BILL ANALYSIS Ó
AB 1116
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Date of Hearing: May 8, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1116 (Hall) - As Amended: May 1, 2013
Policy Committee: Governmental
Organization Vote: 17 - 0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill expands current law provisions that allow specified
licenses to provide, free of charge, entertainment, food, and
distilled spirits, wine, or nonalcoholic beverages to a limited
number of consumers over 21 years of age at an invitation-only
event, by allowing those events to be held on the premises of a
hotel. Specifically, this bill:
1)Adds the premises of a licensed hotel, as a location where an
invitation-only event can be held by a manufacturer of
distilled spirits, distilled spirits manufacturer's agent,
winegrower, rectifier, or distiller, or its authorized
unlicensed agent. At the event, the licensee may continue to
provide, free of charge, entertainment, food, and distilled
spirits, wine, or nonalcoholic beverages to consumers in
connection with the sale or distribution of wine or distilled
spirits.
2)Defines hotel as any hotel, motel, resort, bed and breakfast
inn, or other similar transient lodging establishment, but it
does not include any residential hotel as defined in Section
50519 of the Health and Safety Code.
3)Increases from 400 to 600 the total number of consumers and
their guests allowed at any event.
4)Extends the current January 1, 2014 sunset date to January 1,
2018.
FISCAL EFFECT
AB 1116
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1)If the expansion of this tied house exception to 20,000 new
venues across the state results in 100 additional events a
year being held and violations were discovered at five of
those authorized events, costs to ABC could exceed $150,000
(ABC Fund), assuming average investigation costs of $25,000
per case, plus staffing for increased administrative workload.
2)Negligible non-reimbursable costs for prosecution and/or
incarceration, offset by fine revenue, for misdemeanor
violations of these provisions of the Alcoholic Beverage and
Control Act.
COMMENTS
1)Purpose . This bill significantly expands the privileges
provided under AB 2293 (De Leon), Chapter 638, Statutes of
2008. AB 2293 allowed specific ABC alcohol licenses
(distilled spirits manufacturer, winegrower, etc.) to
entertain consumers at private parties and events by
invitation-only where potential buyers can consume their
alcohol product, free of charge. The bill contained
restrictive criteria in order to provide appropriate controls
relating to the promotional events. Primarily, the bill
limited the number of guests to 400 and specified that these
events could only be held at certain unlicensed locations. In
other words, they could not be held at restaurants, bars,
hotels, liquor stores or other venues that had a permanent
liquor license.
The author notes that there have only been 21 of these events
held since 2009. This figure may not represent all of the
events that have been held. These events are authorized
through catering permits. ABC issues approximately 4,000
catering permits each year and does not track how many of
those permits were used for these invitation-only events.
There could have been significantly more events than the 21
identified by the author.
Proponents of this bill contend that the low number of
invitation-only events is directly related to the narrow
criteria placed in AB 2293. By broadening those criteria, they
hope to significantly increase the number of events.
The author argues that because the restrictions were so
AB 1116
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narrow, the original tied house exception has been largely
unsuccessful. The author argues that the venues where these
events can currently be held are difficult to find, often in
remote, unsafe and/or cost-prohibitive locations. The bill
significantly expands the permissible venues to include hotels
that have permanent ABC licenses. Under this legislation,
manufacturers and winegrower will now be able to host these
events at any hotel, motel, resort or bed and breakfast that
has a permanent liquor license. There are over 20,000 hotels
in the state, it is likely that most of them have some type of
permanent ABC license.
AB 1116 also proposes to increase the number from 400 to 600
persons that can attend these events. Proponents argue, when
these events are held; the host must assume all invitees will
attend so that the supplier is not in violation of the law.
Past experiences have shown that far fewer actually attend.
This means a supplier should only invite 400 consumers to the
private party to ensure that they stay within the confines of
current law.
The author states, the prohibitions and requirements of the
law have limited opportunities and result in the program being
underutilized. The author believes the changes proposed in AB
1116 are necessary to meet the original intent of the law,
which was to allow suppliers the ability to responsibly
showcase products to consumers over 21 years of age. However,
as the original legislation moved through the legislative
process in 2008, the bill was intentionally and carefully
narrowed to ensure that these unprecedented events were held
in very limited locations and with a limited number of
invitees.
2)Tied-house law . The tied-house laws, developed after
prohibition, sought to break up and separate the liquor
industry by categorizing and regulating each aspect of the
business. It is essentially divided into manufacturing,
wholesaling, and retailing. Each category is independent of
the other with specific laws ensuring that the relationship
between manufacturers, distributors and retailers remains
distinct. 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
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permitted to do business as another type of licensee within
the "three-tier" system.
The current Tied House laws are specific about who can sell
alcoholic beverage products to whom. Generally, manufacturers
must sell their products through wholesalers so that there is
no direct contact between the manufacturer and the retailer or
the consumer. This bill expands and extends the tied-house
exception granted under AB 2293, which allows manufacturers to
have direct contact with consumers.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081