BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 527


                                                                    Page  1


          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          527 (Dodd)


          As Amended  September 4, 2015


          Majority vote


           -------------------------------------------------------------------- 
          |ASSEMBLY:  | 76-0 | (May 26,      |SENATE: |40-0  | (September 10,  |
          |           |      |2015)          |        |      |2015)            |
          |           |      |               |        |      |                 |
          |           |      |               |        |      |                 |
           -------------------------------------------------------------------- 


          Original Committee Reference:  G.O.


          SUMMARY:  Creates, until January 1, 2019, a new tied-house  
          exception in the Alcoholic Beverage Control Act (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.


          The Senate amendments:


          1)Add clarity relative to the type of alcohol licensees that can  
            sponsor events promoted by, and may purchase advertising space  
            and time from, or on behalf of, a live entertainment marketing  
            company in the County of Napa, as specified.








                                                                     AB 527


                                                                    Page  2




          2)Add language requiring the live entertainment company  
            promoting the event to affirmatively represent and warrant in  
            writing to any retail licensee operating as the retail  
            licensee for such an event that it has fulfilled the  
            requirements and restrictions proscribed by law.


          3)Add a January 1, 2019, sunset date to the bill.


          4)Make technical and clarifying amendments.


          EXISTING LAW:


          1)Establishes the Department of Alcoholic Beverage Control (ABC)  
            and grants it exclusive authority to administer the provisions  
            of the 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 or  
            occupation taxes 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)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  








                                                                     AB 527


                                                                    Page  3


            within the "three-tier" system.  


          4)The Act prohibits an alcoholic beverage supplier from paying  
            money, or giving or furnishing anything of value, for the  
            privilege of placing or painting a sign or advertisement, or  
            window display, on or in premises selling alcoholic beverages  
            at retail.  


          5)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 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 other venues).


          6)Provides a tied-house exception allowing certain alcohol  
            manufacturers and distributors to sponsor events or purchase  
            advertising space from a live entertainment company that has  
            its principal place of business in the County of Los Angeles,  
            as defined. 


          7)Defines an "On-sale" license as authorizing the sale of all  
            types of alcoholic beverages namely, beer, wine and distilled  
            spirits, for consumption on the premises (such as at a  
            restaurant or bar).


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.


          COMMENTS:  This bill, as amended in the Senate is consistent  
          with Assembly actions.








                                                                     AB 527


                                                                    Page  4




          Purpose of this bill:  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 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


                                                                    Page  5


          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.


          Proponents contend that this bill 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 this bill 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.


          Related Legislation:  SB 462 (Wolk) of the current legislative  
          session.  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 Act that allows alcoholic beverage licensees, as  
          specified, to make monetary or alcoholic beverage contributions  
          to the Green Music Center under certain conditions.  (Enrolled  
          and presented to the Governor on 9/3/15)


          AB 1320 (Maienschein) of the current legislative session.   
          Creates a new tied-house exception in the 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 on the Senate  
          Floor)


          Prior legislation:  SB 600 (Bonta), Chapter 139, Statutes of  








                                                                     AB 527


                                                                    Page  6


          2014.  Extended a tied-house exception in the ABC Act pertaining  
          to the general prohibition against advertising arrangements  
          between retail, wholesale and manufacturer licensees to include  
          an outdoor stadium (Levi's Stadium) with a fixed seating  
          capacity of at least 68,000 seats located in the City of Santa  
          Clara.


          SB 324 (Wright), Chapter 164, Statutes of 2013.  Provided a  
          tied-house exception to the ABC Act pertaining to the general  
          prohibition against advertising arrangements between retail,  
          wholesale and manufacturer licensees and the Los Angeles Forum  
          in the City of Inglewood.


          AB 813 (John A. Pérez), Chapter 647, Statutes of 2009.  Created  
          a tied-house exception by allowing 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.


          SB 520 (Governmental Organization Committee), Chapter 349,  
          Statutes of 2007.  Provided a tied-house exception allowing  
          certain alcohol manufacturers and distributors to sponsor events  
          or purchase advertising space from a live entertainment company  
          that has its principal place of business in the County of Los  
          Angeles.  


          AB 776 (Aghazarian) Chapter 221, Statutes of 2007.  Created a  
          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 a  
          tied-house exception pertaining to the general prohibition  








                                                                     AB 527


                                                                    Page  7


          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) located in San Joaquin County.  


          AB 3046 (Chavez) Chapter 587, Statutes of 2006.  Extended a  
          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 a  
          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.


          AB 3085 (Governmental Organization Committee), Chapter 437,  
          Statutes of 2004.  Provided the Los Angeles County Fair with an  
          exemption from tied-house laws so that so that alcohol  
          manufacturers may purchase advertising from, or on behalf of,  
          the on-sale licensees at this venue. 


          SB 1647 (Perata) Chapter 275, Statutes of 2004.  Extended a  
          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 a  
          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.


          Analysis Prepared by:                                             








                                                                     AB 527


                                                                    Page  8


                          Eric Johnson / G.O. / (916) 319-2531  FN:  
          0002349