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 SB 1096 Page 2 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 SB 1096 Page 3 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