BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                        AB 776|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
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                                   THIRD READING 


          Bill No:  AB 776
          Author:   Cooper (D)
          Amended:  9/4/15 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


          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.  Additionally,  
          this bill adds a new provision to the ABC Act that prohibits a  
          retail licensee from purchasing beer at the beer manufacturer's  
          licensed premises and then re-retailing the beer product at  
          their own licensed premise. 

          Senate Floor Amendments of 9/4/15 add a provision to prevent  








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          retail licensees from re-retailing beer purchased from a beer  
          manufacturer; add language modifying the terms for which an  
          administrative hearing involving the sale of alcohol to a minor  
          may be delayed, to include reasonable situations where the minor  
          is generally unavailable; and rewrite, as specified, the  
          requirements under which manufacturers and retailers may  
          participate in sponsoring promotional events for the benefit of  
          nonprofit organizations. 

          ANALYSIS:
          
          Existing law:

          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,  








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            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.

          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. 

          8)Authorizes specified licensees to purchase alcoholic beverages  
            for resale under specified conditions.

          9)Requires the Department of ABC, in any hearing on an  
            accusation charging a licensee with a violation of specified  
            provisions relating to minors, to produce the alleged minor  
            for examination at the hearing unless he or she is unavailable  
            as a witness because he or she is dead or unable to attend the  
            hearing because of a then-existing physical or mental illness  
            or infirmity, or unless the licensee has waived, in writing,  
            the appearance of the minor.  The law also provides that when  
            a minor is absent because of a then-existing physical or  
            mental illness or infirmity, a reasonable continuance shall be  
            granted to allow for the appearance of the minor if the  
            administrative law judge finds that it is reasonably likely  
            that the minor can be produced within a reasonable amount of  
            time. 

          This bill:

          1)Allows a licensed beer manufacturer to apply to the Department  








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            of ABC for a brewery event permit which will 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 and  
            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.

          3)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).  

          4)Provides that all money collected as fees shall be deposited  
            in the ABC Fund for allocation, upon appropriation by the  
            Legislature.

          5)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  
            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. 

          6)Authorizes a licensee to sponsor or otherwise participate in  
            an event conducted by, and for the benefit of, a nonprofit  
            organization in which retail or nonretail licensees are  
            involved as sponsors or participants, provided that all of the  
            following conditions are met:

             a)   Except as otherwise provided in this bill, any payment  








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               of money or other consideration for sponsorship or  
               participation in the event shall be made only to the  
               nonprofit organization conducting the event;

             b)   Except as otherwise provided in this bill, a nonretail  
               licensee shall not, directly or indirectly, pay money or  
               provide any other thing of value to a permanent retail  
               licensee that is also a sponsor of, or participant in, the  
               event;

             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 the ABC Act, a retail  
               licensee shall not give, sell, or furnish alcoholic  
               beverages to the temporary licensee;

             e)   A nonretail or retail licensee may choose to participate  
               in any level of sponsorship, including at the name or  
               principal sponsor level.  Also, permits a nonprofit  
               organization to choose to have one, or multiple, name or  
               principal sponsors;

             f)   A nonretail licensee may advertise or communicate  
               sponsorship or participation in the event.  This  
               advertising or communication may include, but is not  
               limited to, initiating, sharing, reposting, or otherwise  
               forwarding a social media post by a permanent retail  
               licensee or a nonretail licensee if the advertisement or  
               communication does not contain the retail price of any  
               alcoholic beverage or otherwise promotes a retail licensee  
               beyond its sponsorship or participation in the event.   
               Also, a nonretail licensee shall not pay or reimburse a  
               retail licensee, directly or indirectly, for any social  
               media advertising services.  And, a permanent retail  
               licensee shall not accept any payment or reimbursement,  
               directly or indirectly, for any advertising services  
               offered by a nonretail licensee;

             g)   A nonretail licensee shall not require, directly or  
               indirectly, as a condition of sponsorship or participation  
               in any event that its products be sold or served  








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               exclusively at the event.  Also, a retail licensee shall  
               not receive, directly or indirectly, any advertising, sale,  
               or promotional benefit from any permanent retail licensee  
               in connection with the sponsorship or participation.  In  
               addition, a permanent retail licensee shall not offer or  
               provide a nonretail licensee any advertising, sale, or  
               promotional benefit in connection with the sponsorship or  
               participation.  Additionally, requires a licensee that  
               sponsors or participates in a nonprofit event to keep  
               detailed records for a period of at least three years.

          7)Adds a new provision to the ABC Act that prohibits a retail  
            licensee from re-retailing any beer that is purchased from a  
            beer manufacturer at the beer manufacturer's licensed premises  
            under specified circumstances.

          8)Modifies the terms for which an administrative hearing  
            involving the sale of alcohol to a minor may be delayed, to  
            include reasonable situations where the minor is generally  
            unavailable.  

          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  
          is intended to address four significant issues.  First of all,  
          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  
          will 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 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.









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          Additionally, 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.  

          Furthermore, the author's office points out that this bill is  
          intended to address a growing problem involving licensed  
          retailers who are purchasing beer from craft breweries at retail  
          prices and then re-selling those products at their own licensed  
          locations.  Such practice violates existing price posting laws  
          and places the brewery license and employees in legal jeopardy. 

          Finally, this bill seeks to remedy a problem related to  
          administrative hearings involving the sale of alcoholic  
          beverages to minors.  The author's office states that violations  
          by licensees involving the sale of alcoholic beverages to minors  
          are among the highest public safety priority of the Department  
          of ABC.  The Department is required to produce the minor at any  
          hearing held on an appeal of the disciplinary action.  However,  
          quite often, the minor is unavailable to attend the scheduled  








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          hearing due to changes in life circumstances, such as moving out  
          of state to attend college or enlisting in the military, or due  
          to last minute situations such as transportation problems or  
          forgetful scheduling by the minor.  The author's office contends  
          that the changes incorporated in Section 25666 of the B & P Code  
          will guarantee fairness in the administration of justice by  
          allowing all witnesses to be heard.

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          Yes


          SUPPORT:  (Verified 9/8/15)

          California Craft Brewers Association (source)
          Anheuser-Busch
          Family Winemakers of California

          OPPOSITION:  (Verified 9/8/15)

          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
          9/8/15 14:42:02


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