BILL ANALYSIS Ó
AB 2349
Page 1
Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
AB 2349 (Nestande) - As Introduced: February 24, 2012
SUBJECT : Alcoholic beverages: tied-house restrictions:
advertising.
SUMMARY : Revises the direct inquiry provisions with the
Alcoholic Beverage Control Act (Act) to remove the requirement
that the unaffiliated on-sale retailer operates and is licensed
as a bona fide public eating place.
EXISTING LAW :
1) Establishes the Department of Alcoholic Beverage Control
(ABC) and grants it exclusive authority to administer the
provisions of the 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.
2) 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).
3) Provides that the listing of the names, addresses, telephone
numbers or e-mail addresses, or both, or Internet Web site
addresses, of two or more unaffiliated on-sale retailers selling
beer, wine, or distilled spirits, and operating and licensed as
bona fide public eating places selling the beer, wine, or
distilled spirits produced, distributed, or imported by a
nonretail industry member in response to a direct inquiry from a
consumer, as specified, does not constitute a thing of value or
prohibited inducement to the listed on-sale retailer, if
specified conditions are met.
4) Defines "nonretail industry member" as a manufacturer,
including, but not limited to, a beer
manufacturer, winegrower, or distiller of alcoholic beverages or
an agent of that entity, or a wholesaler, regardless of any
AB 2349
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other licenses held directly or indirectly by that person.
FISCAL EFFECT : Unknown.
COMMENTS :
Purpose of the bill : According to the author's office, current
law prohibits a "nonretail industry member," as defined
(manufacturers and distributors), from giving or lending money
or anything of value to anyone who operates, owns or maintains
any off-sale licensed premise. However, these licensed entities
may list or publish, in response to a direct inquiry from a
consumer, the name, address, telephone numbers, or e-mail, web
address of two or more retailers who sell their products so long
as the retailer operates and is licensed as a bona fide public
eating place. i.e., restaurant.
AB 2349 revises the direct inquiry provisions in current law to
remove the requirement that the unaffiliated on-sale retailer
operates and is licensed as a bona fide public eating place.
This change will allow a "nonretail industry member", as
defined, to list or publish the address, telephone number, web
address, etc. of a bar and/or other retail locations in response
to a direct inquiry from a consumer.
Currently, "nonretail industry members, as defined, often list,
on a Facebook fan page or website, the different restaurants
where a consumer may purchase their product. The author
believes that given the development of new social media, a
"nonretail industry member", as defined, should be allowed to
utilize the various social media mediums as a marketing tool to
educate a potential customer about additional retail locations
where a product can be purchased, not just at restaurants.
The author's office also points out that the impact of this bill
would be broader brand awareness for small producers in a highly
competitive marketplace that could improve overall economic
viability.
Background : 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).
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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.
In support : According to the sponsor of this bill, the
California Beer and Beverage Distributors, a recent decision of
the U.S. District Court for the Western District of Texas,
Austin Division, ruled unconstitutional a Tied-house provision
of the Texas Alcoholic Beverage Control Act prohibiting brewers
and beer distributors from listing retailers that sell their
beers. In light of the ruling, the Texas ABC announced that
manufacturers and distributors can list the retailers who carry
their products so long as there is no financial remuneration,
incentive, inducement, or compensation between a member of one
tier of the industry and member of another tier.
California law currently permits alcohol manufacturers and
distributors to list two or more unaffiliated off-sale and
on-sale restaurant licensees that carry their beers, but
prohibits listing on-sale bars that carry their beers. AB 2349
corrects that inequity, levels the playing field for all
retailers and brings California law into compliance with the
most recent, relevant federal court decision on this issue.
California's current prohibitions related to payments for
advertising or any other financial remuneration, incentive,
inducement or other compensation between suppliers
(manufacturers and distributors) and retailers remain unaffected
by this bill.
Prior legislation : SB 1096 (Wiggins), Chapter 285, Statutes of
2010. Made various technical and code maintenance changes to
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several provisions of the Act to keep up with modern technology.
SB 1423 (Chesbro), Chapter 205, Statutes of 2000. Authorized
wineries and brandy manufacturers to advertise the name and
location of restaurants that sell their products.
SB 1233 (Chesbro), Chapter 666, Statutes of 1999. Allowed for
the limited dissemination of information regarding the off-sale
availability of alcoholic beverages.
AB 2777 (Granlund), Chapter 980, Statutes of 2000. Broadened an
existing tied-house exception relating to the purchase of
alcohol advertisements at specified venues to include distilled
spirits manufacturers, and authorizes a non-retail alcohol
industry member to list specified information relating to the
availability of alcoholic beverages at no more than two
restaurants in response to a direct inquiry from a consumer
received by telephone, mail, or the Internet.
REGISTERED SUPPORT / OPPOSITION :
Support
California Beer and Beverage Distributors
Family Winemakers of California
Heimark Distributing LLC
Opposition
None on file
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531