BILL ANALYSIS                                                                                                                                                                                                    


          |SENATE RULES COMMITTEE            |                  SB 1022|
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                                 THIRD READING

          Bill No:  SB 1022
          Author:   Strickland (R)
          Amended:  3/15/10
          Vote:     21

           SENATE GOVERNMENTAL ORG. COMMITTEE  :  9-0, 4/13/10
          AYES:  Wright, Calderon, Denham, Florez, Negrete McLeod,  
            Oropeza, Padilla, Price, Yee
          NO VOTE RECORDED: Harman, Wyland

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8 

           SUBJECT  :    Alcoholic beverages:  licensees: donations

           SOURCE  :     Author

           DIGEST  :    This bill expands an existing tied-house  
          exception within the Alcoholic Beverage Control Act to  
          enable licensed distilled spirits rectifiers to donate or  
          sell their products to specified nonprofit entities for the  
          purpose of assisting in fund-raising efforts.

           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.  

          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  


                                                               SB 1022

          distilleries), wholesaler, and retailer (both on-sale and  

          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.  

          Tied-house law generally prohibits any alcoholic beverage  
          manufacturer, winegrower, agent, importer or wholesaler  
          from holding any interest in the business of a retailer of  
          alcoholic beverages or to give any thing of value to a  
          licensed retailer of alcoholic beverages.  Licensees are  
          also prohibited from giving away any gift, premium or free  
          goods in connection with the sale or distribution of  
          alcoholic beverages.

          The ABC Act provides that nothing in that body of law  
          prohibits a wine grower or a beer and wine wholesaler from  
          giving or selling wine, a beer manufacturer from giving or  
          selling beer, a distilled spirits manufacturer or its agent  
          from giving or selling distilled spirits, or a licensed  
          importer from giving or selling beer, wine, or spirits to  
          certain nonprofit organizations, as specified, at prices  
          other than those contained in schedules filed with the  
          Department of ABC.  

          The ABC Act defines "rectifier" to mean every person who  
          colors, flavors, or otherwise processes distilled spirits  
          by distillation, blending, percolating, or other processes.


                                                               SB 1022

          This bill provides for an exemption to allow rectifiers to  
          give or sell beer to certain nonprofit organizations. 

          According to the author's office, current law does not  
          allow holders of a "rectifiers" license to give or sell  
          rectified distilled spirits to nonprofit organizations to  
          assist them in fund-raising efforts.  However, current law  
          permits licensed "importers" to perform this function.  

          As an example, the author's office points to a local  
          rectifier, Ventura Limoncello Company, which cannot donate  
          a gift basket containing a bottle of Ventura Limoncello,  
          produced in the County of Ventura, to a local charity for  
          its silent auction. Yet, the importer of Il Convento  
          Limoncello, produced in Italy, can be donated (by the  
          importer) to any charitable event.

          According to the author's office, this bill is intended to  
          allow licensed rectifiers to support charities in the same  
          manner as the State's wineries, breweries, and distilled  
          spirits manufacturers and importers.   

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

           SUPPORT  :   (Verified  4/26/10)

          Boys & Girls Club of Ventura
          Ventura Limoncello Company, LLC
          Napa Valley Limoncella Company

          TSM:nl  4/26/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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