BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 1928
          Author:   Bocanegra (D)
          Amended:  6/4/14 in Senate
          Vote:     21

           
           SENATE GOVERNMENTAL ORGANIZATION COMMITTEE  :  8-0, 6/10/14
          AYES:  Correa, Cannella, De León, Galgiani, Hernandez, Padilla,  
            Torres, Vidak
          NO VOTE RECORDED:  Berryhill, Lieu, Vacancy

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  75-1, 5/5/14 - See last page for vote


           SUBJECT  :    Alcoholic beverages:  coupons:  beer

           SOURCE  :     Author


           DIGEST  :    This bill prohibits a beer manufacturer or a beer and  
          wine wholesaler from offering, promoting, or redeeming coupons,  
          as defined, and also prohibits an alcoholic beverage retail  
          licensee from accepting or redeeming any type of coupon that is  
          funded, produced or promoted by a beer manufacturer or beer and  
          wine wholesaler.

           ANALYSIS  :    

          Existing law:

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

          2. 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.  This is known as the "tied-house" law.

          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.  The  
             ABC Act provides that a violation of any of its provisions  
             for which another penalty or punishment is not specifically  
             provided is a misdemeanor.

          4. Provides that, with respect to beer, premiums, gifts, or free  
             goods, including advertising specialties that have no  
             significant utilitarian value other than advertising, shall  
             be deemed to have greater than inconsequential value if they  
             cost more than $0.25 per unit, or cost more than $15 in the  
             aggregate for all those items given by a single supplier to a  
             single retail premises per calendar year.  Additionally,  
             prohibits ABC from imposing a dollar limit of less than $3  
             per unit original cost to the beer manufacturer who purchased  
             it.

          5. Provides that, with respect to distilled spirits and wines, a  
             licensee may furnish, give, rent, loan, or sell advertising  
             specialties to a retailer, provided those items bear  
             conspicuous advertising required of a sign and the total  
             value of all retailer advertising specialties furnished by a  
             supplier, directly or indirectly, to a retailer do not exceed  
             $50 dollars per brand in any one calendar year per retail  
             premises.

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          6. Prohibits 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.   
             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.

          7. Prohibits the giving of any premium, gifts or goods of any  
             sort, whether by way of sweepstakes, drawings, prizes, cross  
             merchandizing promotions with a non-alcoholic beverage or  
             product, or any other method if the value of the premium,  
             gift or good exceeds $0.25 with respect to beer, $1 with  
             respect to wine, or $5 with respect to distilled spirits.   
             ABC Rule 106 authorizes alcohol suppliers to sponsor contests  
             and other similar activities subject to these monetary limits  
             and other specified conditions.

          8. Permits, under the ABC Act, 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:  (a) no more than one-fourth  
             ounce of distilled spirits is offered in one tasting; (b) no  
             more than one ounce of wine is offered in one tasting; and  
             (c) no more than three tastings are offered to an individual  
             in one day.

          9. 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.

          10.Permits a licensed winegrower, manufacturer, importer, or  
             wholesaler to provide samples of the alcoholic beverages  
             which are authorized to be sold by the licensee in accordance  
             with rules prescribed by ABC.  A retail licensee, however, is  
             not authorized to provide any free samples of alcoholic  
             beverages.  Moreover, ABC regulations provide that samples of  
             alcoholic beverages may only be given away to licensees or  
             employees of licensees who are in a position to purchase the  
             product or who are in need of additional information about  
             the product, as specified.


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

          This bill:

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

          2. 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.

          3. Defines the following terms:

             A.    "Beer manufacturer" to mean 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, cider, or perry, or a winegrower that is a  
                wholly owned subsidiary of a beer manufacturer.

             B.    "Cider" and "perry" as set forth in the Code of  
                Federal Regulations.

             C.    "Coupon" to mean any method by which a consumer  
                receives an instant discount at the time of 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, or an electronic coupon  
                commonly referred to as a scan or scanback.

          4. Provides that the above prohibition will not apply to:

             A.    A mail-in rebate by which the consumer purchases an  

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                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 winegrower,  
                a wine rectifier, a wine blender, a beer and wine  
                wholesaler, 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.

             C.    A coupon that is offered and funded by a distilled  
                spirits producer, importer, or   wholesaler that offers  
                a discount on the purchase of a distilled spirits  
                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.

           
          Comments
           
          According to the author, "Currently, there is a lack of  
          transparency in how coupons are used in the beer market.  This  
          lack of transparency has contributed to the rise of counterfeit,  
          paper coupons in the beer market, which has been particularly  
          problematic for large beer manufacturers and distributors.   
          Electronic coupons (scanbacks) are also an issue, especially as  
          they relate to loyalty and club card programs, because there is  
          no way to know whether 100 percent of the coupon discount from  
          the beer manufacturer is actually being passed onto consumers by  
          the retailers.

          "Additionally, this bill would bring greater equity to the  
          retail environment in the beer industry.  It would level the  
          playing field between major brewing conglomerates and the craft  
          breweries that often cannot afford to offer their own coupons  
          and that are, at the same time, quickly becoming a sizeable part  
          of our state economy.  The bill would also increase parity  
          between large and small retailers by ensuring that coupons  

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          aren't simply made available to a select number of retailers.

          "To be clear, this bill only deals with the beer industry, and  
          it only deals with coupons that are in the beer market.  Because  
          beer and other alcoholic products are uniquely subject to  
          'tied-house' regulations, AB 1928 only eliminates coupons that  
          come from beer manufacturers or beer distributors.  Retailers  
          may still offer their own coupons and fund their own loyalty and  
          club card programs for beer purchases."

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

           SUPPORT  :   (Verified  6/13/14)

          Alcohol Justice 
          Anheuser-Busch
          California Beer & Beverage Distributors
          California Chamber of Commerce
          California Craft Brewers Association
          Constellation Brands Beer Division (Corona, etc.)
          MillerCoors

           OPPOSITION  :    (Verified  6/13/14)

          California Grocers Association
          California Retailers Association

           ARGUMENTS IN SUPPORT  :    Writing in support, beer producers  
          emphasize that this bill does not prohibit all consumer discount  
          offers.  Mail-in rebates and retailer-sponsored coupons are  
          still permitted, as they are coupon types that either have a  
          system for checks and balances or are not otherwise problematic.  
           Proponents state that this bill is narrowly tailored to only  
          prohibit instant coupons that are sponsored by beer  
          manufacturers and distributors, but still allows distilled  
          spirits and wine companies to offer coupons for spirits and  
          wine.

           ARGUMENTS IN OPPOSITION  :    The California Retailers Association  
          and the California Grocers Association are opposed unless this  
          bill is amended to enable retailers to maintain the ability to  
          offer an instant electronic discount to the consumer at the time  
          of purchase that is funded in whole or in part by the beer  

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          manufacturer as part of a retail loyalty or card club program or  
          scanback.  
           
           ASSEMBLY FLOOR  :  75-1, 5/5/14
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  
            Dababneh, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,  
            Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Holden,  
            Jones, Jones-Sawyer, Levine, Linder, Lowenthal, Maienschein,  
            Medina, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan,  
            Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,  
            Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,  
            Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A.  
            Pérez
          NOES:  Donnelly
          NO VOTE RECORDED:  Logue, Mansoor, Melendez, Vacancy


          MW:d  6/13/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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