BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: AB 527 Hearing Date: 6/29/2015
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|Author: |Dodd |
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|Version: |5/4/2015 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Arthur Terzakis |
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SUBJECT: Alcoholic beverage control: tied-house restrictions:
advertising
DIGEST: This bill creates a new tied-house exception in the
Alcoholic Beverage Control (ABC) Act that authorizes certain
alcoholic beverage licensees to sponsor a limited number of
events promoted by or to purchase advertising space and time
from, or on behalf of, a live entertainment marketing company
that conducts live artistic, musical, sports, food, beverage,
culinary, or other cultural entertainment events at venues
located solely in the County of Napa, under specified
conditions.
ANALYSIS:
Existing law:
1)Establishes the Department of 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)Separates the alcoholic beverage industry into three component
parts, or tiers (referred to as the "tied-house" law or
"three-tier" system), of manufacturer (including breweries,
AB 527 (Dodd) Page 2 of ?
wineries and distilleries), wholesaler, and retailer (both
on-sale and off-sale). The original policy rationale for this
body of law was to: (a) promote the state's interest in an
orderly market; (b) prohibit the vertical integration and
dominance by a single producer in the market place; (c)
prohibit commercial bribery and to protect the public from
predatory marketing practices; and, (d) discourage and/or
prevent the intemperate use of alcoholic beverages.
Generally, other than exceptions 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.
3)Prohibits, in general, an alcohol manufacturer, wholesaler, or
any officer, director, or agent of any such person from
owning, directly, or indirectly, any interest in any on-sale
license, or from providing anything of value to retailers, be
it free goods, services, or advertising.
4)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,
Levi's Stadium in the City of Santa Clara, and other venues].
5)Provides a narrow tied-house exception that expressly
authorizes, under specified conditions, a beer manufacturer,
holder of a winegrower's license, California winegrower's
agent, distilled spirits manufacturer, holder of a distilled
spirits rectifiers general license, or a distilled spirits
manufacturer's agent to purchase advertising space or time
from a fully enclosed venue (ClubNokia) with box office sales
and attendance by the public on a ticket basis only, with a
patronage capacity in excess of 2,000, but not more than
3,000, located in Los Angeles County within the area subject
to the Los Angeles Sports and Entertainment District Specific
Plan adopted by the City on September 6, 2001, where the owner
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of the venue is not the on-sale retail licensee. (Business &
Professions Code Section 25503.42)
This bill:
1)Authorizes a beer manufacturer, holder of a winegrower's
license, winegrower's agent, holder of an importer's general
license that does not also hold a wholesale or retail license
as an additional license, holder of a distilled spirits
rectifiers general license, distilled spirits manufacturer, or
a distilled spirits manufacturer's agent (these entities will
hereafter be referred to as "alcoholic beverage suppliers") to
sponsor events promoted by or to purchase advertising space
and time from, or on behalf of, a live entertainment marketing
company subject to the following conditions:
a) The live entertainment marketing company is a wholly
owned subsidiary of a live entertainment company that is
not publicly traded, has its principal place of business in
Napa County, and may also own interests, directly or
indirectly, in retail licenses or winegrower licenses.
b) The venue of the event is located within the County of
Napa with expected attendance of at least 5,000 people per
day, with no more than three such events to be held in the
County each year.
c) The sponsorship and the advertising space or time is
purchased only in connection with the promotion of live
artistic, musical, sports, food, beverage, culinary,
lifestyle, or other cultural entertainment events at
facilities, parks, fairgrounds, auditoriums, arenas or
venues that are designed for, or set up to be, lawfully
used for such events.
d) Any on-sale licensee operating at a venue where live
events are performed pursuant to a sponsorship or where
advertising is purchased must serve other brands of beer,
wine, or distilled spirits distributed by a competing
wholesaler in addition to any brand manufactured or
distributed by the sponsoring or advertising alcoholic
beverage supplier.
e) Any on-sale retail licensee "owned by the live
entertainment company" must serve other brands of beer,
AB 527 (Dodd) Page 4 of ?
distilled spirits, and wine distributed by a competing
wholesaler in addition to any brand manufactured or
distributed by the sponsoring or advertising alcoholic
beverage supplier.
f) Advertising space or time purchased shall not be placed
in any on-sale licensed premises where the on-sale retail
licensee is owned directly or indirectly by the live
entertainment company, or any of its subsidiaries.
g) Sponsorship shall not be allowed if the event is held at
or in any on-sale licensed premises where the on-sale
retail licensee is owned by the live entertainment company,
or any of its subsidiaries.
h) An agreement for the sponsorship of or for the purchase
of advertising space and time during a live event shall not
be conditioned directly, or indirectly, in any way, on the
purchase, sale, or distribution of any alcoholic beverage
manufactured or distributed by the advertising or
sponsoring alcoholic beverage supplier by the live
entertainment company.
2) Provides that any sponsorship of events or purchase of
advertising space or time must be conducted pursuant to a
written contract entered into by the alcoholic beverage
supplier and the live entertainment marketing company.
3)Makes it a misdemeanor for an alcoholic beverage supplier to
coerce or induce, directly or indirectly, a licensed
wholesaler to fulfill the contractual obligations entered into
pursuant to the above provisions. Also, subjects the
alcoholic beverage supplier (licensee) to license suspension
or revocation.
4)Makes it a misdemeanor for any on-sale retail licensee to
solicit or coerce, directly or indirectly, an alcoholic
beverage supplier to purchase advertising time or space and
subjects the on-sale retail licensee to license suspension or
revocation.
5)Contains boiler plate language (legislative findings and
declarations) relative to the necessity of requiring a
separation between manufacturing interests, wholesale
interests, and retail interests in the production and
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distribution of alcoholic beverages.
6)Finds and declares that the earthquake that struck Napa on
August 24, 2014, was a catastrophic event that resulted in
economic hardship and that the tied-house exception provided
by this bill is in the best interests of the citizens of Napa
County.
Background
Purpose of AB 527. As noted above, existing tied-house laws
prohibit an alcoholic beverage supplier, or any officer,
director or agent of an alcoholic beverage supplier, from
providing anything of value to an on-sale retailer licensee, be
it free goods, money, services or advertising. Over the years,
numerous exceptions to this prohibition have been added to the
ABC Act encompassing various venues throughout the state.
According to the author's office, Latitude 38 Entertainment,
headquartered in Napa County, produces the annual BottleRock
festival and budgets approximately $2 million for costs
associated with renting the Napa County fairgrounds, hiring Napa
County based employees and contractors, City of Napa fees,
security, parking rentals and other added expenses. More than
95,000 festival attendees spend an estimated $14 million on
tourism, including hotel accommodations, food, and beverage and
retail purchases. In addition, the festival generates
approximately $35 million of economic activity in the City and
County of Napa.
This bill creates a stand-alone tied-house exception applicable
to Latitude 38 Entertainment Company (or any other such live
entertainment marketing company based in Napa County) which
promotes and produces the BottleRock Napa Valley Festival - a
three-day event held in late May that features a diverse mix of
live music, culinary offerings, libations and other amenities.
This bill is necessary due to the fact that Latitude 38
Entertainment's ownership group includes a wine producer. This
bill will enable alcoholic beverage suppliers to purchase
advertising space and time at the festival from Latitude 38
Entertainment, as well as other live entertainment marketing
companies in Napa County who fall under the same circumstances.
This bill subjects Latitude 38 Entertainment to certain
requirements, as specified, and also requires that other brands
of beer, wine, or distilled spirits distributed by a competing
AB 527 (Dodd) Page 6 of ?
wholesaler be served at the venue in addition to any brand
manufactured or distributed by the sponsoring or advertising
alcoholic beverage supplier. Furthermore, this bill makes it
explicit that no more than three such events may be held in Napa
County each year.
Staff Comments. This bill contains two distinct legislative
findings sections, one codified and the other uncodified. The
uncodified findings attempt to draw a connection between the
2014 earthquake in Napa County and the need for this bill,
suggesting the tied-house exception will help Napa County
recover from the earthquake. The author may wish to consider
striking Section 1 of this bill, the uncodified findings,
referencing the Napa earthquake in light of the fact that he has
also introduced AB 18 relating to "Napa earthquake disaster
relief" which is pending in this committee. AB 18 seeks to add
the 2014 Napa earthquake to the list of disasters eligible for
100% state reimbursement of local agency costs under the
California Disaster Assistance Act.
Prior/Related Legislation
SB 462 (Wolk, 2015) extends an existing tied-house exception in
the ABC Act pertaining to the general prohibition against
advertising arrangements between retail, wholesale and
manufacturer licensees to include a specified entertainment
complex, known as the Green Music Center, located on the campus
of Sonoma State University. Additionally, this bill adds a new
section of law to the ABC Act that allows alcoholic beverage
licensees, as specified, to make monetary or alcoholic beverage
contributions to the Green Music Center under certain
conditions. (Pending in Assembly policy committee)
AB 1320 (Maienschein, 2015) creates a new tied-house exception
in the ABC Act that authorizes certain alcoholic beverage
licensees to sponsor a limited number of events promoted by or
to purchase advertising space and time from, or on behalf of, a
live entertainment marketing company that conducts live
artistic, musical, sports, or cultural entertainment events
solely at the San Diego County Fairgrounds in Del Mar, under
specified conditions. (Pending in this Committee)
AB 600 (Bonta, Chapter 139, Statutes of 2014) extended an
existing tied-house exception in the ABC Act pertaining to the
general prohibition against advertising arrangements between
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retail, wholesale and manufacturer licensees to include an
outdoor stadium with a fixed seating capacity of at least 68,000
seats located in the City of Santa Clara (Levi's Stadium - new
home of the San Francisco 49ers).
SB 324 (Wright, Chapter 164, Statutes of 2013) extended an
existing tied-house exception 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
(the Forum) in the City of Inglewood.
AB 813 (John A. Perez, Chapter 647, Statutes of 2009) created a
new tied-house exception that authorized the owner of a venue
(Club Nokia) in Los Angeles to engage in a sponsorship agreement
with an alcoholic beverage supplier for the privilege of placing
advertising in the on-sale licensee's premises, subject to
specified conditions.
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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
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SUPPORT:
California Travel Association
Family Winemakers of California
Napa, City of
Napa County Board of Supervisors
Napa Valley Vintners
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: Proponents contend that AB 527 will
provide Napa County based companies the ability to receive
advertising and sponsorship monies directly from alcoholic
beverage manufacturers to the benefit of the region and the
State of California. Additionally, proponents claim that AB 527
will help facilitate sponsorship agreements between vintners and
sponsors of certain community events which in turn will help
promote travel and tourism throughout the Napa region.