BILL ANALYSIS Bill No: SB 1323 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2009-2010 Regular Session Staff Analysis SB 1323 Author: Walters As Amended: April 7, 2010 Hearing Date: April 13, 2010 Consultant: Art Terzakis SUBJECT Alcoholic Beverages DESCRIPTION SB 1323 modifies an existing provision of the Alcoholic Beverage Control (ABC) Act that allows, until January 1, 2014, a manufacturer, winegrower, rectifier, or distiller to provide their product offerings directly to consumers (free of charge) during invitation-only events, as specified, to additionally grant the same privilege to: (1) a distilled spirits manufacturer's agent; (2) a holder of a distilled spirits importer's general license; (3) a holder of a distilled spirits rectifier's general license; and (4) a holder of an out-of-state distilled spirit's shipper's certificate. EXISTING LAW 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 distilleries), wholesaler, and retailer (both on-sale and off-sale). Tied-house law generally prohibits alcoholic beverage licensees from giving away any gift, premium or SB 1323 (Walters) continued Page 2 free goods in connection with the sale or distribution of alcoholic beverages. Existing law, until January 1, 2014, permits a manufacturer, winegrower, rectifier, or distiller, or any authorized agent of that person to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers over 21 years of age at an invitation-only event in connection with the sale or distribution of wine or distilled spirits, as specified. Existing law also authorizes the Department of Alcoholic Beverage Control to impose a fee to cover the costs of administering such events. SB 1323 (Walters) continued Page 3 BACKGROUND Purpose of SB 1323: This measure is intended to correct a minor oversight discovered since enactment of AB 2293 (De Leon) Chapter 638 of 2008. AB 2293 of 2008 was introduced to allow distilled spirits manufacturers and winegrowers to provide their product offerings directly to consumers, by invitation only, within a controlled environment for which there is a caterer's permit authorization. The bill contained significant restrictive criteria in order to provide appropriate controls on promotional events. The sponsor of this measure, the Distilled Spirits Council of the United States (DISCUS), contends that the list of licensees authorized by AB 2293 of 2008 to provide supplier hosted promotion and entertainment was not inclusive of all DISCUS member companies. In fact, the sponsor claims that since enactment of AB 2293, certain licensees have not been able to secure a permit from the Department of ABC to hold an event. According to the sponsor, this measure is simply intended to correct this shortcoming and follow through on the original intent of AB 2293 of 2008. Staff Comments: As introduced on February 19, 2010, this measure would have increased the standard of proof required to prove a violation per Business and Professions Code Section 25503 relating to consignment sales; commercial bribery; signs; and advertisement. Under the February 19th version of the bill, a person would have to act "knowingly" in order to be found in violation. Several labor organizations had expressed opposition to that version of the bill. The author's recent amendments (April 7, 2010) have deleted the word "knowingly" from Business and Professions Code Section 25503, thus removing the earlier opposition and keeping this existing provision of law intact. PRIOR/RELATED LEGISLATION SB 1022 (Strickland) 2009-10 Session. Would expand an existing tied-house exception within the ABC 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. (Pending in this Committee) SB 1323 (Walters) continued Page 4 AB 2293 (De Leon) Chapter 638, Statutes of 2008. Added a new provision to the ABC Act that allows distilled spirits manufacturers and winegrowers to provide their product offerings directly to consumers (free of charge) during invitation-only events on premises for which a caterer's permit authorization has been issued. SUPPORT: As of April 9, 2010: Distilled Spirits Council of the United States (sponsor) OPPOSE: None on file as of April 9, 2010. FISCAL COMMITTEE: Senate Appropriations Committee **********