibits the sale  
        of wine, produced, bottled, or labeled after December 31, 2008,  
        that identifies, in a brand name or otherwise, on any label,  
        packaging material, or advertising, the name "Sonoma", unless at  
        least 75% of the grapes used to make the wine are from Sonoma  
        County, as specified.








                                                                            
         AB 1798
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        SB 1293 (Chesbro), Chapter 831, Statutes of 2000, prohibits the use  
        of the word "Napa" on a brand label unless at least 75% of the  
        grapes used to make that wine came from Napa County.  One of the  
        stated purposes of this law was to minimize consumer confusion  
        because consumers assume brand names of wines suggest the origin of  
        the grapes.  The law essentially prohibited Bronco from marketing  
        the three labels referenced above using non-Napa grapes.  Bronco  
        challenged the law in court arguing that state law could not  
        preempt federal law, which also provides a 75% requirement, but  
        exempts brands established before July 7, 1986.  Bronco also argued  
        that its labels were not deceptive since the origin of the grapes  
        was spelled out, although in smaller print.  Bronco also challenged  
        the law on other claims including free speech rights, but the  
        California Court of Appeals rejected those arguments.  

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


        FN: 0006784