BILL ANALYSIS Ó
Bill No: AB
1116
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
AB 1116 Author: Hall
As Amended: May 1, 2013
Hearing Date: June 25, 2013
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages
DESCRIPTION
AB 1116 expands an existing provision of law that permits
certain alcoholic beverage producers to hold private,
free-of-charge, invitational-only promotional events, with
entertainment, food and beverages, for a limited number of
consumers over 21 years of age and subject to specified
conditions, to also allow such events to be held on the
premises of a licensed "hotel." Specifically, this
measure:
1) Extends the ability of licensed distilled spirits
manufacturers and winegrowers to hold private,
invitation-only events for brand promotion, under
specified conditions, to include the premises of a
licensed hotel, but only in areas that are not open to
the public.
2) Defines "hotel" to mean 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 law.
3) Increases from 400 to 600 the total number of consumers
and their guests allowed at any such event.
4) Clarifies that all alcoholic beverages provided at any
such event must be purchased from the holder of the
caterer's permit or the licensed hotel, as applicable.
AB 1116 (Hall) continued
Page 2
5) Extends the current sunset on this body of law by four
years (from January 1, 2014 to January 1, 2018).
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.
Existing law, known as the "tied-house" law, separates the
alcoholic beverage industry into three component parts, or
tiers, of manufacturer (including breweries, wineries and
distilleries), wholesaler, and retailer (both on-sale and
off-sale).
Tied-house refers to a practice in this country prior to
Prohibition and still occurring in England today where a
bar or public house, from whence comes the "house" of tied
house, is tied to the products of a particular
manufacturer, either because the manufacturer owns the
house, or the house is contractually obligated to carry
only a particular manufacturer's products.
The original policy rationale for this body of law was to:
(a) promote the state's interest in an orderly market; (b)
prohibit the vertical integration and dominance by a single
producer in the marketplace; (c) prohibit commercial
bribery and protect the public from predatory marketing
practices; and, (d) discourage and/or prevent the
intemperate use of alcoholic beverages. Generally, other
than exceptions 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.
Existing law (Business & Professions Code Section 25600.5),
until January 1, 2014, permits a manufacturer of distilled
spirits, distilled spirits manufacturer's agent,
winegrower, rectifier, or distiller, or its authorized
licensed agent to provide, free of charge, entertainment,
food, and distilled spirits, wine, or nonalcoholic
beverages to consumers over 21 years of age at an
invitation-only event in connection with the sale or
AB 1116 (Hall) continued
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distribution of wine or distilled spirits, subject to
specified conditions. The law provides that no authorized
event shall be conducted on premises for which a permanent
retail license has been issued and makes it explicit that
the total number of consumers and their guests allowed at
any such event shall not exceed 400 people . ABC also is
granted the authority to impose a fee to cover the costs of
administering such events. Additionally, existing law
limits the number of events that can be conducted in a
calendar year to 12 events where the consumers and guests
in attendance exceed 100 people and not more than 24 events
in a calendar year where the consumers and guests in
attendance is 100 people or fewer. The law provides for a
four-hour duration limitation on any such event and
prohibits holding any event at the same location more than
eight times in a calendar year. Furthermore, the law
specifies that all alcoholic beverages served at any such
event must be purchased from the holder of the caterer's
permit. As noted above, this body of law "sunsets" on
January 1, 2014.
Existing law (Business and Professions Code Section
23363.1) permits a licensed distilled spirits manufacturer
to conduct tastings of distilled spirits produced or
bottled by, or produced or bottled for, the licensee, on or
off the licensee's premises. Tastings conducted by the
licensee off the licensee's premises must be for an event
sponsored by a nonprofit organization, as defined, and only
if persons attending the event are affiliated with the
sponsor. Existing law also makes it explicit that no
distilled spirits shall be sold or solicited for sale in
that portion of the premises where the distilled tasting is
being conducted.
Existing law also 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. An instruction may include the history, nature,
values and characteristics of the product being offered,
and the methods of presenting and serving the product.
Existing law defines an "on-sale" license as authorizing
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the sale of all types of alcoholic beverages: namely, beer,
wine and distilled spirits, for consumption on the premises
(such as at a restaurant or bar). An "off-sale" license
authorizes the sale of all types of alcoholic beverages for
consumption off the premises in original, sealed
containers.
BACKGROUND
This measure would expand the privileges provided under AB
2293 (De Leon), Chapter 638, Statutes of 2008 to specified
alcoholic beverage producers. AB 2293 authorized licensed
distilled spirits manufacturers and winegrowers to
entertain consumers at private parties and events by
invitation-only where potential buyers could consume
alcoholic beverages and food free of charge. AB 2293
contained restrictive criteria in order to provide
appropriate controls relating to the promotional events.
Specifically, AB 2293 limited the number of guests to 400
and stipulated that such events could only be held on
premises for which a caterer's permit has been issued.
Events are also authorized to be held on the premises of a
licensed winegrower, provided distilled spirits, other than
brandy, are not served. Such events are not allowed to be
held at restaurants, bars, hotels, liquor stores or other
venues that have a permanent liquor license. The original
sunset provision in AB 2293 was intended as an assessment
period for conduct of such events.
Purpose of AB 1116: The author's office points out that
alcoholic beverage producers have held 21 such promotional
events since 2009 - this figure may not represent all of
the events that have been held in light of the fact that
such events are authorized pursuant to a caterer's permit
and ABC issues several thousand catering permits each year
but does not necessarily track those permits to determine
how many may have been used for these invitation-only
promotional events.
The author's office notes that the low number of
invitation-only events that have been held is directly
related to the narrow criteria placed in AB 2293 of 2008.
The author's office claims that because the existing
restrictions were so narrow, the original tied house
exception has been largely unsuccessful. This measure
proposes to: (a) expand the permissible venues to include
AB 1116 (Hall) continued
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the premises of a licensed hotel and (b) increase the
number of individuals that can attend such events from 400
to 600. The author's office emphasizes that this measure
will enable alcoholic beverage producers to host such
events at a broader range of venues with easier access to
taxis, other transportation, parking and overnight lodging.
PRIOR/RELATED LEGISLATION
AB 933 (Skinner), 2013-14 Session. Would grant licensed
distilled spirits manufacturers and licensed brandy
manufacturers the privilege to conduct consumer tastings on
their licensed premises and to charge for those tastings.
(Pending in this Committee)
AB 949 (Quirk), 2013-14 Session. Would authorize licensed
distilled spirits manufacturers to charge consumers for
tastings and would impose additional conditions on the
provision of tastings by the licensee, including limiting
the size and number of tastes. Also, would provide that a
distilled spirits manufacturer's license authorizes the
licensee to serve and sell food, general merchandise, and
nonalcoholic beverages for consumption on or off the
premises. (Held in Assembly Rules Committee)
AB 636 (Hall), 2013-14 Session. Would permit, under
specified conditions and until January 1, 2016, the
appearance of a person for the purpose of providing
autographs at an instructional event for consumers that a
winegrower, California winegrower's agent, importer, or
other specified parties conduct, or participate in, that is
held at a retailer's premises featuring wines produced by
or for the winegrower or, imported by the wine importer.
(Pending in Senate Appropriations Committee)
AB 2184 (Hall), Chapter 480, Statutes of 2012. Created a
new tied-house exception in the ABC Act that authorizes,
until January 1, 2016, wine, beer and spirits producers to
participate in promotional events held at an off-sale
retail licensed location for the purpose of providing
autographs on bottles or other items to consumers.
AB 252 (Charles Calderon), Chapter 153, Statutes of 2012.
Modified an existing provision of the ABC Act that allows,
until January 1, 2014, a manufacturer, winegrower,
rectifier, or distiller to provide their product offerings
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directly to consumers (free of charge) during
invitation-only events, as specified, to additionally grant
the same privilege to a distilled spirits manufacturer's
agent.
SB 1101 (Wolk), Chapter 177, Statutes of 2010. Clarified
that winemakers who participate in instructional events or
"meet the winemaker dinners," held at a retailer's licensed
premises for consumers, may offer minimal samples (no more
than three one-ounce tastes) of wine from "bottles."
SB 1068 (Hancock), 2009-10 Session. Would have added a new
provision to the ABC Act authorizing a licensed distiller
that distills fewer than 50,000 gallons of spirits annually
to self-distribute to consumers and licensed retailers
(restaurants, liquor stores). (Held in this Committee at
author's request)
SB 1022 (Strickland), Chapter 281, Statutes of 2010.
Expanded an existing tied-house exception to enable
licensed distilled spirits "rectifiers" to donate or sell
their products to specified nonprofit entities for the
purpose of assisting in fund-raising efforts.
AB 2134 (Chesbro), Chapter 149, Statutes of 2010. Created
a new tied-house exception in the ABC Act that allows
licensed brewers to conduct and participate in events
called "Beer Maker Dinners" for consumers held at an
on-sale retail licensed premise.
AB 605 (Portantino), Chapter 230, Statutes of 2010. Among
other things, authorized ABC to issue to the holder of an
"off-sale" retail license an "instructional tasting
license" for the purpose of furnishing tastings of
alcoholic beverages to consumers, subject to certain
limitations.
SB 639 (Calderon), 2009-10 Session. Would have created a
new on-sale tasting license to allow off-sale retail
licensees to furnish tastes of alcoholic beverages to
consumers, as specified. (Died on Senate Appropriations
Suspense File)
AB 2293 (De Leon), Chapter 638, Statutes of 2008. Added a
new provision to the ABC Act authorizing distilled spirits
manufacturers and winegrowers to provide their product
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offerings directly to consumers (free of charge) during
invitation-only events on premises for which a caterer's
permit authorization has been issued.
SB 995 (Maldonado), 2007-08 Session. Would have permitted
winegrowers, distilled spirits manufacturers, distilled
spirits rectifiers general, or distilled spirits importers
general, out-of-state distilled spirits shippers, and
authorized agents of any of the above to instruct consumers
on the premises of an off-sale licensee regarding wine and
distilled spirits, respectively, as provided. Also, would
have allowed the instruction to include the furnishing of
tastings under specified conditions. (Held in this
Committee at author's request.)
AB 2613 (Plescia), 2007-08 Session. Would have authorized
winegrowers, distilled spirits manufacturers, as well as
rectifiers, importers and shippers of these beverages to
offer tastings of wine or distilled spirits at off-sale
retail licensed premises (grocery stores and liquor stores)
in a segregated area. Also, would have required
verification of age at entrance to the
segregated area and placed limits on tastings (one-quarter
ounce of spirits and one ounce of wine) and limited
tastings to three per person each day. (Held in Assembly
Appropriations Committee)
SB 1548 (Murray), Chapter 670, Statutes of 2006.
Authorized 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.
SB 993 (Burton), Chapter 544, Statutes of 1997. Among
other things, authorized a licensed distilled spirits
manufacturer to conduct tastings of distilled spirits on
the licensed premises under specified conditions.
SUPPORT: As of June 21, 2013:
California Hotel and Lodging Association
Diageo
Distilled Spirits Council of the United States
Family Winemakers of California
OPPOSE: None on file as of June 21, 2013.
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FISCAL COMMITTEE: Senate Appropriations Committee
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