BILL ANALYSIS Ó
Bill No: AB
573
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
AB 573 Author: Chesbro
As Amended: June 15, 2012
Hearing Date: June 26, 2012
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages: tied house restrictions
DESCRIPTION
AB 573 corrects inconsistencies in existing provisions of
the Alcoholic Beverage Control (ABC) Act in order to allow
all licensed manufacturers and wholesalers the same
opportunity to inspect, clean and replace their tapping
equipment.
EXISTING LAW
Existing law establishes the Department of 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
AB 573 (Chesbro) continued
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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.
Existing law also provides that no licensee shall, directly
or indirectly, give any premium, gift, free goods, or other
thing of value in connection with the sale, distribution,
or sale and distribution of alcoholic beverages, and no
retailer shall, directly or indirectly, receive any
premium, gift, free goods or other thing of value from a
supplier of alcoholic beverages, except as authorized by
the Department of ABC.
Existing law exempts from specified tied-house restrictions
the occasional inspection and cleaning by beer
manufacturers and wholesalers of beer taps and tapping
equipment, as provided. Existing law also permits a beer
manufacturer or beer wholesaler to furnish, give, rent,
lend, or sell, any equipment, fixtures, or supplies, other
than alcoholic beverages, to a retailer whose equipment,
fixtures, or supplies were lost or damaged as a result of a
natural disaster, as provided.
BACKGROUND
Purpose of AB 573: The author's office notes that this
measure would not expand any existing privileges within the
ABC Act but rather it is "code cleanup." Specifically,
existing law, Business & Professions Code Section 25510,
permits a manufacturer to furnish to a licensed wholesaler,
and a licensed wholesaler or manufacturer to furnish to an
on-sale licensee specified maintenance on any licensed
beverage tapping equipment. However, language in Business &
Professions Code Sections 25504.5 and 25511 limits access
to this cleaning service to "beer" manufacturers and their
AB 573 (Chesbro) continued
Page 3
wholesalers. The author's office states that AB 573 would
simply strike the reference to "beer" in Sections 25504.5
and 25511 so that those provisions are consistent with
Section 25510.
Arguments in Support: Writing in support, the Wine
Institute points out that when it consulted with ABC staff
regarding the inconsistencies in these statutes, the ABC
suggested that the changes incorporated in AB 573 would
provide uniformity and clarity.
Also writing in support, the Family Winemakers of
California indicates that wine casks have recently emerged
as a most cost effective way to supply licensed on-sale
premises that sell wine by glass and that AB 573 would
allow wineries to supply and service such equipment.
PRIOR/RELATED LEGISLATION
AB 2878 (Aghazarian) Chapter 604, Statutes of 2004. Added
"filters" to the list of alcoholic beverage tapping
equipment that can be furnished by a licensed wholesaler or
manufacturer to an on-sale licensee.
SUPPORT: As of June 22, 2012:
Family Winemakers of California
Wine Institute
OPPOSE: None on file as of June 22, 2012.
FISCAL COMMITTEE: Senate Appropriations Committee