BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 324
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          Date of Hearing:   June 12, 2013

                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
                                 Isadore Hall, Chair
                 SB 324 (Wright) - As Introduced:  February 19, 2013

          SENATE VOTE  :   36-0
           
          SUBJECT  :   Alcoholic beverages: tied-house restrictions:  
          advertising.

           SUMMARY  :   Extends an existing "tied-house" exception in the  
          Alcoholic Beverage Control Act (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  :

          1)  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. 

          2)  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 practices.  

          3)  Generally prohibits 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.  

          4)  Prohibits paid advertising by winegrowers, beer  
          manufacturers and distilled spirits producers in cases where a  








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          retail licensee also owns a sports or entertainment venue.  Over  
          the years numerous exceptions to this prohibition have been  
          added to the ABC Act
           
          FISCAL EFFECT  :   Unknown.

           COMMENTS  :   

           Background  :  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.

          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.

           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, Elvis  
          Presley, the Jackson 5, Jethro Tull, the Bee Gees, Prince, U2,  
          Sting, Guns N' Roses, Janet Jackson, and Nirvana).  

          In 2000, the Forum was acquired by the Faithful Central Bible  
          Church which used it for church services while also leasing the  








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          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 the bill  :   According to the author's office, this  
          bill amends 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 bill's sponsor, 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 legislation  :  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.  








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          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.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Madison Square Garden Company (source)
          Family Winemakers of California
           
            Opposition 
           
          None on file

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