BILL ANALYSIS Bill No: SB 1101 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2009-2010 Regular Session Staff Analysis SB 1101 Author: Wiggins As Amended: March 23, 2010 Hearing Date: April 13, 2010 Consultant: Art Terzakis SUBJECT Alcoholic Beverages DESCRIPTION SB 1101 clarifies that winemakers who participate in instructional events or "meet the winemaker dinners", held at a retailer's licensed premises for consumers, may offer minimal samples of wine from "bottles." Specifically, this measure: 1. Modifies an existing provision of the Alcoholic Beverage Control (ABC) Act which allows winemakers participating in instructional events for consumers at a retailer's premises to offer samples of wine from barrels or tanks to also allow for wine samples (no more than three one-ounce tastings per consumer) at the event from "bottles" of wine provided by the winemaker. 2. Provides that minimal amounts of the samples or tastes provided at the instructional event do not constitute a thing of value. 3. Stipulates that any unused wine provided by the winemaker for the instructional event must be removed from the retailer's premises by the winemaker. EXISTING LAW Existing law establishes the Department of Alcoholic SB 1101 (Wiggins) continued Page 2 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 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. 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 permits an on-sale retail licensee of wine or distilled spirits to conduct "instructional" consumer tastings on the licensed retail premise provided the following conditions are met: (1) no more than ounce of distilled spirits is offered in one tasting; (2) no more than one ounce of wine is offered in one tasting; and, (3) no more than three tastings are offered to an individual in one day. An instruction may include the history, nature, SB 1101 (Wiggins) continued Page 3 values and characteristics of the product being offered, and the methods of presenting and serving the product. Existing law authorizes beer manufacturers and wholesalers to offer beer samples (not to exceed 8 ounces per person, per day) to individuals of legal drinking age at on-sale retail licensed premises under specified conditions. Existing law permits a licensed winegrower, manufacturer, importer, or wholesaler to provide samples of the alcoholic beverages which are authorized to be sold by the licensee in accordance with rules prescribed by the ABC. A retail licensee, however, is not authorized to provide any free samples of alcoholic beverages. Moreover, ABC regulations provide that samples of alcoholic beverages may only be given away to licensees or employees of licensees who are in a position to purchase the product or who are in need of additional information about the product, as specified. BACKGROUND As a limited exception to the general tied-house rule, existing law (Business and Professions Code Section 25503.4) permits winegrowers and their agents, including wine importers, to conduct and participate in instructional events and dinners held at a retailer's premises featuring the winemaker's wine, provided certain conditions are met. Although no wine can be given away at the events, minimal amounts of wine, taken from barrels or tanks, may be sample tasted. Purpose of SB 1101: As noted above, current law allows winemakers to conduct and participate in, and serve wine at, instructional events and "meet the winemaker dinners" held at a retailer's premises featuring wines produced by or for the winegrower or, imported by the wine importer, provided the wine samples are taken from "barrels" or from "tanks." This measure would simply clarify that winemakers participating in such events may also offer samples of wine (three one-ounce tastes) from bottles. Arguments in Support: Proponents note that this measure "responds to the practical aspects of how meet the winemaker dinners are conducted." Proponents also emphasize that "the tastes, which are instructional, will conform to existing law on the number and size of tastes SB 1101 (Wiggins) continued Page 4 allowed during a dinner." Staff Comments/Historical Perspective: As noted above, alcoholic beverage licensees are generally prohibited from giving away any gift, premium or free goods in connection with the sale or distribution of alcoholic beverages. AB 2868 (Floyd), Chapter 471, of 1992 (Business and Professions Code Section 25503.4) was introduced to clarify existing law and allow winemakers, alcoholic beverage retailers and importers, to advertise and promote winemaker dinners and tastings featuring specific wines of a winery. The events addressed by AB 2868 (Floyd) of 1992 were commonly known and advertised as "winemaker dinners" or "meet the winemaker events." Such events were intended to offer consumers an educational opportunity to learn more about food and wine pairing and a bit of the wine's unique history. At that particular time, the activities encompassed by AB 2868 (Floyd) were commonplace however the Department of ABC had expressed concern that such activities might violate the prohibition against licensees giving away things of value. AB 2868 (Floyd) of 1992 was introduced on behalf of the Wine Institute and the Family Winemakers of California so that the ability of vintners and restaurateurs to advertise and participate in such events would not be constrained. PRIOR LEGISLATION AB 611 (Cortese) Chapter 394, Statutes of 1993. Provided that an adult resident of California may apply for a permit to receive, under specified conditions, a shipment of wine (not more than nine liters in any calendar month) from another state that allows adult residents of that state to receive shipments of wine from California. Also, deleted the requirement that wine taken from barrels or tanks, and sampled at winemaker dinners, be the same wine used to blend the bottled wine featured at the dinners. AB 2868 (Floyd) Chapter 471, Statutes of 1992. Authorized a winegrower, California winegrower's agent, importer, or their specified representatives, to participate as described, in an instructional event for consumers held at a retailer's premises featuring wines produced by or for the winegrower or imported by the importer, under specified SB 1101 (Wiggins) continued Page 5 conditions. SUPPORT: As of April 9, 2010: Family Winemakers of California Wine Institute OPPOSE: None on file as of April 9, 2010. FISCAL COMMITTEE: Senate Appropriations Committee