BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 776| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 776 Author: Cooper (D) Amended: 8/17/15 in Senate Vote: 21 SENATE GOVERNMENTAL ORG. COMMITTEE: 13-0, 7/14/15 AYES: Hall, Berryhill, Block, Gaines, Galgiani, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Runner, Vidak SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 76-0, 5/26/15 (Consent) - See last page for vote SUBJECT: Alcoholic beverage control: licenses and tied-house restrictions SOURCE: California Craft Brewers Association DIGEST: This bill enables a licensed beer manufacturer to apply to the Department of Alcoholic Beverage Control (ABC) for a brewery event permit which grants the licensee the privilege of selling beer it produces for consumption on property contiguous and adjacent to its licensed premises for special events (up to four such events in a calendar year). This bill also authorizes licensed alcoholic beverage manufacturers and retailers to participate together in sponsoring and promoting events conducted by, and for the benefit of, nonprofit organizations, subject to certain conditions. ANALYSIS: Existing law: AB 776 Page 2 1)Establishes the Department of ABC and grants it exclusive authority to regulate the licensing, enforcement, and administration of the alcoholic beverage control laws. 2)Authorizes a beer manufacturer to sell or serve all beer, wines, and brandy, regardless of source, to guests during private events held on the licensed beer manufacturer's premises, as specified. 3)Authorizes a licensed winegrower to apply to the Department of ABC for a wine sales event permit that allows the sale of bottled wine produced by that winegrower at specified events approved by the Department of ABC. The law prohibits a wine sales event permit from being used more than two times a month at a particular location and requires the winegrower to pay a fee of $50 for the permit. 4)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, 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. 5)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. 6)Specifies that the ABC Act does not prohibit holders of retail on-sale or off-sale licenses from purchasing advertising in any publication by specified alcoholic beverage licensees. AB 776 Page 3 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). An "off-sale" license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers. This bill: 1)Allows a licensed beer manufacturer to apply to the Department of ABC for a brewery event permit which would allow the sale of beer produced by the licensee for consumption on property contiguous and adjacent to the licensed premises owned or under the control of the licensee. 2)Limits the number of events authorized by a brewery event permit to no more than four in any calendar year. 3)Stipulates that the fee for a brewery event permit issued during the 2016 calendar year shall be one hundred ten dollars ($110), and for a permit issued during the years thereafter, the annual fee shall be calculated, as specified. The permit may be renewed annually at the same time as the licensee's license and shall be transferable as a part of the license. 4)Specifies that for each brewery event, consent for the sale of beer must be obtained by the licensee from the Department of ABC in the form of an event authorization issued by the Department. Also, provides that an event authorization shall be subject to approval by the appropriate local law enforcement agency and limits the fee for each event authorization to no more than twenty-five dollars ($25). 5)Provides that all money collected as fees shall be deposited in the ABC Fund for allocation, upon appropriation by the Legislature. 6)Makes it explicit that at all approved events, the licensee may exercise only those privileges authorized by the licensee's license and requires the licensee to comply with all provisions of the ABC Act pertaining to the conduct of AB 776 Page 4 on-sale premises. Any violation of those provisions may be grounds for suspension or revocation of the licensee's license or permit, or both, as though the violation occurred on the licensed premises. 7)Authorizes a licensee to sponsor or otherwise participate in an event conducted by, and for the benefit of, a nonprofit organization that has obtained a temporary daily on-sale or off-sale license from the Department of ABC, in which retail or nonretail licensees are involved as sponsors or participants, provided that all of the following conditions are met: a) Sponsorship or participation must be pursuant to a written agreement; b) Except as otherwise provided, any payment for sponsorship or participation shall be as moneys paid only to the nonprofit organization holding the temporary license; c) A nonretail licensee may donate alcoholic beverages to a nonprofit only as otherwise authorized by the ABC Act; d) Except as otherwise provided by this bill, a retail licensee shall not give, sell, or furnish alcoholic beverages to the temporary licensee; e) All sponsorship agreements for the event shall be on identical terms and sponsorship or participation opportunities shall be made available to any retail and nonretail licensee wishing to sponsor or participate. Also, permits the temporary daily licensee to establish different levels of sponsorship, as specified. Additionally, provides that any advertising or promotion of the event by the temporary daily licensee must identify all sponsors; f) A nonretail licensee may communicate sponsorship, or participation, and share, repost, or otherwise forward a social media post by a retail licensee or nonretail licensee if the communication, sharing, reposting, or AB 776 Page 5 forwarding of the social media post does not contain the retail price of any alcoholic beverage. Also, a nonretail licensee shall not pay or reimburse a retail licensee, directly or indirectly, for any social media advertising services. And, a retail licensee shall not accept any payment or reimbursement, directly or indirectly, for any social media advertising services offered by a nonretail licensee; g) The temporary retail licensee must conspicuously offer for sale alcoholic beverages other than the products produced, distributed, bottled, or otherwise offered for sale by any of the sponsors of the event. Also, the temporary retail licensee must serve other brands of alcoholic beverages distributed by a competing wholesaler in addition to the brands manufactured or marketed by the nonretail licensee sponsoring or participating in the event. Additionally, requires a licensee that sponsors or participates in a nonprofit event to keep detailed records for a period of at least three years. 8)Specifies that the ABC Act does not prohibit purchasing advertising in a publication published by a nonretail licensee, as defined, and includes Internet Web sites and social media feeds as types of publications for these purposes. 9)Specifies that the Department of ABC may adopt any regulations necessary for the administration of this bill. Background Purpose of AB 776. According to the author's office, this bill does two things. First, it provides for the creation of a brewery event permit intended to allow brewery owners to apply to the Department of ABC for a temporary expansion of their permitted brewery premises for special events. The temporary permit for premises expansion would be limited to only the property that is immediately adjacent to, or contiguous to, the existing brewery premises. This bill will enable breweries to hold special anniversary celebrations, new release parties, or other special events where the expected crowd could not be AB 776 Page 6 accommodated in the public areas of the brewery. The author's office points out that current law authorizes wineries to apply for a similar temporary permit for special events - this bill simply extends that privilege to breweries. Secondly, this bill addresses concerns with current law that led to the cancellation of a major food and wine festival in Sacramento. Specifically, the ABC Act prohibits the involvement of alcoholic beverage manufacturers in events that benefit any permanent retail licensee or otherwise provide anything of value to a retail license. In 2014, the Sacramento Convention and Visitors Bureau, a nonprofit organization, held its annual "Grape Escape" food and wine event. A number of wineries and breweries donated alcoholic beverages and participated in the event. However, a large chain retailer sponsored the event as the name sponsor and the event was branded the "Save Mart Grape Escape." As a result, the involvement of manufacturers and their promotion of the event by various methods, including social media, violated the law. The author's office states that this bill will allow licensed alcoholic beverage manufacturers and retailers to participate together in sponsoring and promoting nonprofit fundraising events. By restructuring several sections of the ABC Act pertaining to non-profit events, suppliers and retailers will be able to sponsor and participate in such events and promote their products in a socially responsible manner. The author's office emphasizes that in addition to allowing suppliers and retailers to participate together, these new provisions also allow for communication of sponsorship or participation in these events through social media. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No SUPPORT: (Verified 8/18/15) California Craft Brewers Association (source) AB 776 Page 7 OPPOSITION: (Verified 8/18/15) None received ASSEMBLY FLOOR: 76-0, 5/26/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Bloom, Chávez, Harper, Mathis Prepared by:Arthur Terzakis / G.O. / (916) 651-1530 8/20/15 16:41:06 **** END ****