BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:   April 22, 2015


                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION


                                  Adam Gray, Chair


          AB 780  
          Williams - As Amended April 8, 2015


          SUBJECT:  Alcoholic beverages:  tied-house restrictions:   
          on-sale retailers advertising


          SUMMARY:  Broadens the exception in the Alcoholic Beverage  
          Control Act (Act) by removing the requirement that the listing  
           be in response to a direct inquiry  , as specified.  The bill  
          would also permit the listing of contact information for  
          off-sale retailers and would make conforming changes to reflect  
          this inclusion.  Specifically, this bill:  



          1)  Provides the listing of the names, addresses, telephone  
          numbers, email addresses, or Internet web site addresses, or  
          other electronic media, of two or more unaffiliated on-sale or  
          off-sale retailers selling beer, wine, or distilled spirits  
          produced, distributed, or imported by a non-retail industry  
          member does not constitute a thing of value or prohibited  
          inducement to the listed on-sale or off-sale retailer, provided  
          all of the following conditions are met:

            a)  The listing is the only reference to the on-sale or  
          off-sale retailers in the direct communication.










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            b)  The listing does not refer only to one on-sale or off-sale  
          retailer or only to on-sale or off-sale retail establishments  
          controlled directly or indirectly by the same retailer.


          EXISTING LAW:  


          1)Establishes the Department of Alcoholic Beverage Control (ABC)  
            and grants it exclusive authority to administer the provisions  
            of the Act in accordance with laws enacted by the Legislature.  
             This involves licensing individuals and businesses associated  
            with the manufacture, importation and sale of alcoholic  
            beverages in this state and the collection of license fees or  
            occupation taxes for this purpose. 

          2)Existing law, known as the "Tied-house" law, separates the  
            alcoholic beverage industry into three component parts, or  
            tiers:  manufacturer (including breweries, wineries and  
            distilleries), wholesaler, and retailer (both on-sale and  
            off-sale).

          3)Prohibits a manufacturer, winegrower, manufacturer's agent,  
            California winegrower's agent, rectifier, distiller, bottler,  
            importer, or wholesaler from furnishing or lending money or  
            other thing of value to a person engaged in operating, owning,  
            or maintaining an on-sale licensed premise.

          4)Provides that the listing of the names, addresses, telephone  
            numbers, email addresses, Internet Web site addresses, or  
            other electronic media, of 2 or more unaffiliated on-sale  
            retailers selling beer, wine, or distilled spirits, as  
            specified, in response to a direct inquiry from a consumer, as  
            specified, does not constitute a thing of value or prohibited  
            inducement, if specified conditions are met. The Act includes  
            among those conditions the requirement that the listing not  
            refer to only one on-sale retailer or only to on-sale retail  
            establishments controlled by the same retailer.
          








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          FISCAL EFFECT:  Unknown


          COMMENTS:  


           Purpose of the bill  :  The author's office notes that current ABC  
          law prohibits a supplier (manufacturer and distributor) from  
          giving or lending money or anything of value to anyone who  
          operates, owns or maintains any off-sale licensed premise.   
          However, these licensed entities may list or publish, in  
          response to a direct inquiry from a consumer, the name, address,  
          telephone numbers, e-mail, or web address of two or more  
          retailers who sell their products so long as the retailer  
          operates and is licensed as a bona fide public eating-place  
          (restaurant).


          The author's office states, this bill "will provide small  
          distillers, brewers and wineries with an additional tool to  
          promote their start-up businesses.  Social media has forever  
          changed basic communication, and by not allowing small  
          businesses to participate in this integral form of free  
          communication, the Tied-House laws have disadvantaged them from  
          connecting with customers and distributors.   





          The author's office states, "Social media is a free form of  
          advertisement to the public; therefore, it should not be defined  
          as a gift of advertisement.  For many millennials, social media  
          is the equivalent of personal speech and is ingrained in today's  
          society.  Current law needs to provide flexibility for the small  
          manufacturers, who do not always have the start-up money to  
          spend on advertising.  With the societal shift towards craft  








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          breweries, and small wineries, manufacturers should be allowed  
          to use social media as a communication tool."


          AB 780 will provide greater flexibility and protect the ability  
          of specified alcohol interests to engage in social media  
          communications with consumers, while preserving the original  
          intent of the Tied-house law of prohibiting gifts of  
          advertisement from alcoholic beverage producers, distributors or  
          importers.


           Background  :  Existing law, known as the "Tied-house" law,  
          separates the alcoholic beverage industry into three component  
          parts, or tiers, of manufacturer (including breweries, wineries  
          and distilleries), wholesaler, and retailer (both on-sale and  
          off-sale).  





          Tied-house refers to a practice in this country prior to  
          Prohibition and still occurring in England today where a bar or  
          public house, from whence comes the "house" of tied house, is  
          tied to the products of a particular manufacturer, either  
          because the manufacturer owns the house, or the house is  
          contractually obligated to carry only a particular  
          manufacturer's products.   





          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 marketplace; (c) prohibit commercial bribery and protect the  
          public from predatory marketing practices; and, (d) discourage  








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          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.  





          Existing law provides that no licensee shall, directly or  
          indirectly, give any premium, gift, free goods, or other thing  
          of value in connection with the sale, distribution, or sale and  
          distribution of alcoholic beverages, and no retailer shall,  
          directly or indirectly, receive any premium, gift, free goods or  
          other thing of value from a supplier of alcoholic beverages,  
          except as authorized by ABC.  





           In Support  : Writing in support, the California Craft Brewers  
          Association states, "Craft beer enthusiasts are extremely  
          interested in learning about new beer releases and product  
          availability in their cities.  The use of social media  
          communications between beer manufacturers and their customers  
          has become a primary means of communication in recent years to  
          provide this information.  However, a substantial amount of  
          confusion exists within the industry about form and content of  
          social media communications when it comes to compliance with  
          California's alcohol beverage laws and regulations.  AB 780  
          seeks to reduce this confusion and increase industry compliance  
          by making minor modifications to state law."  





           Related legislation  :  AB 973 (Gray) of the 2015-16 Legislative  








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          Session.  Merges two similar tied-house exceptions (one  
          pertaining to "on-sale" retailers the other to "off-sale"  
          retailers) within the Alcoholic Beverage Control (ABC) Act,  
          which authorizes the dissemination of information regarding the  
          retail availability of products by alcoholic beverage producers,  
          distributors or importers in response to direct requests from  
          consumers.  (Pending in Assembly Appropriations Committee)





           Prior legislation  : AB 2349 (Nestande), Chapter 374, Statutes of  
          2012.  Revised the direct inquiry provisions in the Act to  
          remove the requirement that manufacturers and distributors can  
          only provide consumer information on where they can find a  
          specific product at an on-sale establishment if that on-sale  
          retailer operates and is licensed as a restaurant.  By removing  
          that requirement, manufacturers and distributors can add bars to  
          the list they provide consumers of on-sale establishments that  
          serve their specific products.


          SB 1423 (Chesbro) Chapter 205, Statutes of 2000.  Authorized  
          wineries and brandy manufacturers to advertise the name and  
          location of restaurants that sell their products.





          SB 1233 (Chesbro) Chapter 666, Statutes of 1999.  Allowed for  
          the limited dissemination of information regarding the off-sale  
          availability of alcoholic beverages.


          AB 2777 (Granlund), Chapter 980, Statutes of 2000.   Among other  
          things, broadened an existing tied-house exception relating to  
          the purchase of alcoholic beverage advertisements at specified  








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          venues to include distilled spirits manufacturers.  Also,  
          authorized a non-retail         alcohol industry member to list  
          specified information relating to the availability of alcoholic  
          beverages at no more than two restaurants in response to a  
          direct inquiry from a consumer received by telephone, mail, or  
          the Internet.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          California Craft Brewers Association


          Family Winemakers of California




          Opposition


          None on file




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














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