BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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                              UNFINISHED BUSINESS


          Bill No:  SB 1480
          Author:   Senate Governmental Organization Committee
          Amended:  8/2/10
          Vote:     21

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

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8 

           SENATE FLOOR  :  33-0, 4/29/10
          AYES: Aanestad, Alquist, Ashburn, Calderon, Cedillo,  
            Cogdill, Corbett, Correa, Cox, DeSaulnier, Ducheny,  
            Dutton, Florez, Hancock, Harman, Hollingsworth, Huff,  
            Kehoe, Leno, Liu, Lowenthal, Negrete McLeod, Oropeza,  
            Padilla, Pavley, Price, Runner, Simitian, Steinberg,  
            Walters, Wolk, Wright, Wyland
          NO VOTE RECORDED: Denham, Romero, Strickland, Wiggins, Yee,  
            Vacancy, Vacancy

           ASSEMBLY FLOOR :  78-0, 8/12/10 - See last page for vote


           SUBJECT  :    Alcoholic beverages:  tied-house restrictions:   
          operating
                        permits

           SOURCE  :     Author


                                                           CONTINUED





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           DIGEST  :    This bill makes a minor clarifying change, as  
          well as code maintenance changes, to existing provisions of  
          the Alcoholic Beverage Control (ABC) Act in order to reduce  
          paperwork requirements of the Department of the ABC.

           Assembly Amendments  (1) extend ABC's authority to issue an  
          interim operating permit to a non-retail license applicant,  
          (2) make minor technical corrections to the ABC Act  
          necessitated by legislation enacted in 2008, and (3) delete  
          a section relating to caterers permits.

           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.  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. 

          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.  







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          This bill:

          1.Deletes the requirement that the director of ABC include  
            recommendations for legislation in the annual ABC report  
            to the Legislature. 

          2.Streamlines a tied-house exception that allows  
            winegrowers under specific conditions to also hold an  
            ownership interest in an on-sale license. 

          3.Extends ABC's authority to issue an interim operating  
            permit to a non-retail liquor license applicant. 

          4.Makes other technical, nonsubstantive changes to the  
            Alcoholic Beverage Control Act. 

           Background
           
          Current law provides as an exception to tied-house  
          restrictions that a winegrower who deals in wine only may  
          hold an ownership interest in any on-sale license, provided  
          that the winegrower has entered into an "undertaking"  
          approved by the Department of ABC not to sell or furnish  
          his or her wine to the holder of the license for as long as  
          the winegrower's ownership interest in the license  
          continues, or to enter into any collusive scheme to  
          unfairly sell or promote the wine of another winegrower in  
          his or her retail businesses in return for the same  
          treatment in the retail businesses of the other winegrower.

          Current law also provides that a licensed winegrower may  
          hold an ownership interest in an on-sale license, if  
          certain conditions are met, including that the licensed  
          on-sale premises are operated as a bona fide eating place  
          or a bona fide bed and breakfast inn; any alcoholic  
          beverage sold and served at the on-sale licensed premises  
          is purchased only from a California wholesale licensee,  
          except as specified; the winegrower and any officer,  
          director, or agent of that person, whether individually or  
          in the aggregate, do not sell and serve wine products  
          produced or bottled under any brand or trade name owned by  
          that winegrower through more than 2 on-sale licensed  
          premises in which any of them holds an ownership interest;  







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          and, in the case of a bona fide public eating place, wine  
          produced by the winegrower does not exceed a specified  
          percentage of the wine items offered for sale in the  
          on-sale premises.

          This bill retains the requirement that the winegrower meet  
          the specified conditions regarding the sale or furnishing  
          of wine under the circumstances described above, but  
          eliminates the requirement that statements describing these  
          conditions be made pursuant to an "undertaking approved by  
          the Department of ABC."  Additionally, this bill makes  
          other minor technical changes to this section of law  
          intended to streamline, simplify and provide for a more  
          conforming tied-house exception without materially  
          impacting its effect. 

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

           ASSEMBLY FLOOR  :  
          AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill  
            Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,  
            Bradford, Brownley, Buchanan, Caballero, Charles  
            Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De  
            La Torre, De Leon, DeVore, Eng, Evans, Feuer, Fletcher,  
            Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani,  
            Garrick, Gatto, Gilmore, Hagman, Hall, Harkey, Hayashi,  
            Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight,  
            Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller,  
            Monning, Nava, Nestande, Niello, Nielsen, V. Manuel  
            Perez, Portantino, Ruskin, Salas, Saldana, Silva,  
            Skinner, Smyth, Solorio, Audra Strickland, Swanson,  
            Torlakson, Torres, Torrico, Tran, Villines, Yamada, John  
            A. Perez
          NO VOTE RECORDED: Norby, Vacancy


          TSM:nl  8/16/10   Senate Floor Analyses 

                       SUPPORT/OPPOSITION:  NONE RECEIVED

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