BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1928
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          ASSEMBLY THIRD READING
          AB 1928 (Bocanegra)
          As Amended  April 21, 2014
          Majority vote 

           GOVERNMENTAL ORGANIZATION 19-0               APPROPRIATIONS       
                         16-0 
           
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          |Ayes:|Hall, Nestande,           |Ayes:|Gatto, Bigelow,           |
          |     |Achadjian, Bigelow,       |     |Bocanegra, Bradford, Ian  |
          |     |Campos, Chesbro, Cooley,  |     |Calderon, Campos, Eggman, |
          |     |Dababneh, Gray, Roger     |     |Gomez, Holden, Jones,     |
          |     |Hernández, Jones,         |     |Linder, Pan, Quirk,       |
          |     |Jones-Sawyer, Levine,     |     |Ridley-Thomas, Wagner,    |
          |     |Medina, Perea, V. Manuel  |     |Weber                     |
          |     |Pérez, Salas, Waldron,    |     |                          |
          |     |Wilk                      |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Prohibits a beer manufacturer or a beer and wine  
          wholesaler from offering, funding, producing, sponsoring,  
          promoting, furnishing, or redeeming any type of coupon.  The  
          bill also prohibits a licensee authorized to sell alcoholic  
          beverages at retail from accepting, redeeming, possessing, or  
          utilizing any type of coupon that is funded, produced,  
          sponsored, promoted, or furnished by a beer manufacturer or beer  
          and wine wholesaler.  Specifically,  this bill  :  

          1)Provides that a beer manufacturer or a beer and wine  
            wholesaler shall not offer, fund, produce, sponsor, promote,  
            furnish, or redeem any type of coupon, as specified.

          2)Provides that a licensee authorized to sell alcoholic  
            beverages at retail shall not accept, redeem, possess, or  
            utilize any type of coupon that is funded, produced,  
            sponsored, promoted, or furnished by a beer manufacturer or  
            beer and wine wholesaler.

          3)Defines "beer manufacturer" as a holder of a beer  
            manufacturer's license, a holder of an out-of-state beer  
            manufacturer's certificate, a holder of a beer and wine  
            importer's general license when selling beer, malt beverages,  








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            cider, or perry, or a winegrower that is a wholly owned  
            subsidiary of a beer manufacturer

          4)Defines "Cider" and "Perry" as set forth in the Code of  
            Federal Regulations.

          5)Defines "Coupon" as any method by which a consumer receives an  
            instant discount at the time of a purchase that is funded,  
            produced, sponsored, promoted, or furnished, either directly  
            or indirectly, by a beer manufacturer or beer and wine  
            wholesaler, including, but not limited to, a paper coupon, a  
            digital coupon, an instant redeemable coupon (IRC), or an  
            electronic coupon commonly referred to as a scan or scanback.   
            A "Coupon" does not include:

             a)   A mail-in rebate by which the consumer purchases an item  
               and submits required information in order to receive a  
               rebate or discount from the beer manufacturer.

             b)   A coupon that is offered and funded by a distilled  
               spirits manufacturer, distilled spirits importer general,  
               distilled spirits importer, or distilled spirits wholesaler  
               that offers a discount on the purchase of a distilled  
               spirits product such as beer, malt beverages, cider, or  
               perry are not advertised in connection with the coupon.
             c)   A coupon offered and funded by a winegrower, a wine  
               rectifier, a wine blender, a beer and wine importer, a beer  
               and wine importer general, or a wine broker that offers a  
               discount on the purchase of a wine product if beer, malt  
               beverages, cider, or perry are not advertised in connection  
               with the coupon.

             d)   A discount that is offered and funded by a beer  
               manufacturer on the purchase of beer, malt beverages,  
               cider, or perry at the licensed premises of production or  
               other licensed premises owned and operated by the beer  
               manufacturer.

          EXISTING LAW  :

          1)The enactment of the 21st Amendment to the United States  
            (U.S.) Constitution in 1933 repealed the 18th Amendment and  
            ended the era of Prohibition.  Accordingly, states were  
            granted the authority to establish alcoholic beverage laws and  








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            administrative structures to regulate the sale and  
            distribution of alcoholic beverages.  

          2)Establishes the Department of Alcohol Beverage Control (ABC)  
            and grants it exclusive authority to administer the provisions  
            of the Alcoholic Beverage Control Act (Act).  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 for this  
            purpose.

          3)Prohibits any licensee from giving any premium, gift, or free  
            goods in connection with the sale or distribution of any  
            alcoholic beverage, except as specifically authorized.  With  
            respect to beer, a beer manufacturer may give consumer  
            advertising specialties to the general public that do not  
            exceed $3 per unit original cost to the beer manufacturer who  
            purchased it.  

          4)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.

          5)Authorizes wine, beer and spirits producers to conduct  
            consumer "contests" or "sweepstakes," as specified.

          6)States that 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.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee, minor and absorbable enforcement costs to ABC.










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           COMMENTS  :   

          Purpose of the bill:  According to the author, there is a lack  
          of transparency in the beer market as it relates to beer  
          manufacturer coupons.  Additionally, there is a high level of  
          inequity between the major beer conglomerates and the craft  
          breweries in the marketplace.

          Instant redeemable coupons (IRCs) offered by beer manufacturers  
          are one type of discount that offers an instant reduction in the  
          price of a product when purchased at a retail licensee.   
          However, these beer manufacturer coupons could easily lend  
          themselves to fraudulent practices, such as counterfeiting.

          The author states, brewers and retailers are losing revenues and  
          are being exposed to unnecessary liability due to fake coupons,  
          which are often hard to distinguish from coupons that are  
          produced by the manufacturer.  

          The author further states that the elimination of coupons will  
          level the playing field between the major brewing conglomerates  
          and the craft breweries that are quickly becoming a sizeable  
          part of our state economy.  Unlike the major conglomerates, most  
          craft breweries, which are much smaller operations, cannot  
          afford to offer their own beer coupons. 

          The author points out that a number of states, including New  
          York, Massachusetts, and Texas, already ban manufacturer beer  
          coupons.

          In support:  MillerCoors, in support, states this bill will  
          prohibit instant redeemable coupons (IRCs) offered by beer  
          manufacturers.  IRCs are a type of discount that offers an  
          instant reduction in the price of a product when purchased at a  
          retail facility.  However, IRCs easily lend themselves to  
          fraudulent practices like counterfeiting with little checks or  
          balances.  They have thus grown to become a costly liability and  
          there is widespread support within the beer industry to remove  
          them from the marketplace.

          Furthermore, this bill would only prohibit instant coupons that  








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          are sponsored by beer manufacturers and beer distributors but  
          would still allow distilled spirits and wine companies to offer  
          coupons on spirits and wine. 

          According to Anheuser-Busch, "unfortunately, IRCs which  
          represent a redeemable cash value, provide an easy way to evade  
          alcohol beverage laws that restrict the giving away of things of  
          value to licensed retailers.  Therefore, the use of instant  
          redeemable coupons should be prohibited by the state, thus  
          ensuring the protection of Tied-house principles.  Under AB  
          1928, coupons offered and funded by retailers and  
          mail-in-rebates offered and funded by beer manufactures would  
          still be permitted."

          Prior legislation:  AB 2184 (Hall), Chapter 480, Statutes of  
          2012, authorized, 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 778 (Padilla), Chapter 489, Statutes of 2012, added a new  
          section of law to the Act that authorizes wine, beer and spirits  
          producers to conduct consumer "contests" or "sweepstakes."  

          AB 1245 (Torrico), Chapter 629, Statutes of 2008, allowed beer  
          manufacturers to give adult consumers promotional advertising  
          items valued at $3 per unit original cost to the beer  
          manufacturer who purchased it.

          AB 2293 (De León), Chapter 638, Statutes of 2008, added a new  
          provision to the Act that permits a manufacturer of distilled  
          spirits, winegrower, rectifier, or distiller, or its authorized  
          agent to provide their product, as well as entertainment and  
          food to consumers over 21 years of age during invitation-only  
          events (free of charge), as specified.  The events must occur on  
          premises for which a caterer's permit authorization has been  
          issued.  

          SB 1548 (Murray), Chapter 670, Statutes of 2006, authorized 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, as specified.   










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          AB 2285 (Brown), Chapter 248, Statutes of 1998, allowed on-sale  
          retail licensees to offer limited tastings of wine or distilled  
          spirits at the licensed establishment.

          SB 993 (Burton), Chapter 544, Statutes of 1997, among other  
          things:  1) provided that no rule 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; and, 2) authorized a licensed distilled  
          spirits manufacturer to conduct tastings of distilled spirits on  
          the licensed premises under specified conditions.  
           

          Analysis Prepared by  :    Eric Johnson / G.O. / (916) 319-2531 


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