BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1096
                                                                  Page  1

          Date of Hearing:   June 16, 2010

                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
                                   Joe Coto, Chair
                SB 1096 (Wiggins) - As Introduced:  February 17, 2010

          SENATE VOTE  :   32-0
           
          SUBJECT  :   Alcoholic beverages: tied-house restrictions.

           SUMMARY  :   Makes various technical and code maintenance changes  
          to several provisions of the Alcoholic Beverage Control Act  
          (Act) to keep up with modern technology.  Specifically,  this  
          bill  :

          1)Revises the direct inquiry provisions to include any  
            electronic inquiries from consumers.

          2)Makes technical, nonsubstantive changes to the Act.

           EXISTING LAW  :

          1)Establishes the Department of Alcoholic Beverage Control (ABC)  
            and grants it exclusive authority to administer the provisions  
            of the 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. 

          2)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).  

          3)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 non-retail 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  








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            prohibited inducement to the listed on-sale retailer, if  
            specified conditions are met.
           
          FISCAL EFFECT  :   Unknown.

           COMMENTS  :  

           Purpose of the bill  :  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.  The author's  
          office notes that current law references electronic internet  
          inquiries which could be narrowly construed to prohibit other  
          types of electronic communications - such as texting.  

          Under existing law, 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 or off-sale  
          retailer.  Therefore, this measure is simply intended to modify  
          the current restrictions to include, "electronic inquiry,"  
          instead of just "electronic Internet inquiry."

           Background  :  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.   

          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  








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          to do business as another type of licensee within the  
          "three-tier" system.  
           
          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.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Family Winemakers of California
           
            Opposition 
           
          None on file

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