BILL NUMBER: AB 816 AMENDED
BILL TEXT
AMENDED IN SENATE MARCH 6, 2014
INTRODUCED BY Assembly Member Hall
FEBRUARY 21, 2013
An act to amend Section Sections
25000.2 and 25500.1 of, and to repeal Section 25502.1 of,
the Business and Professions Code, relating to alcoholic beverages.
LEGISLATIVE COUNSEL'S DIGEST
AB 816, as amended, Hall. Alcoholic beverages: tied-house
restrictions: on-sale and off-sale retailers advertising.
beverages.
(1) The Alcoholic Beverage Control Act authorizes a licensed beer
manufacturer that produces more than 60,000 barrels of beer a year to
manufacture cider or perry, as defined, at the licensed premises of
production and to sell cider or perry to any licensee authorized to
sell wine. Further, under existing law, if a successor beer
manufacturer, as defined, acquires the rights to manufacture, import,
or distribute a product, defined as a brand or brands of beer, and
then cancels the distribution rights of an existing beer wholesaler,
as defined, the successor beer manufacturer is required to notify the
existing beer wholesaler of his or her intent to cancel those
rights. Existing law also requires the existing beer wholesaler to
continue to distribute the product to at least the same extent that
it distributed the product immediately before the successor beer
manufacturer acquired rights to the product until receipt of the
payment of the specified compensation is made or awarded. The act
provides that a violation of its provisions is a misdemeanor, unless
otherwise specified.
This bill would redefine "product" to also include cider or perry,
as defined. By changing the definition of a crime, the bill would
impose a state-mandated local program.
The
(2) The Alcoholic Beverage
Control Act contains limitations on sales commonly known as
"tied-house" restrictions, which generally prohibit a manufacturer,
winegrower, manufacturer's agent, California winegrower's agent,
rectifier, distiller, bottler, importer, or wholesaler from
furnishing, giving, or lending any money or other thing of value to
any person engaged in operating, owning, or maintaining any off-sale
licensed premises. For purposes of these provisions, the listing of
the names, addresses, telephone numbers, or email
e-mail addresses, or Internet Web site addresses, of 2 or
more unaffiliated off-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 off-sale retailer, if
specified conditions are met.
Existing law includes similar provisions applicable to on-sale
licensed premises, except that those provisions also extend the
above-described exception to other forms of electronic media.
This bill would delete the above exceptions that apply
specifically to off-sale licensed premises and instead would include
off-sale licensed premises within the exceptions previously
applicable only to on-sale licensed premises.
(3)The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 25000.2 of the
Business and Professions Code is amended to read:
25000.2. (a) For purposes of this section:
(1) "Acquire" means to purchase, receive, assume, obtain, or
otherwise come into possession or control of.
(2) "Affected distribution rights" means the distribution rights
to the product held by the existing beer wholesaler prior to
before the acquisition of the right to
manufacture, import, or distribute the product by the successor beer
manufacturer.
(3) "Beer manufacturer" includes any holder of a beer manufacturer'
s license, any holder of an out-of-state beer manufacturer's
certificate, or any holder of a beer and wine importer's general
license.
(4) "Cancel" means to terminate, reduce, not renew, not appoint or
reappoint, or cause any of the same.
(5) "Existing beer wholesaler" means a beer wholesaler that
distributes a product at the time a successor beer manufacturer
acquires the rights to manufacture, import, or distribute that
product.
(6) "Fair market value" includes all elements of value, including,
but not limited to, goodwill.
(7) "Product" means a brand or brands of beer, as defined by
Section 23006 and cider and perry as defined in
Section 4.21(e)(5) of Title 27 of the Code of Federal Regulations.
This paragraph does not alter or amend the classification
of cider or perry as wine for any purpose other than that provided by
this section .
(8) "Successor beer manufacturer" means a beer manufacturer that
acquires the rights to manufacture, import, or distribute a product.
(9) "Successor beer manufacturer's designee" means one or more
distributors designated by the successor beer manufacturer to replace
the existing beer wholesaler, for all or part of the existing beer
wholesaler's territory, in the distribution of the product.
(b) (1) Any successor beer manufacturer that acquires the rights
to manufacture, import, or distribute a product, and who cancels any
of the existing beer wholesaler's rights to distribute the product,
shall comply with this section.
(2) A successor beer manufacturer's designee shall comply with
this section.
(c) (1) The successor beer manufacturer shall notify the existing
beer wholesaler of the successor beer manufacturer's intent to cancel
any of the existing beer wholesaler's rights to distribute the
product.
(2) The successor beer manufacturer shall mail the notice by
certified mail, return receipt requested, to the existing beer
wholesaler. The successor beer manufacturer shall include in the
notice the name, address, and telephone number of the successor beer
manufacturer's designee or designees.
(d) The successor beer manufacturer's designee shall negotiate
with the existing beer wholesaler to determine the fair market value
of the affected distribution rights and, if the existing beer
wholesaler and the successor beer manufacturer's designee agree to
the fair market value of the affected distribution rights, shall
compensate the existing beer wholesaler in the agreed amount. The
successor beer manufacturer's designee and the existing beer
wholesaler shall negotiate in good faith.
(e) The existing beer wholesaler shall continue to distribute the
product to at least the same extent that it distributed the product
immediately before the successor beer manufacturer acquired rights to
the product until receipt of the payment of the compensation agreed
to under subdivision (d) is made or is awarded under subdivision (f).
The successor beer manufacturer and the existing beer wholesaler
shall act in good faith regarding the ongoing supply and distribution
of the product.
(f) If the successor beer manufacturer's designee and the existing
beer wholesaler are unable to mutually agree on the fair market
value of the affected distribution rights within 30 days of the
existing beer wholesaler's receipt of the successor beer manufacturer'
s notice pursuant to subdivision (c), the successor beer manufacturer'
s designee or the existing beer wholesaler shall initiate arbitration
against each other to determine the issue of compensation for the
fair market value of the affected distribution rights no later than
40 days after the existing beer wholesaler's receipt of the successor
beer manufacturer's notice pursuant to subdivision (c). Upon
submission to arbitration, the arbitration shall be the means of
determining compensation to the existing beer wholesaler for the fair
market value of the affected distribution rights, and the fair
market value of the affected distribution rights shall be the purpose
of the arbitration unless the parties agree otherwise.
(1) An arbitration held under this subdivision shall be held in
California through a private arbitration services provider with at
least three offices in California and a statewide roster of at least
70 neutral arbitrators, of which at least 30 have prior experience as
a sole arbitrator in franchise, distribution, or related business
litigation.
(2) The direct costs of the arbitration, including any fees
charged by the arbitrator, shall be borne equally by the parties
engaged in the arbitration. All other costs shall be paid by the
party incurring them.
(3) The parties shall mutually agree on an arbitrator. If the
parties cannot agree on the arbitrator, the arbitration provider
shall select an impartial arbitrator.
(4) (A) No later than 20 days after receipt of a notification to
arbitrate, the parties shall complete an initial exchange of all
nonprivileged documents and other information relevant to the fair
market value of the affected distribution rights in their possession
and control, including, without limitation, copies of all documents
and the names of individuals who may be called to testify at the
arbitration hearing. No later than 45 days after receipt of
notification to arbitrate, the parties shall complete an exchange of
the names of any experts who may be called to testify at the
arbitration hearing, together with each expert's report that may be
introduced at the arbitration hearing.
(B) The arbitrator may modify the requirements of subparagraph (A)
on a showing of good cause. The arbitrator shall permit third-party
discovery and additional discovery between beer wholesalers,
including depositions, which the arbitrator finds appropriate for a
period of time not to exceed 90 days after receipt of a notification
to arbitrate. No discovery shall be permitted against a beer
manufacturer.
(5) The decision of the arbitrator shall be final and binding on
the parties unless notice of appeal is filed, within 10 business days
after service of the arbitration award, with the superior court of
the county in which the hearing was held. Upon filing of the appeal,
the court shall review the arbitration award for errors of fact or
law by determining whether the award is supported by the sufficiency
of the evidence presented at the arbitration. This subdivision shall
further permit any other appeal or review that is authorized by
the California Arbitration Act (Title Title
9 (commencing with Section 1280) of Part 3 of the Code of Civil
Procedure) Procedure, which governs
arbitration .
(6) The arbitrator's award shall be monetary only and shall not
enjoin or compel conduct.
(7) The arbitration hearing shall conclude not more than 180 days
after receipt of a notification to arbitrate, unless the time period
is extended by mutual agreement of the parties or by the arbitrator.
(8) The arbitrator shall render a decision not later than 15 days
after the conclusion of the arbitration unless this time period is
extended by mutual agreement of the parties or by the arbitrator.
(9) A party who fails to participate in the arbitration hearings
waives all rights the party would have had in the arbitration and is
considered to have consented to the determination of the arbitrator.
(10) The Legislature finds and declares that several unique
factors in combination warrant the Legislature authorizing limited
mandatory arbitration between an existing beer wholesaler and a
successor beer manufacturer's designee solely to determine the issue
of compensation for the fair market value of the affected
distribution rights:
(A) On the issue of the fair market value of the affected
distribution rights, the parties are sophisticated and in an equal
position in their knowledge of this legal issue and understand the
law and their legal rights, including their jury trial rights.
(B) The parties desire a mandatory arbitration provision to
resolve the question of compensation for the fair market value of the
affected distribution rights if the parties are not able to reach a
mutual settlement so that product distribution can be continued in an
orderly manner and the determination of compensation can be made in
a timely manner.
(C) The state's regulatory interest in maintaining orderly markets
for the safe and efficient transportation, distribution, and sale of
beer within the state warrants the statutory authorization for
mandatory arbitration as provided in this section.
(g) If the existing beer wholesaler does not receive payment of
the compensation under subdivision (d) or (f) not later than 10
business days after the date of the settlement or service of the
arbitration award, and if there is no appeal or review filed under
paragraph (5) of subdivision (f), the existing beer wholesaler shall
remain the distributor of the product in the existing beer wholesaler'
s territory to at least the same extent that the existing beer
wholesaler distributed the product immediately before the successor
beer manufacturer acquired rights to the product, and the existing
beer wholesaler is not entitled to the settlement or arbitration
award.
(h) Nothing in this section shall be construed to limit or
prohibit good faith settlements voluntarily entered into by the
parties subsequent to the successor beer manufacturer's notice
pursuant to subdivision (c).
SECTION 1. SEC. 2. Section 25500.1
of the Business and Professions Code is amended to read:
25500.1. (a) The listing of the names, addresses, telephone
numbers, email e-mail addresses, or
Internet Web site addresses, or other electronic media, of two or
more unaffiliated on-sale or off-sale retailers selling beer, wine,
or distilled spirits produced, distributed, or imported by a
nonretail industry member in response to a direct inquiry from a
consumer received by telephone, by mail, by electronic inquiry, or in
person does not constitute a thing of value or prohibited inducement
to the listed on-sale or off-sale retailer, provided all of the
following conditions are met:
(1) The listing does not also contain the retail price of the
product.
(2) The listing is the only reference to the on-sale or off-sale
retailers in the direct communication.
(3) The listing does not refer only to one on-sale retailer or
only to on-sale or off-sale retail establishments controlled directly
or indirectly by the same retailer.
(4) The listing is made by, or produced by, or paid for,
exclusively by the nonretail industry member making the response.
(b) For the purposes of this section, "nonretail industry member"
is defined 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 other
licenses held directly or indirectly by that person.
SEC. 2. SEC. 3. Section 25502.1 of
the Business and Professions Code is repealed.
SEC. 4. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.