BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                        AB 776|
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                                   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:









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          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.








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          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  








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            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  








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               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  








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          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)









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          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


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