BILL ANALYSIS Ó
Bill No: SB
324
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
SB 324 Author: Wright
As Introduced: February 19, 2013
Hearing Date: April 9, 2013
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages: tied-house restrictions: purchase of
advertising
DESCRIPTION
SB 324, an urgency measure, extends an existing
"tied-house" exception in the Alcoholic Beverage Control
(ABC) Act pertaining to the general prohibition against
advertising arrangements between retail, wholesale and
manufacturer licensees to include a fully enclosed arena
with a fixed seating capacity in excess of 13,000 seats in
the City of Inglewood (the Forum).
EXISTING LAW
Existing law establishes the Department of Alcoholic
Beverage Control (ABC) and grants it exclusive authority to
administer the provisions of the 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.
Existing law, known as the "tied-house" law or "three-tier"
system, separates the alcoholic beverage industry into
three component parts of manufacturer (the first tier),
wholesaler (the second tier), and retailer (the third
tier). 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
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practices.
Tied-house laws generally prohibit suppliers and retailers
from sharing common owners and legally restrict alcohol
beverage suppliers' ability to gain control over retailers
through indirect means. 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.
Existing "tied-house" law prohibits paid advertising by
winegrowers, beer manufacturers and distilled spirits
producers in cases where a retail licensee also owns a
sports or entertainment venue. Over the years numerous
exceptions to this prohibition have been added to the ABC
Act [e.g., Sleep Train Arena (formerly known as ARCO Arena)
in Sacramento, Oakland Coliseum in Oakland, Arrowhead Pond
Arena in Anaheim, Kern County Arena in Bakersfield, the
National Orange Show Event Center in San Bernardino,
California Speedway in Fontana, Grizzly Stadium in downtown
Fresno, Raley Field in West Sacramento, HP Pavilion in San
Jose, the Home Depot Center in the City of Carson and
numerous other venues].
BACKGROUND
The Forum: Located at 3900 West Manchester Boulevard in
Inglewood, this indoor arena was constructed in 1967, for
approximately $16 million, by Jack Kent Cooke, then owner
of the Los Angeles Lakers (NBA) and founding owner of the
Los Angeles Kings (NHL). The circular structure was
designed by renowned Los Angeles architect Charles Luckman
and was intended to evoke the Roman Forum. Both the Lakers
and Kings moved to the new Staples Center in 1999.
For the better part of 40 plus years this venue has hosted
a plethora of events such as tennis matches, boxing
matches, college basketball tournaments and political
events. Additionally, the Forum has played host to some of
the world's greatest musical performances (e.g., Led
Zeppelin, Cream, Steppenwolf, Deep Purple, Elvis Presley,
the Jackson 5, Jethro Tull, the Bee Gees, Prince, KISS, U2,
Sting, Jackson Browne, Guns N' Roses, Janet Jackson,
Nirvana, AC/DC).
In 2000, the Forum was acquired by the Faithful Central
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Bible Church which used it for church services while also
leasing the building for various events. In recent years,
the building has suffered from competition from newer and
more state-of-the-art arenas, as well as deferred
maintenance needs. In 2012, a subsidiary of the Madison
Square Garden Company bought the facility for approximately
$23.5 million. The company has been working on a plan to
renovate the Forum and make it a world-class entertainment
venue once again.
Purpose of SB 324: The author's office notes that this
measure would amend ABC tied-house provisions to include
the Forum on the list of exemptions in the law, thereby
allowing the Madison Square Garden Company to develop
certain alcoholic beverage sponsorships with various
manufacturers and distributors. The author's office points
out that existing law precludes any signage paid for by an
alcoholic beverage manufacturer or distributor unless such
an exception is created. The author's office emphasizes
that such an exemption would put the Forum on an even
playing field with other arenas and stadiums in California
and help support the company's efforts to make the Forum
economically viable.
The sponsor of this measure, the Madison Square Garden
Company, states that the project is expected to generate
several hundred full-time jobs immediately during
rehabilitation and several hundred more full-time jobs
annually for operations once it is completed. The company
estimates that the total economic impact, over the life of
the project, will be hundreds of millions of dollars.
PRIOR/RELATED LEGISLATION
SB 351 (Negrete-McLeod) 2007-08 Session. Would have
extended an existing "tied-house" exception pertaining to
the general prohibition against advertising arrangements
between retail, wholesale and manufacturer licensees so
that alcoholic beverage manufacturers may purchase
advertising from on-sale retail licensees in order to
promote "safe ride home programs" at specified stadiums and
arenas. (Placed on Assembly inactive file)
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AB 776 (Aghazarian) Chapter 221, Statutes of 2007. Created
a new tied-house exception by authorizing a beer
manufacturer to sponsor or purchase advertising space and
time from, or on behalf of, an off-sale retail licensee
that is an owner or co-owner of a professional sports team
(California Cougars indoor soccer team) that plays its home
games, in an arena with a fixed seating capacity of 10,000
seats (Stockton Arena) located in San Joaquin County.
AB 663 (Galgiani) Chapter 745, Statutes of 2007. Extended
an existing "tied-house" exception pertaining to the
general prohibition against advertising arrangements
between retail, wholesale and manufacturer licensees to
include an outdoor professional sports facility with a
fixed seating capacity of at least 4,200 (Banner Island
Ballpark - home of the Stockton Ports Class A baseball
team) located in San Joaquin County.
AB 3046 (Chavez) Chapter 587, Statutes of 2006. Extended
an existing "tied-house" exception pertaining to the
general prohibition against advertising arrangements
between retail, wholesale and manufacturer licensees to the
HP Pavilion in Santa Clara County.
AB 1442 (Horton) Chapter 617, Statutes of 2005. Extended
an existing "tied-house" exception pertaining to the
general prohibition against advertising arrangements
between retail, wholesale and manufacturer licensees to the
Home Depot Center, a sports and athletic complex within the
City of Carson in Los Angeles and the Nokia Theater,
located within the Los Angeles Sports and Entertainment
District, adjacent to STAPLES Center.
SB 1647 (Perata) Chapter 275, Statutes of 2004. Extended
an existing tied-house exception pertaining to the general
prohibition against advertising arrangements between
retail, wholesale and manufacturer licenses to the Oakland
Coliseum in Alameda County.
SB 1189 (Costa) Chapter 47, Statutes of 2002. Extended an
existing tied-house exception pertaining to the general
prohibition against advertising arrangements between
retail, wholesale and manufacturer licenses to the Visalia
Oaks Stadium in Visalia and the California Speedway in
Fontana.
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SUPPORT: As of April 5, 2013:
The Madison Square Garden Company and its affiliates
(sponsor)
Family Winemakers of California
OPPOSE: None on file as of April 5, 2013.
FISCAL COMMITTEE: Senate Appropriations Committee