BILL ANALYSIS Ó
Bill No: AB
2184
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
AB 2184 Author: Hall
As Amended: June 20, 2012
Hearing Date: June 26, 2012
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages: tied-house restrictions
DESCRIPTION
AB 2184 creates a new tied-house exception in the Alcoholic
Beverage Control (ABC) Act that authorizes wine, beer and
spirits producers to participate in promotional events held
at an off-sale retail licensed location for the purpose of
providing autographs on bottles or other items to
consumers. Specifically, this measure:
1)Permits, until January 1, 2016, the appearance of a
person employed or engaged by an "authorized licensee,"
as defined, at a promotional event held at the premises
of an off-sale retail licensee for the purpose of
providing autographs only under the following conditions:
a) A fee is not charged to attend the event and a
purchase from the off-sale retail licensee is not
required.
b) The promotional event does not exceed 4 hours in
duration and there are no more than two such events
per calendar year involving the same authorized
licensee at a single premise of an off-sale licensee.
c) Autographing may only be provided on consumer
advertising specialties given by the authorized
licensee to a consumer or on any item provided by the
consumer.
d) The off-sale retail licensee may advertise the
AB 2184 (Hall) continued
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promotional event. Additionally, an authorized
licensee may advertise in advance of the event only in
publications of the authorized licensee, subject to
specified conditions.
e) A wholesaler does not directly or indirectly
underwrite, share in, or contribute to any costs
related to the promotional event, other than for a
promotional event for which the wholesaler employs or
engages the person providing autographs to consumers
at the event.
f) The authorized licensee notifies ABC in writing of
the event at least 30 days in advance and maintains
records necessary to establish compliance with this
law.
2)Defines "authorized licensee" to mean a manufacturer,
winegrower, manufacturer's agent, California winegrower's
agent, rectifier, importer, brandy manufacturer, brandy
importer, or wholesaler.
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
manufacturer, either because the manufacturer owns the
house, or the house is contractually obligated to carry
only a particular manufacturer's products.
AB 2184 (Hall) continued
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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 defines an "on-sale" license as authorizing
the sale of all types of alcoholic beverages: namely, beer,
wine and distilled spirits, for consumption on the premises
(such as at a restaurant or bar). An "off-sale" license
authorizes the sale of all types of alcoholic beverages for
consumption off the premises in original, sealed
containers.
BACKGROUND
Purpose of AB 2184: According to the author's office, this
measure is necessary because it has become more and more
common for individuals in the entertainment industry in
particular to acquire an ownership interest in a brand of
distilled spirits or create a new spirits line and then
arrange to have those brands distributed in the normal and
lawful distribution system established by ABC laws.
Additionally, those individuals will often promote the
product at the retail point of sale through personal
appearances which may include bottle signing events in
licensed premises which carry the product. Examples of
"celebrities" who have garnered an ownership interest in
distilled spirits include: Dan Ackroyd, Crystal Head
Vodka; Sean "P. Ditty" Combs, Ciroc Vodka (primary owner
Diageo); Sammy Hagar, Cabo Wabo Tequila (primary owner
Gruppo Campari); Donald Trump, Trump Vodka; Willie Nelson,
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Old Whiskey River, Heaven Hill Distilleries; Danny DeVito,
Danny DeVito's Limoncello; and, Jay-Z, Armadale Vodka.
The Department of ABC has taken the position that the
appearance of any public personality, with an ownership
interest in an alcoholic beverage product, at a licensed
retail premises to autograph bottles of his or her product,
constitutes a "thing of value" in violation of current
tied-house provisions of the ABC Act - the department
considers the autographed bottle a "premium."
According to the author's office, this measure is intended
to allow wine, beer and spirits producers the opportunity
to participate in promotional events which include
autographs on bottles and other items furnished by a
consumer at a licensed off-sale location.
Arguments in Support: Proponents emphasize that this
measure has been carefully crafted to include a number of
well-reasoned provisions and built-in safeguards that do
not require purchase of a product, prevent charging a fee
for an autograph, and provide a limitation on the number
and duration of events. Additionally, proponents point out
that AB 2184 provides for limitations on how such events
are advertised, as well as a requirement that the ABC be
notified in advance of any such event.
Proponents note that the alcoholic beverage industry is
highly competitive with thousands of competing brands in
the wine and spirits categories - this measure will provide
brand owners and producers the opportunity to market their
product on a personal basis and help build brand awareness
and loyalty.
PRIOR/RELATED LEGISLATION
AB 1531 (Wolk) 2011-12 Session. Would create a new
tied-house exception in the ABC Act authorizing a
winegrower whose licensed premises of production are
located within Napa County to donate wine to the Napa Opera
House, as specified. (Pending in Assembly G.O. Committee)
AB 605 (Portantino) Chapter 230, Statutes of 2010. Added
new provisions to the ABC Act authorizing the department to
issue to the holder of an "off-sale" retail license an
"instructional tasting license" for the purpose of
AB 2184 (Hall) continued
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furnishing tastings of alcoholic beverages to consumers,
subject to certain limitations.
AB 2134 (Chesbro) Chapter 149, Statutes of 2010. Created a
new tied-house exception in the ABC Act that allows
licensed brewers to conduct and participate in events
called "Beer Maker Dinners" for consumers held at an
on-sale retail licensed premise.
SB 131 (Wolk) Chapter 638, Statutes of 2009. Authorized,
until December 31, 2014, monetary contributions and
contributions of alcoholic beverages by specified alcoholic
beverage licensees to the San Francisco Symphony
Association under specified circumstances.
AB 2293 (De Leon) Chapter 638, Statutes of 2008. Added a
new provision to the ABC Act that permits 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.
AB 1245 (Torrico) Chapter 629, Statutes of 2008. Provided
that no rule of the department of ABC may impose a dollar
limit for consumer advertising specialties furnished by a
beer manufacturer to the general public of other than $3
per unit original cost to the beer manufacturer who
purchased it.
SB 1548 (Murray) Chapter 670, Statutes of 2006. Authorized
beer manufacturers and wholesalers to offer beer samples
(not to exceed 8 ounces per person, per day) to individuals
of legal drinking age at on-sale retail licensed premises
under specified conditions.
SB 993 (Burton) Chapter 544, Statutes of 1997. Among other
things, provided that no rule of the Department of ABC may
impose a dollar limit for consumer advertising specialties
furnished by a distilled spirits supplier to a retailer or
to the general public of less than $5 per unit original
cost to the supplier who purchased it. Also, authorized a
licensed distilled spirits manufacturer to conduct tastings
of distilled spirits on the licensed premises under
specified conditions.
SUPPORT: As of June 22, 2012:
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Wine and Spirits Wholesalers, Inc. (sponsor)
Family Winemakers of California
OPPOSE: None on file as of June 22, 2012.
FISCAL COMMITTEE: Senate Appropriations Committee
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