BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                              Senator Isadore Hall, III
                                        Chair
                                2015 - 2016  Regular 

          Bill No:           AB 973           Hearing Date:    6/29/2015
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          |Author:    |Gray                                                 |
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          |Version:   |2/26/2015    Introduced                              |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Arthur Terzakis                                      |
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          SUBJECT: Alcoholic beverages: tied-house restrictions: on-sale  
          and off-sale retailers advertising


            DIGEST:    This bill consolidates two similar tied-house  
          exceptions (one pertaining to "on-sale" retailers and the other  
          to "off-sale" retailers) within the Alcoholic Beverage Control  
          (ABC) Act which authorize the dissemination of information  
          pertaining to the retail availability of products by alcoholic  
          beverage producers, distributors or importers in response to  
          direct inquiries from consumers.

          ANALYSIS:
          
          Existing law:
          
          1)Establishes the Department of ABC and grants it exclusive  
            authority to administer the provisions of the ABC Act in  
            accordance with laws enacted by the Legislature.  

          2)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  







          AB 973 (Gray)                                       Page 2 of ?
          
          
            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. 

          3)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.

          4)Provides that the listing of the names, addresses, telephone  
            numbers, email addresses, or Internet Web site addresses, of  
            two or more unaffiliated off-sale retailers selling beer,  
            wine, or distilled spirits and operating and licensed as bona  
            fide public eating places selling the beer, wine, or distilled  
            spirits produced, distributed, or imported by a nonretail  
            industry member in response to a direct inquiry from a  
            consumer, as specified, does not constitute a thing of value  
            or prohibited inducement to the listed off-sale retailer, if  
            specified conditions are met.

          5)Includes similar provisions applicable to "on-sale" licensed  
            premises, except that those provisions also extend the  
            exception described in item #4 above to others forms of   
            "electronic" media. 

          6)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)Deletes an existing tied-house exception pertaining to the  
            listing of off-sale licensed retailers as a thing of value or  
            prohibited inducement and instead includes off-sale retailers  
            within the exception previously applicable only to on-sale  
            licensed retailers. 

          2)Makes other minor conforming changes.








          AB 973 (Gray)                                       Page 3 of ?
          
          

          Background

          Tied-house:  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.  Existing tied-house laws generally  
          prohibit a manufacturer, importer or wholesaler from furnishing,  
          giving, or lending any money or other thing of value to any  
          person engaged in operating, owning, or maintaining any off-sale  
          or on-sale licensed retail premise.  Existing law also provides  
          two separate tied-house exceptions (one pertaining to on-sale  
          retailers and the other to off-sale retailers) relative to the  
          listing of a licensed retailer as a thing of value or prohibited  
          inducement.     

          Purpose of AB 973:  According to the author's office, alcoholic  
          beverage suppliers often list on a Facebook fan page or Web  
          site, the various restaurants where a consumer may purchase  
          their products.  Given the development of new social media,  
          alcoholic beverage distributors are utilizing various social  
          media mediums as a marketing tool to inform consumers about  
          additional retail locations where a particular product may be  
          purchased.  The author's office states that AB 973 is simply  
          intended to clean-up existing ABC statutes by consolidating into  
          a single statute the "on-sale" and "off-sale" provisions of law  
          which authorize manufacturers and distributors, in response to a  
          direct inquiry from a consumer, to provide information relative  
          to where their product is available for purchase.    

          Prior/Related Legislation
          
          AB 2349 (Nestande, Chapter 374, Statutes of 2012) provided that  
          the listing of names, addresses, telephone numbers, or email  
          addresses in other forms of electronic media do not constitute a  
          thing of value.  

          SB 1096 (Wiggins, Chapter 285, Statutes of 2010) revised the  
          direct inquiry provisions in the ABC Act pertaining to the  
          authority of producers, wholesalers and importers to respond to  
          consumer inquiries as to where their products may be found to  
          include any "electronic" inquiries from consumers.








          AB 973 (Gray)                                       Page 4 of ?
          
          

          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.

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


            SUPPORT:  

          California Beer & Beverage Distributors 

          OPPOSITION:

          None received