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 ----------------------------------------------------------------- |Author: |Gray | |-----------+-----------------------------------------------------| |Version: |2/26/2015 Introduced | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Arthur Terzakis | | | | ----------------------------------------------------------------- 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