BILL ANALYSIS Ó
Bill No: SB
778
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
SB 778 Author: Padilla
As Amended: January 5, 2012
Hearing Date: January 10, 2012
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages: contests and sweepstakes
DESCRIPTION
SB 778 adds a new section of law to the Alcoholic Beverage
Control (ABC) Act that authorizes wine, beer and spirits
producers to conduct, sponsor, or participate in consumer
"contests" or "sweepstakes." Specifically, this measure:
1. Stipulates that, notwithstanding any other
provision of law, an authorized licensee may conduct,
sponsor, or participate in consumer contests and
sweepstakes, as defined.
2. Prohibits a purchase or entry fee to enter a
contest or sweepstakes and makes it explicit that
entrance into a contest or sweepstakes shall be
limited to persons 21 years of age or older.
3. Prohibits the use of caps, cap liners, corks,
labels, cartons, cases, or other material attached to
an alcoholic beverage when purchased as an entry to a
contest or sweepstakes or as a means of determining
the amount or size of the prize or the winner.
4. Authorizes "neck-hangers" to carry an entry form
only if similar entry forms are available at the point
of sale and are reproduced or an alternative means of
entry is available.
5. Prohibits the use of scratch-offs, pull tabs, or
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other means of instant wins. Also, prohibits any
requirement to visit a retail premises in order to
enter a contest or sweepstakes.
6. Makes it explicit that alcoholic beverages or
anything redeemable for alcoholic beverages shall not
be awarded as a contest or sweepstakes prize.
7. Prohibits a retail licensee from serving as the
agent of an authorized licensee for purposes of
collecting or forwarding entries or awarding prizes to
a contest or sweepstakes winner.
8. Prohibits a licensee that is not an authorized
licensee from sharing in, or contributing to, the
costs of a contest or sweepstakes.
9. Stipulates that advertising of a contest or
sweepstakes must comply with existing signage and
advertising restrictions and regulations issued by the
Department of ABC. Also, prohibits such advertising
from identifying or referring to any retail licensee.
10. Makes it explicit that a prize awarded for a
contest or sweepstakes shall not be subject to the
monetary limitations imposed by existing provisions of
the ABC Act (Section 25600 of the Business &
Professions Code) or a regulation issued by the
Department of ABC.
11. Provides that contest or sweepstakes prizes shall
not be awarded to any retail or wholesale licensee or
agent officer, or family member of any retail or
wholesale licensee. Additionally, requires authorized
licensees to maintain all records pertaining to a
contest or sweepstakes for three years following the
completion of a contest or sweepstakes.
12. Provides that an authorized licensee that violates
any of the above listed provisions, in addition to any
other penalties imposed by law, may be prohibited by
the Department of ABC from offering a contest or
sweepstakes to California residents for a period of 12
months.
13. Defines "authorized licensee" to mean a winegrower,
beer and wine importer general, beer manufacturer,
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out-of-state beer manufacturer certificate holder,
distilled spirits manufacturer, distilled spirits
manufacturer's agent, distilled spirits importer
general, distilled spirits rectifier, distilled
spirits general rectifier, rectifier, out-of-state
distilled spirits shipper's certificate holder, brandy
manufacturer, and brandy importer. An authorized
licensee is allowed to hold more than one license.
14. Defines "contest" to mean a game, contest, puzzle,
scheme, plan, or similar activity that holds out or
offers to participants the opportunity to receive or
compete for gifts, prizes, gratuities, or other things
of value as determined by skill, knowledge, or ability
rather than upon random selection ("skill, knowledge,
or ability" does not include the consumption or use of
alcoholic beverages).
15. Defines "sweepstakes" to mean a procedure,
activity, or event for the distribution of anything of
value by lot, chance, or random selection where the
odds for winning a prize are equal for each entry.
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 of
manufacturer, wholesaler, and retailer. The original
policy rationale for this body of law was to prohibit the
vertical integration of the alcohol industry and to protect
the public from predatory marketing practices. Generally,
other than exemptions 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.
The ABC Act prohibits any licensee from giving any premium,
gift, or free goods in connection with the sale or
distribution of any alcoholic beverage, except as provided.
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With respect to beer, existing law provides that premiums,
gifts, or free goods, including advertising specialties
that have no significant utilitarian value other than
advertising, shall be deemed to have greater than
inconsequential value if they cost more than $0.25 per
unit, or cost more than $15 in the aggregate for all those
items given by a single supplier to a single retail
premises per calendar year. Additionally, existing law
prohibits the ABC from imposing a dollar limit of less than
$3 per unit original cost to the beer manufacturer who
purchased it.
With respect to distilled spirits and wines, a licensee may
furnish, give, rent, loan, or sell advertising specialties
to a retailer, provided those items bear conspicuous
advertising required of a sign and the total value of all
retailer advertising specialties furnished by a supplier,
directly or indirectly, to a retailer do not exceed $50
dollars per brand in any one calendar year per retail
premises.
Existing law prohibits the ABC from imposing a dollar limit
of less than $5 for consumer advertising specialties
furnished by a distilled spirits supplier to a retailer or
the general public. Existing law also provides that
consumer advertising specialties furnished by a wine
supplier to a retailer or to the general public shall not
exceed $1 per unit original cost to the supplier who
purchased it.
ABC Rule 106 prohibits the giving of any premium, gifts or
goods of any sort, whether by way of sweepstakes, drawings,
prizes, cross merchandizing promotions with a non-alcoholic
beverage or product, or any other method if the value of
the premium, gift or good exceeds $0.25 with respect to
beer, $1 with respect to wine, or $5 with respect to
distilled spirits. Rule 106 authorizes alcohol suppliers
to sponsor contests and other similar activities subject to
these monetary limits and other specified conditions.
The ABC Act permits an on-sale retail licensee of wine or
distilled spirits to conduct "instructional" consumer
tastings on the licensed retail premise provided the
following conditions are met: (1) no more than ounce of
distilled spirits is offered in one tasting; (2) no more
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than one ounce of wine is offered in one tasting; and, (3)
no more than three tastings are offered to an individual in
one day.
Existing law authorizes 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.
Existing law permits a licensed winegrower, manufacturer,
importer, or wholesaler to provide samples of the alcoholic
beverages which are authorized to be sold by the licensee
in accordance with rules prescribed by the ABC. A retail
licensee, however, is not authorized to provide any free
samples of alcoholic beverages. Moreover, ABC regulations
provide that samples of alcoholic beverages may only be
given away to licensees or employees of licensees who are
in a position to purchase the product or who are in need of
additional information about the product, as specified.
Existing law authorizes distilled spirits manufacturers to
conduct tastings and provide distilled spirits without
charge for events sponsored by nonprofit organizations.
Only persons affiliated with the nonprofit organization,
including up to three guests, may attend. No distilled
spirits may be sold or solicited for sale at the tasting,
and the organization must obtain a permit from ABC prior to
the event.
BACKGROUND
Purpose of SB 778: The author's office notes that this
measure is co-sponsored by the Wine Institute and the
Family Winemakers of California and is simply intended to
allow Californians 21 years of age or older to join the
rest of the nation's consumers in being able to take part
in marketing activities conducted by producers as a means
to build brand awareness and interest. The sponsors point
out that SB 778 is modeled after guidelines previously
utilized by the Department of ABC and includes numerous
restrictions and safeguards to preserve the integrity of
the state's alcoholic beverage laws and regulations in
order to guide authorized licensees in how to legally
conduct contests and sweepstakes.
Proponents emphasize that SB 778 is "responsible
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legislation that does not encourage consumption of alcohol.
In fact, the legislation prohibits a requirement of
purchase for participation. It also requires that
participants be of legal drinking age and requires that all
such promotions meet the existing advertising laws and
guidelines issued by the Department of ABC."
Arguments in Opposition: The California Council on Alcohol
Problems (CCAP) is opposed to this measure on the basis
that it is a "gut-and-amend" of a two year bill which must
be passed through the House of origin in less than three
weeks. Writing in opposition, CCAP states that "The
public, the media, and interest groups outside the alcohol
industry have a right to be given the opportunity to
digest, consider and respond to such a measure in a more
deliberative fashion."
A Sampling of 2011 Winery Sweepstakes/Contests Offered to
"Non-California" Residents:
Barefoot Wine & Bubbly Hosts Jake Owen Sweepstakes
Prize - The grand prize winner and three friends will win a
once-in-a-lifetime opportunity; a trip to Jake's hometown
in Florida to catch his concert in Vero Beach in a premium
viewing area and will have the opportunity to meet and
mingle with Jake.
Concannon Vineyard "Family First" Celebration Sweepstakes
Prize - Chance to win $20,000 to host the family reunion of
their dreams.
Wente Discover the Wine, Discover the Music Sweepstakes
Grand Prize - trip for two (2) to Livermore, CA for a 2012
Concert at Wente Vineyards, consisting of domestic coach
air transportation within the United States for two people,
(2) nights accommodations at the Wente Vineyards cottage, 3
meals per day for 2 days for winner and travel companion at
Wente Vineyards, and ground transportation to and from
airport to Wente Vineyards.
Robert Mondavi Wine Country Getaway Sweepstakes
Prize - A trip for two (2) to Napa, California, to attend a
Robert Mondavi Winery concert scheduled between July 2011
and August 2011, consisting of round-trip coach air
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transportation from major airport nearest winner's
residence to San Francisco, two (2) nights double-occupancy
Napa hotel accommodations, three (3) days car rental, $500
cash, admission for two (2) to the concert including a VIP
reception, and a winery tour.
Beringer and Buble Ultimate VIP Experience Sweepstakes
Prize - A trip for 2 to Beringer Vineyards to attend a
special performance by Michael Buble. Prize also includes
airfare, accommodations, and dinner at Beringer.
Fetzer's Big Green Egg Grill Sweepstakes
Prize - The grand-prize winner will receive a large Big
Green Egg Grill and one starter kit.
Korbel Mimosa Girls Getaway Contest
Prize - Package includes all airfare and accommodations for
four days of VIP extravagance in California with limousine
transportation, an exclusive winery tour, a private chef
and poolside spa treatment at the Korbel Winery for the
grand prize winner and her 5 girlfriends.
Sutter Home Build a Better Burger Contest
Prize - The Grand Prize Winner for the Best Beef Burger
will receive a cash prize of $100,000.
Beringer Great Steak Challenge
Grand prize $25,000; Second prize $7,500; Third prize
$2,500; Fourth prize Weber Genesis E320 grill.
Staff Comments
Historical Perspective: For the better part of a 20-year
period California consumers were eligible to enter
alcoholic beverage sweepstakes like other states due to the
fact that the Department of ABC had sanctioned the use of
sweepstakes, and had issued a series of policy guidelines
authorizing sweepstakes under specific conditions.
However, in response to what many felt was an overly
aggressive brewer marketing program, where increasingly
attractive gifts could be redeemed based on the quantities
of alcohol consumed (e.g., redemption of bottle caps), the
Department of ABC in 1999 amended its Rule 106 to clarify
the existing law that prohibits the giving of any premium,
gift, or free goods, by any means whatsoever, including,
but not limited to, sweepstakes, drawings, prizes, and
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cross-merchandising promotions, where the value of such
premium, gift, or free good exceeds the monetary limits
determined in statute.
At the time, various segments of the alcohol industry
complained that the revised rule was inconsistent with the
Department of ABC's previous position regarding consumer
promotions and sweepstakes. This prompted the Department
of ABC to pursue legal means to halt the marketing program
and issue a warning to the alcohol industry that the ABC
was returning to a strict interpretation of existing law
and would prohibit future alcohol advertising campaigns
that sought to use sweepstakes, contests, or cross
merchandising themes. Subsequently, several beer
manufacturers filed legal challenges claiming that the
Department of ABC had exceeded its statutory authority by
in effect prohibiting beer manufacturers from conducting
sweepstakes promotions. These challenges were ultimately
rejected by the Third District Court of Appeal and the
State Supreme Court and were denied a hearing. In doing
so, the court observed that the ABC's position regarding
sweepstakes prizes was consistent with the statute despite
its 20-year history of authorizing sweepstakes.
SB 778 would once again permit California residents to
enter alcohol-related sweepstakes and contests, giving them
the same opportunity to win a prize as someone from outside
the state. There have been several attempts (see
prior/related legislation listed below) over the past dozen
or so years to clarify existing law with respect to this
matter however, those efforts failed due to a lack of
consensus within the alcohol beverage industry as to the
appropriate policy on the use of contests, sweepstakes, and
cross merchandizing themes in industry advertising
programs.
PRIOR/RELATED LEGISLATION
AB 1245 (Torrico) Chapter 629, Statutes of 2008. Modified
an existing provision of the ABC Act to allow beer
manufacturers to give adult consumers promotional
advertising items valued at $3 per unit original cost to
the beer manufacturer who purchased it.
AB 2518 (Bill Campbell) 2001-02 Session. Would have
allowed alcoholic beverage suppliers to conduct sweepstakes
or contests that offer adults the opportunity to win prizes
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or things of value. (Failed passage in Assembly G.O.
Committee)
AB 642 (Strickland) 2001-02 Session. Would have provided
that no rule of the Department of ABC may permit a licensee
to offer any premium, gift, or free goods to a consumer in
such a way that would encourage the purchase or consumption
of alcoholic beverages by minors, and that is conditioned
on the purchase of an alcoholic beverage. (Held in
Assembly G.O. Committee)
AB 953 (Brown) 1997-98 Session. Would have allowed a
distilled spirits or beer supplier to sponsor a consumer
sweepstakes or contest, as defined, offering the chance to
win prizes or other things of value, if specified
conditions are met. (Withdrawn from Senate third reading
and re-referred to Senate Committee on Rules)
SB 1069 (Thompson) 1997-98 Session. Would have allowed a
winegrower or brandy
manufacturer to sponsor a sweepstakes or contest, as
defined, offering the chance to win prizes or other things
of value, if specified conditions are met, and to provide
rebates or
discounts on nonalcoholic beverages or services in
connection with the sale or distribution of wine and brandy
under certain conditions. (Placed on Assembly inactive
file)
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 January 6, 2012:
Wine Institute (co-sponsor)
The Family Winemakers of California (co-sponsor)
Diageo
OPPOSE: As of January 6, 2012:
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California Council on Alcohol Problems
FISCAL COMMITTEE: Senate Appropriations Committee
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