BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1928| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1928 Author: Bocanegra (D) Amended: 6/23/14 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 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 wholesaler, as defined. Senate Floor Amendments of 6/23/14 clarify that the bill's provisions apply only to beer manufacturers and beer wholesalers. ANALYSIS : CONTINUED AB 1928 Page 2 Existing law: 1. Establishes the Department of Alcoholic Beverage Control (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. 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, CONTINUED AB 1928 Page 3 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. 6. 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. This bill: 1. Stipulates that a beer manufacturer or a beer 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 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. "Beer wholesaler" as a holder of a beer and wine wholesaler license when selling beer, malt beverages, cider, or perry. C. "Cider" and "perry" as set forth in the Code of Federal Regulations. D. "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, CONTINUED AB 1928 Page 4 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. E. "Wine wholesaler" as a holder of beer and wine wholesaler license when selling wine. 4. Provides that "coupon" does not apply to: 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 winegrower, a wine rectifier, a wine blender, a beer and wine wholesaler, a beer and wine importer, a 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 manufacturer, importer general, 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 CONTINUED AB 1928 Page 5 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 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 6/25/14) Alcohol Justice American Petroleum and Convenience Store Association Anheuser-Busch California Beer & Beverage Distributors California Chamber of Commerce California Craft Brewers Association California Manufacturers &Technology Association Constellation Brands Beer Division (Corona, etc.) MillerCoors Neighborhood Markets Association Service Station Franchise Association, Inc. OPPOSITION : (Verified 6/24/14) California Grocers Association California Retailers Association Family Winemakers of California ARGUMENTS IN SUPPORT : Writing in support, beer producers CONTINUED AB 1928 Page 6 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 because they wish 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 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 6/25/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED