BILL ANALYSIS Ó
SB 778
Page 1
SENATE THIRD READING
SB 778 (Padilla)
As Amended August 20, 2012
Majority vote
SENATE VOTE :35-0
GOVERNMENTAL ORGANIZATION 17-0 APPROPRIATIONS 17-0
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|Ayes:|Hall, Nestande, Atkins, |Ayes:|Gatto, Harkey, |
| |Block, Blumenfield, | |Blumenfield, Bradford, |
| |Chesbro, Cook, Galgiani, | |Charles Calderon, Campos, |
| |Garrick, Gatto, Hill, | |Davis, Donnelly, Fuentes, |
| |Jeffries, Ma, Perea, V. | |Hall, Hill, Cedillo, |
| |Manuel Pérez, Silva, | |Mitchell, Nielsen, Norby, |
| |Torres | |Solorio, Wagner |
| | | | |
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SUMMARY : Would permit an authorized licensee, as defined, to
offer the chance to win prizes
via a consumer contest, sweepstakes or by sponsoring a
sweepstakes, subject to specified conditions. Specifically,
this bill :
1) Allows an authorized licensee, as defined to conduct
consumer contests, as specified.
2) Provides that nothing in this bill shall preclude licensees
from sponsoring contests as permitted by regulations of the
Department of Alcoholic Beverage Control (ABC).
3) Provides that entry into or participation in a contest shall
be limited to persons 21 years of age or older. Specifies that
no contest shall involve consumption of alcoholic beverages by a
participant.
4) Specifies that a contest may not be conducted for the
benefit of any permanent retail licensee.
5) Provides that closures, caps, cap liners, corks, labels,
cartons, cases, packaging, or other similar material shall not
be used as an entry to a contest or as a means of determining
the amount or size of the prize or the winner in a contest,
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except as specified.
6) Provides that entry forms may be provided through electronic
or other media, including point of sale, as specified.
7) Specifies that a contest shall not provide for the instant
or immediate awarding of a prize or prizes. Instant or immediate
notification to the consumer that he or she is a winner is
permissible.
8) Specifies that except for providing a means of entry, a
contest authorized by this bill shall not be conducted at the
premises of a retail licensee or the premises of a winegrower or
beer manufacturer operating under a duplicate license for a
branch office.
9) Provides that alcoholic beverages or anything redeemable for
alcoholic beverages shall not be awarded as a contest prize.
10) Provides that advertising or promotion of a contest shall
only be conducted on the premises of a retail licensee when such
advertisement or promotion involves a minimum of three
unaffiliated retail licensees, as defined.
11) Provides that an authorized licensee shall maintain all
records pertaining to a contest for three years following the
completion of a contest, as specified.
12) Provides that an "authorized licensee" shall not include a
beer and wine wholesaler, a beer and wine importer general, or
distilled spirits importer general that only holds a
wholesaler's or retailer's license as an additional license.
13) Defines "Contest" as a game, contest, puzzle, 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.
14) Provides that an authorized licensee may conduct or sponsor
consumer sweepstakes, subject to the specified conditions.
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15) Provides that no entry fee may be charged to participate in
a sweepstakes authorized by this bill. Entry or extra chances
in a sweepstakes shall not be made available via the purchase of
an alcoholic beverage.
16) Provides that entry into or participation in a sweepstakes
shall be limited to persons 21 years of age or older.
17) Specifies that no sweepstakes shall involve consumption of
alcoholic beverages by a participant. Provides that any
sweepstakes offered in California shall be open to all residents
of California. Provides that a sweepstakes may not be conducted
for the benefit of any permanent retail license.
18) Provides that closures, caps, cap liners, corks, labels,
cartons, cases, packaging, or other similar material shall not
be used as an entry to a sweepstakes or as a means of
determining the amount or size of the prize or the winner in a
sweepstakes, except as specified.
19) Provides that the authorized licensee shall provide an
alternative means of entry that does not require a visit to a
licensed premise.
20) Specifies that except as provided, removable entry forms
shall not be used on alcoholic beverage labels, containers,
packaging, cases, or cartons. Entry forms may be provided
through electronic or other media, including point of sale, as
specified.
21) Provides that all sweepstakes entry forms shall provide an
entrant with an equal odds of winning. Provides that a
sweepstakes shall not provide for the instant or immediate
awarding of a prize or prizes. Instant or immediate
notification to the consumer that he or she is a winner is
permissible.
22) Provides that a sweepstakes authorized by this bill shall
not be conducted at the premises of a retail licensee or the
premises of a winegrower or beer manufacturer operating under a
duplicate license for a branch office.
23) Provides that alcoholic beverages or anything redeemable
for alcoholic beverages shall not be awarded as a sweepstakes
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prize, as defined.
24) Provides that an "authorized licensee" shall not include a
beer and wine wholesaler, a beer and wine importer general, or
distilled spirits importer general that only holds a
wholesaler's or retailer's license as an additional license.
25) Provides that "Sweepstakes" means 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.
26) 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.
27) Stipulates that advertising of a contest or sweepstakes
must comply with existing signage and advertising restrictions
and regulations issued by ABC. Also, prohibits such advertising
from identifying or referring to any retail licensee.
28) Provides for the purpose of contest and sweepstakes an
"authorized licensee" means a winegrower, beer and wine importer
general, beer manufacturer, out-of-state beer manufacturer
certificate holder, distilled spirits manufacturer, distilled
spirits manufacturer's agent, distilled spirits importer
general, distilled spirits general rectifier, rectifier,
out-of-state distilled spirits shipper's certificate holder,
brandy manufacturer, and brandy importer.
29) Specifies that an authorized licensee that violates the law
pertaining to contest and sweepstakes, may be prohibited by ABC
from offering a contest to California residents for a period of
12 months, in addition to any other penalty imposed under law.
EXISTING LAW :
1) The 21st Amendment to the United States Constitution
provides that the states with the authority to regulate
importation of alcohol within their borders.
2) Establishes 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
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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.
3) States that 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.
4) 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.
5) Provides that no rule 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.
6) 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.
7) 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.
8) ABC Rule 106 clarifies that the giving of any prohibited
premium, gifts or goods of any sort, is a violation, 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 does allow suppliers to
sponsor contests being conducted by bona fide amateur or
professional organizations established for the encouragement of
the activities involved (for example, PGA golf tournaments or
NFL football games, and the like). Such sponsorship is limited
to monetary payments to such bona fide amateur or professional
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organization conducting the contest, and the Rule also provides
that such sponsorship shall not require the exclusive sale of
the supplier's products and the supplier shall not give anything
of value to anyone other than the organization conducting the
contest. Entry fees may be charged to such contests, but there
shall be no requirement that a participant purchase any of the
supplier's products.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, approximately 4,500 licensees would be authorized to
conduct sweepstakes and contests in California. This would
likely result in a significant increase in public inquiries and
complaints to ABC Trade Enforcement Unit. Assuming those
inquiries and complaints result in between 25 and 50
investigations per year, workload costs for ABC would be between
$100,000 and $200,000 per year (ABC Fund).
COMMENTS :
Purpose of the bill : 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 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 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 ABC."
The bill would permit an authorized licensee to "conduct" a
contest themselves (meaning that they are organizing and holding
the contest in their own name) and they would be able to
"sponsor" someone else's contest under the existing authority
(and with the express limitations) of Rule 106(i)(2).
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Background : 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 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 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 ABC's previous
position regarding consumer promotions and sweepstakes. This
prompted 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 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
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advertising programs.
A Sampling of 2011 Winery Sweepstakes/Contests Offered to
"Non-California" Residents: Concannon Vineyard "Family First"
Celebration Sweepstakes Prize - Chance to win $20,000 to host
the family reunion of their dreams.
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 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.
In support : MillerCoors writes, "Beer manufacturers are
currently allowed to conduct contest and sweepstakes promotions
in other states. Unfortunately, Californians may not
participate in these national sweepstakes and contests because
the state's unique laws limit the value of gifts and free goods
that may be given to consumers to $3 for beer, $5 for distilled
spirits, and $1 for wine. SB 778 would permit California
residents of legal age to enter contests and sweepstakes
promotions offering prizes in excess of the current monetary
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limits under carefully crafted conditions designed to assure
that these events are conducted responsibly and the chances of
winning a prize are not conditioned on the purchase or
consumption of an alcoholic beverage."
The Wine Institute states, "SB 778 includes numerous safeguards
not in other states' laws, such as consumer contests and
sweepstakes cannot be conducted at a retail licensee's premise.
Recent amendments, for clarity sake, bifurcate consumer contests
and sweepstakes into separate code sections and further refine
the bill's intent, such as referencing the consumer contest's
provision does not preclude licensees from sponsoring a
professional or amateur organization's contest as authorized in
the ABC's rules. In addition, consumer sweepstakes and contests
will provide a winery with an important marketing tool to build
brand awareness within its niche consumer base. This is a
challenge since there are over 7,000 wineries in the United
States alone."
The Family Winemaker of California writes, SB 778 would allow
small producers in a highly competitive business to utilize
another marketing approach to introduce or sell wine. This bill
would let California consumers join the rest of the nation's
consumers in being able to take part in promotions by producers
from a simple online contest or a national sweepstakes as a
means to build brand awareness and interest.
In opposition : The California Council on Alcohol Problems
(CCAP) states "Why would we want to encourage the distribution
and purchase of more alcoholic beverages in California,
particularly via a means that resonates with young people (i.e.,
sweepstakes/giveaways)? Even if California policymakers decide
to join other states in authorizing sweepstakes tied to alcohol
marketing, should there be limits to the number/frequency of
such contests and the scope/size of winnings? SB 778 mixes
irresponsible alcohol marketing and gambling, a powerful
combination that could have all sorts of unintended consequences
for California citizens, families and communities."
Prior legislation : AB 1245 (Torrico), Chapter 629, Statutes of
2008. Provides that no rule of ABC may impose a dollar limit
for consumer advertising specialties furnished by a beer
manufacturer to the general public other than $3 per unit
original cost to the beer manufacturer who purchased it.
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AB 2293 (DeLeon), Chapter 638, Statutes of 2008. Added a new
provision to the Act that permits a manufacturer of distilled
spirits, winegrower, rectifier, or distiller, or its authorized
agent to provide their product, as well as entertainment and
food to consumers over 21 years of age during invitation-only
events (free of charge), as specified. The events must occur on
premises for which a caterer's permit authorization has been
issued. The bill sunsets on January 1, 2014.
AB 642 (Strickland), 2001-02 Legislative 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 Legislative 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 Legislative 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.
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Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
FN: 0005128