BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   AB 573|
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                                    CONSENT


          Bill No:  AB 573
          Author:   Chesbro (D)
          Amended:  6/15/12 in Senate
          Vote:     21

           
           SENATE GOVERNMENTAL ORGANIZATION COMM.  :  13-0, 6/26/12
          AYES:  Wright, Anderson, Berryhill, Calderon, Cannella, 
            Corbett, De León, Evans, Hernandez, Padilla, Walters, 
            Wyland, Yee
           
          SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  Not relevant


           SUBJECT  :    Alcoholic beverages: wine exports and returns

           SOURCE  :     Family Winemakers of California 


           DIGEST  :    This bill 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.

           ANALYSIS  :    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 
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          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 
          (1) promote the state's interest in an orderly market; (2) 
          prohibit the vertical integration and dominance by a single 
          producer in the marketplace; (3) prohibit commercial 
          bribery and protect the public from predatory marketing 
          practices; and (4) 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, 

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          fixtures, or supplies were lost or damaged as a result of a 
          natural disaster, as provided.
           
          FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

           SUPPORT  :   (Verified  8/7/12)

          Family Winemakers of California (source)
          Wine Institute


           ARGUMENTS IN SUPPORT  :    The author's office notes that 
          this bill would not expand any existing privileges within 
          the ABC Act but rather it is "code cleanup."  Specifically, 
          existing law, Business and Professions Code (BPC) 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 
          BPC Sections 25504.5 and 25511 limits access to this 
          cleaning service to "beer" manufacturers and their 
          wholesalers.  The author's office states that this bill 
          simply strikes the reference to "beer" in Sections 25504.5 
          and 25511 so that those provisions are consistent with 
          Section 25510.
           
           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 this bill 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 this bill allows 
          wineries to supply and service such equipment.  
           

          DLW:m  8/7/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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