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          Constitution in 1933 repealed the 18th Amendment and ended  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  




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          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  




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          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.