BILL ANALYSIS Ó SB 324 Page 1 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 SB 324 Page 2 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 SB 324 Page 3 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. SB 324 Page 4 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