BILL ANALYSIS Bill No: SB 806 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2009-2010 Regular Session Staff Analysis SB 806 Author: Wiggins As Amended: January 4, 2010 Hearing Date: January 12, 2010 Consultant: Art Terzakis SUBJECT Alcoholic Beverages: tied-house restrictions DESCRIPTION SB 806 makes various technical and code maintenance changes to an existing provision of the Alcoholic Beverage Control (ABC) Act that permits wineries and brandy manufacturers to respond to consumer inquiries as to where, and at which restaurants, their products may be found. EXISTING LAW The enactment of the 21st Amendment to the U.S. Constitution in 1933 repealed the 18th Amendment and ended the era of Prohibition. Accordingly, states were granted the authority to establish alcoholic beverage laws and administrative structures to regulate the sale and distribution of alcoholic beverages. 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 SB 806 (Wiggins) continued Page 2 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. 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) 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. An existing tied-house provision (Business & Professions Code Section 25500.1) provides that the listing of the names, addresses, telephone numbers or e-mail addresses, or both, or web site addresses, of two or more unaffiliated on-sale retailers selling wine or brandy, or both, and operating and licensed as bona fide public eating places selling the wine or brandy produced, distributed or imported by a nonretail industry member in response to a direct inquiry from a consumer received by telephone, by mail, by electronic Internet inquiry or in person does not constitute a thing of value or prohibited inducement to the listed on-sale retailer, if specified conditions are met. BACKGROUND Purpose of SB 806: According to the author's office, the complex restrictions of the ABC Act's tied-house laws make it difficult for wine and brandy manufacturers to utilize simple, modern ways of responding to consumer inquiries. Due to the fact that existing provisions are so specific, e-mail and responses over the Internet are allowable but, "texting," for example, over a cellular phone network, is SB 806 (Wiggins) continued Page 3 not. Under existing law (Business & Professions Code Section 25500.1), a response to a direct inquiry from a consumer received by telephone, by mail, by electronic Internet inquiry or in person does not constitute a thing of value or prohibited inducement to the listed on-sale retailer. Therefore, this measure is simply intended to modify the current restrictions to include, "electronic inquiry," instead of just "electronic Internet inquiry." Staff Comments: This measure is identical to SB 131 (Wiggins) of 2009 which passed out of this committee on consent (12-0 vote) on April 28, 2009. It should be noted that SB 131 was gutted late in the session for purposes of creating a tied-house exception to allow the San Francisco Symphony to accept both monetary and alcoholic beverage contributions in support of its performing arts program. PRIOR/RELATED LEGISLATION SB 1423 (Chesbro) Chapter 205, Statutes of 2000. Authorized wineries and brandy manufacturers to advertise the name and location of restaurants that sell their products. SB 1233 (Chesbro) Chapter 666, Statutes of 1999. Allowed for the limited dissemination of information regarding the off-sale availability of alcoholic beverages. SUPPORT: Family Winemakers of California OPPOSE: None on file as of January 8, 2010. FISCAL COMMITTEE: No.