BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1480| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 SB 1480 Page 2 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. SB 1480 Page 3 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; SB 1480 Page 4 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 **** END ****