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: 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 AB 776 Page 2 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, AB 776 Page 3 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 AB 776 Page 4 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 AB 776 Page 5 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 AB 776 Page 6 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. AB 776 Page 7 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 AB 776 Page 8 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 **** END **** AB 776 Page 9