BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          AB 1116 (Hall) - Alcoholic Beverages
          
          Amended: May 1, 2013            Policy Vote: GO 10-0
          Urgency: No                     Mandate: No
          Hearing Date: August 30, 2013                           
          Consultant: Maureen Ortiz       
          
          SUSPENSE FILE.
          
          
          Bill Summary:  AB 1116 expands an existing provision of law that  
          permits certain alcoholic beverage producers to hold private,  
          free-of-charge, invitational-only promotional events and extends  
          the sunset from January 1, 2014 to January 1, 2018.

          Fiscal Impact: (As proposed to be amended)
          
              The ABC indicates $166,000 for promulgating regulations and  
              $173,000 in additional enforcement costs with respect to the  
              expansion of the existing authorization, partially offset by  
              fee revenue (Special Fund)

          Background:  The "tied-house" law separates the alcoholic  
          beverage industry into three component tiers of manufacturer,  
          wholesaler and retailer.  The original rationale for this policy  
          as 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.

          Existing law, AB 2293 De Leon (Chapter 638, Statutes of 2008),  
          allows a manufacturer of distilled spirits, winegrower,  
          rectifier, or distiller, or its authorized agent to provide free  
          of charge, entertainment, food, and distilled spirits, wine or  
          nonalcoholic beverages to consumers who are at least 21 years of  
          age at an invitation-only event with the following conditions:

          a)  No authorized event may be held on premises for which a  
          permanent retail license has been issued,









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          b)  The number of guests may not exceed 400 people,

          c)  The number of events are limited to 12 in a calendar year  
          when there are more than 100 people attending, and up to 24  
          events when attendance is less than 100 people,

          d)  The event is limited to a four-hour duration, and events may  
          not be held at the same location more than eight times in a  
          calendar year, and,

          e) Requires a caterer's permit ($100) but also authorizes the  
          ABC to charge $200 per event for administration and enforcement  
          costs.

          Events are not permitted to be held at restaurants, bars,  
          hotels, liquor stores or other venues that have a permanent  
          liquor license.  This authorization will sunset January 1, 2014.  
           Existing law also provides for numerous other authorizations  
          that allow alcohol manufacturers to share their product with  
          consumers free of charge including the following:

           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 a quarter 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.  

           Authorizes beer manufacturers and wholesalers to offer beer  
            samples (not to exceed eight ounces per person, per day) to  
            individuals of legal drinking age at on-sale retail licensed  
            premises under specified conditions.

           Authorizes licensed winegrowers to conduct wine tastings  
            featuring their products either on or off the winegrower's  
            premises, as provided for in rules and regulations adopted by  
            ABC.

           Authorizes distilled spirits manufacturers to conduct tastings  
            and provide distilled spirits without charge for events  








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            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.

          Proposed Law:  AB 1116 contains the following provisions:

          a)   Extends the repeal date of the invitation-only events from  
          January 1, 2014 to January 1, 2018,

          b)   Expands the permissible venues to include the premises of a  
          licensed hotel, provided that the area is restricted to a  
          section that is not open to the general public, 

          c)   Increases the number of individuals that can attend such  
          events from 400 to 600,

          d)   Defines hotel as any hotel, motel, resort, bed and  
          breakfast inn, or other similar transient lodging establishment,  
          but does not include any residential hotel.

          Staff Comments:  Any licensee authorized to conduct an  
          invitation-only event must provide the ABC with the name of the  
          company authorized to conduct the event, the number of people  
          who will attend, the start and end times of the event, and the  
          location where the event will be held.  According to the ABC,  
          since the enactment of AB 2293, only 21 events have been held  
          under this special privilege and no enforcement problems have  
          been noted.