BILL ANALYSIS Ó
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|Hearing Date:April 1, 2013 |Bill No:SB |
| |12 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 12 Author:Corbett
As Introduced: December 3, 2012 Fiscal:Yes
SUBJECT: Consumer affairs.
SUMMARY: Creates the "Made in California Program" within the
Governor's Office of Business and Economic Development (GO-Biz) for
the purpose of encouraging consumer product awareness and to foster
the purchases of products manufactured in California. Provides that
it is an unfair method of competition or unfair business practice to
use the designated "Made in California" label without participating in
the Made in California Program.
Existing law:
1)Prohibits unfair methods of competition, acts or practices by any
person which either results in or is intended to result in the sale
or lease of goods or services to any consumer. Existing law
enumerates several methods of unfair competition, acts or practices.
(Civil Code § 1770)
2)Provides that any consumer who suffers damage as a result of a
practice declared to be unlawful under the Consumer Legal Remedies
Act (CLRA) may bring an action against that person to recover
damages, as specified. Allows for a class action suit to be filed
on behalf of a class of consumers adversely affected by an unfair
method of competition, act or practice. (Civil Code §§ 1780 and
1781)
3)Provides for California to enter into marketing agreements and to
create the "Buy California Program." (Food & Agriculture Code §
58750)
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4)States that it is unlawful for any person, firm, corporation or
association to sell or offer any merchandise in California that uses
the words "Made in U.S.A." "Made in America," "U.S.A.," or similar
words when the merchandise or any article, unit, or part thereof,
has been entirely or substantially made, manufactured, or produced
outside of the United States. (Business and Professions Code §
17533.7)
5)Establishes GO-Biz within the Governor's Office for the purpose of
serving as the lead state entity for economic strategy and marketing
of California on issues relating to business development, private
sector investment and economic growth. GO-Biz also serves as the
administrative oversight for the California Business Investment
Service and the Office of the Small Business Advocate. (Government
Code (GC) §§ 12096 - 12098.5)
6)Establishes processes and accountability measures for GO-Biz to
accept private monies to fund, establish and operate international
trade offices. (GC § 13997)
This bill:
1)Creates a "Made in California Program" within GO-Biz as a public and
private collaboration. States that the purpose of the program is to
encourage consumer product awareness and to foster purchases of
high-quality products manufactured in this state. Allows GO-Biz to
develop and adopt standards that permit a company to represent that
a product is made in California.
2)Specifies that representing that a product is made in California
when it does not comply with the standards adopted by GO-Biz would
be an unfair or deceptive act or practice under the CLRA. Clarifies
that provisions relating to the CLRA would only be operative after
GO-Biz has adopted standards for the Made in California Program.
3)Defines "manufacture" as the process of taking raw materials or
components and adding value to those materials and components in
order to create a final, recognizable product. Specifies that
manufacture does not include the process completing a final assembly
from subassemblies made elsewhere, or the act of packaging a
product. Outlines that the standards adopted by GO-Biz allowing a
company to represent that a product is made in California may
include:
a) A requirement that the company primarily designs and
manufactures a physical product, rather than a digital product or
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a service.
b) A requirement that the company manufactures one or more
products in California.
c) A requirement that the company has a California-based
workforce and has the desire to grow that workforce over time.
4)Authorizes GO-Biz to issue and make effective marketing agreements,
including, but not limited to, issuance of a Made in California
label. Allows California companies to participate in the program on
a voluntary basis.
5)Requires companies to apply to GO-Biz for use of the Made in
California label and authorizes GO-Biz to charge an application fee,
the proceeds from which will support the Made in California program.
Creates the Made in California Fund in the State Treasury. Allows
GO-Biz to begin accepting applications prior to fully developing and
implementing the program.
6)Authorizes GO-Biz to accept private donations for the purpose of
implementing the Made in California Program.
7)Requires GO-Biz to provide a report to the Legislature by January 1,
2015 and each
January 1, thereafter, outlining expenditures, progress and ongoing
priorities for the Made in California Program.
FISCAL EFFECT: Unknown. Legislative Counsel has keyed this bill
"fiscal."
1. Purpose. This bill is sponsored by Small Business California.
According to the Author, California businesses need a unifying
brand targeted at consumers who care about California jobs, the
environment and quality. The Author asserts that a "Made in
California" label assures consumers that the product was
manufactured in California and carries the excellence and standards
that this state offers. The Author also notes that manufacturers
that embrace California's high quality, safety, and environmental
standards as a vital component of their business strategy should
have this marketing advantage. The myriad of similar products on
the market make it difficult for consumers to differentiate between
products that are made in California versus elsewhere. The Author
adds that California is known worldwide for its products, so the
"Made in California" label can help add value to products made in
the Golden State. Because of the high cost of living in
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California, companies that choose to manufacture products in
California do so at a higher cost than they might pay in another
state, or on foreign soil, and have made a conscious decision to
embrace local manufacturing as a vital component of their business
strategy. The Author believes that this bill would help these
businesses in their marketing efforts.
2. Background. According to Small Business California, there are
approximately 3.4 million small businesses in California. This
number includes sole proprietors which account for approximately
2.3 million, leaving 1.4 million small businesses employing 100
employees or less in California. Small businesses in California
make up 50 percent of the employment in California as well as 50
percent of the California economy. On a national level, two thirds
of new jobs come from small businesses.
In 2001, the "Buy California Program" was created within the
Department of Food and Agriculture for the purpose of "encouraging
consumer nutritional and food awareness and to foster purchases of
high-quality California agricultural products." The "California
Grown" label was created for this program, which gave farmers an
opportunity to participate in the marketing campaign promoting
California products. In 2010, a private California-based marketing
and management consulting firm of the California Grown program
released a study. The study found that the specialty crops in the
California Grown program create
$15.9 billion in economic output annually. The study also found
that more than 137,435 jobs are created as a result of the program.
Further, the study found that nearly $567.7 million in indirect
business taxes, not including income taxes, are generated from
specialty agricultural products in California. In addition to the
vast agricultural products grown in California, several other
products are made and produced in this state, many by small
businesses.
In order to keep business competition fair and to protect consumers
from deceptive practices, the Consumer Legal Remedies Act (CLRA)
(Civil Code Section 1750 et seq.) was created in 1970 with "the
underlying purpose . . . as proclaimed in the statutory scheme
itself . . . 'to protect consumers against unfair and deceptive
business practices and to provide efficient and economical
procedures to secure such protection.'" (Kramer v. Intuit Inc.,
(2004) 121 Cal.App.4th 574, 579.) The CLRA also authorizes a
consumer to bring a civil action for damages resulting from
violations of the CLRA.
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3. Governor's Office of Business and Economic Development (GO-Biz).
In February 2010, the Little Hoover Commission (LHC) undertook a
review of the state's economic and workforce development programs.
In its final report, Making up for Lost Ground: Creating a
Governor's Office of Economic Development, it analyzed the status
and effectiveness of current programs since the 2003 demise of the
Technology, Trade and Commerce Agency and recommended the creation
of a new governmental entity to fill the void left by the
dismantled agency.
The report called for a single entity that would promote greater
economic development, foster job creation, serve as a policy
advisor and deliver specific services (i.e., permitting, tax,
regulatory, and other information) directly to the California
business community. In April 2010, Governor Schwarzenegger issued
Executive Order S-05-10 as a means to operationalize the report
recommendations including the creation of the Governor's Office of
Economic Development (GOED).
In October 2011, the Governor signed AB 29 (cited and described
below), which effectively codified GOED and changed its name to
GO-Biz, effective January 1, 2012. Since its inception, the office
has served over 3,000 businesses, 95% of which are small. The most
frequent types of assistance include help with permit streamlining,
starting a businesses, relocation and expansion of businesses, and
regulatory challenges.
Among other programs, GO-Biz administers the Innovation Hub (iHUB)
program in partnership with the statewide network of Small Business
Development Centers. There are currently 12 regional iHUBs located
throughout the state. The iHUB program is designed to improve the
state's national and global competitiveness by stimulating
partnerships, economic development, and job creation around
specific research clusters. Key assets and partners of the
initiative include technology incubators, research parks,
universities, federal laboratories, economic development
organizations, business groups, and venture capitalists.
Another key initiative of GO-Biz is the "strike teams" which can be
mobilized to help attract and/or retain specific businesses.
Strike teams are especially well suited to engage with major
employers and have been successfully activated to assist Bayer
Healthcare, Jazz Semiconductor, and Baxter Pharmaceutical to locate
and/or expand in California.
GO-Biz is also sponsoring a permit streamlining pilot project to
assist business owners, which will offer a One-Stop-Shop for state
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and local permits. The pilot, launched in partnership with the
City and County of San Francisco, will allow a business owner to
login to a single website and apply for and pay all necessary city,
county and state permits on the spot.
4. Related Legislation. SB 823 (Corbett) of 2011 was virtually
identical to this measure. That bill was held in the Assembly
Committee on Appropriations.
5. Staff Comments: This measure specifies that the Made in California
Program is a "public and private collaboration" and authorizes
GO-Biz to collect private monies for the purpose of implementing
the Made in California Program. However, it does not establish a
fund in the State Treasury into which such monies could be paid,
nor does the bill establish any transparency or accountability
measures for those monies. While the bill does require GO-Biz to
provide a report to the Legislature on the program's progress and
expenditures, it may be helpful for the office to have a process
established for accepting private money to fund the program. The
Author may wish to amend this measure to establish a Made in
California account in the State Treasury and clarify that GO-Biz
may expend monies for the Program, to ensure that the office has
access to any private resources intended to fund a Made in
California Program. The Author may also wish to establish a
reporting requirement for private donations to GO-Biz, similar to
the process established for the office to receive donations which
fund international trade and investment offices.
NOTE: Double-referral to Judiciary Committee second.
SUPPORT AND OPPOSITION:
Support:
Small Business California (Sponsor)
AFSCME
California Small Business Association
Plastikon
Primus Power
Tesla
Opposition:
None on file as of March 26, 2013.
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Consultant:Sarah Mason