BILL ANALYSIS Ó
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 778|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 778
Author: Padilla (D)
Amended: 8/20/12
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMM : 10-0, 1/10/12
AYES: Wright, Anderson, Berryhill, Cannella, Corbett, De
León, Evans, Hernandez, Padilla, Yee
NO VOTE RECORDED: Calderon, Strickland, Wyland
SENATE APPROPRIATIONS COMMITTEE : 8-0, 1/17/12
AYES: Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley,
Price, Steinberg
NO VOTE RECORDED: Runner
SENATE FLOOR : 35-0, 1/23/12
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Corbett, Correa, De León, DeSaulnier, Dutton, Emmerson,
Fuller, Gaines, Hancock, Harman, Hernandez, Huff, Kehoe,
Leno, Lieu, Liu, Lowenthal, Negrete McLeod, Padilla,
Pavley, Price, Rubio, Simitian, Steinberg, Strickland,
Vargas, Walters, Wolk, Wright, Yee
NO VOTE RECORDED: Cannella, Evans, La Malfa, Runner,
Wyland
ASSEMBLY FLOOR : 75-4, 8/22/12 - See last page for vote
SUBJECT : Alcoholic beverages licensees: contests and
sweepstakes
SOURCE : The Wine Institute
CONTINUED
SB 778
Page
2
Family of Wine Makers of California
DIGEST : This bill adds a new section of law to the
Alcoholic Beverage Control (ABC) Act that authorizes wine,
beer and spirits producers to conduct consumer "contests"
or "sweepstakes."
Assembly Amendments narrow the bill to conducting consumer
contests or sweepstakes, and make clarifying changes.
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
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.
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
CONTINUED
SB 778
Page
3
$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
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.
CONTINUED
SB 778
Page
4
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.
This bill permits 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.
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
CONTINUED
SB 778
Page
5
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, 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(s). Instant or
immediate notification to the consumer that he/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
CONTINUED
SB 778
Page
6
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.
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/she is a
CONTINUED
SB 778
Page
7
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 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.
CONTINUED
SB 778
Page
8
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.
Comments
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 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.
CONTINUED
SB 778
Page
9
This bill 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.
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
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
CONTINUED
SB 778
Page
10
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.
Prior and 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
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
CONTINUED
SB 778
Page
11
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2012-13 2013-14
2014-15 Fund
Admin/enforcement $47.5 $95 $95Special*
* Alcoholic Beverage Control Fund
CONTINUED
SB 778
Page
12
SUPPORT : (Verified 8/22/12)
Wine Institute (co-source)
Family Winemakers of California (co-source)
California Wine Institute
Diageo
Distilled Spirits Council of the United States
Korbel
Monterey County Board of Supervisors
Monterey County Vintners and Growers Association
Napa Valley Vintners
Treasury Wine Estates
OPPOSITION : (Verified 8/22/12)
Alcohol Justice
ARGUMENTS IN SUPPORT : According to the author's office
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.
Proponents point out that this bill 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 this bill 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 the Department of ABC."
ARGUMENTS IN OPPOSITION : The opposition is concerned
about the policy implications and costs to the state
associated with allowing sweepstakes and other give-away
contests correlated with alcoholic beverages.
ASSEMBLY FLOOR : 75-4, 8/22/12
CONTINUED
SB 778
Page
13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell,
Grove, Hagman, Hall, Harkey, Hayashi, Hill, Huber, Hueso,
Huffman, Jeffries, Jones, Knight, Lara, Bonnie Lowenthal,
Ma, Mansoor, Mendoza, Miller, Mitchell, Monning,
Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel
Pérez, Portantino, Silva, Skinner, Smyth, Solorio,
Swanson, Torres, Valadao, Wagner, Wieckowski, Williams,
Yamada, John A. Pérez
NOES: Carter, Halderman, Logue, Morrell
NO VOTE RECORDED: Roger Hernández
DLW:m 8/22/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED