BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 776


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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          776 (Cooper)


          As Amended  September 4, 2015


          Majority vote


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          |ASSEMBLY:  | 76-0 | (May 26,      |SENATE: | 39-1 | (September 10,  |
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          Original Committee Reference:  G.O.


          SUMMARY:  Allows a licensed beer manufacturer to apply to the  
          Department of Alcoholic Beverage Control (ABC) for a brewery  
          event permit that 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 (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.  Specifically, this bill:


          1)Allows a licensed beer manufacturer to apply to ABC for a  
            brewery event permit that will allow the sale of beer produced  








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            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 $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, the licensee must  
            obtain consent for the sale of beer from 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 $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 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  








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            following conditions are met:


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


             d)   Except as otherwise provided by the 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.  In  
               addition, a nonretail licensee shall not pay or reimburse a  








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               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  
               exclusively at the event.  In addition, 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 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 ABC may adopt any regulations necessary for the  
            administration of this bill. 


          The Senate amendments: 










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          1)Authorize licensed alcoholic beverage manufacturers and  
            retailers to sponsor or otherwise participate in an event  
            conducted by, and for the benefit of, a nonprofit organization  
            that has acquired a specified alcoholic beverages license,  
            subject to specified conditions, including that a nonretail or  
            retail licensee may choose to participate in any level of  
            sponsorship, as specified.


          2)Specify the Act does not prohibit purchasing advertising in a  
            publication published by a nonretail licensee, as defined, and  
            would include Internet Web sites and social media feeds as  
            types of publications for these purposes.


          3)Prohibit a retail licensee from purchasing beer from any beer  
            manufacturer for the purpose of selling or offering to sell  
            that beer under specified circumstances, including where the  
            beer container contains the statement or is marked "Not  
            Packaged for Resale".


          4)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


          5)Make relating technical and clarifying changes.


          EXISTING LAW:  


          1)Establishes 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  








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            premises, as specified. 


          3)Authorizes a licensed winegrower to apply to ABC for a wine  
            sales event permit that allows the sale of bottled wine  
            produced by that winegrower at specified events approved by  
            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 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  








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            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 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. 


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


          COMMENTS:  This bill was substantially amended in the Senate and  
          is inconsistent with Assembly actions.


          Purpose of this bill:  According to the author's office, this  
          bill is intended to address four significant issues.  First, it  
          provides for the creation of a brewery event permit intended to  
          allow brewery owners to apply to 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,  








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          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.


          Additionally, this bill addresses concerns with current law that  
          led to the cancellation of a major food and wine festival in  
          Sacramento.  Specifically, the 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 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. 








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          Lastly, 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 ABC.  ABC 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 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 Business and Professions Code Section  
          25666will guarantee fairness in the administration of justice by  
          allowing all witnesses to be heard.


          Analysis Prepared by:                                             
                          Eric Johnson / G.O. / (916) 319-2531  FN:  
          0002313