BILL ANALYSIS Ó
AB 1320
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Date of Hearing: April 27, 2015
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Adam Gray, Chair
AB 1320
(Maienschein) - As Amended March 26, 2015
SUBJECT: Alcoholic beverages: tied-house restrictions:
fairgrounds
SUMMARY: Extends an existing "Tied-house" exception in the
Alcoholic Beverage Control Act (ABC Act) pertaining to the
general prohibition against advertising arrangements between
retail, wholesale and manufacturer licensees to include a state
or county-owned fairgrounds, under specified conditions.
Specifically, this bill:
1) Authorizes a beer manufacturer, holder of a winegrower's
license, winegrower's agent, holder of an importer's general
license, distilled spirits manufacturer, holder of a distilled
spirits rectifiers general license, or a distilled spirits
manufacturer's agent to sponsor events promoted by or own,
sponsor, conduct, or purchase advertising space and time from,
or on behalf of, an on-sale retail licensee that is the owner,
manager, agent of the owner, assignee of the owner's advertising
rights, or major tenant of a state or county-owned fairground,
under specified conditions.
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2) Makes a beer manufacturer, holder of a winegrower's license,
winegrower's agent, holder of an importer's general license,
distilled spirits manufacturer, holder of a distilled spirits
rectifiers general license, or a distilled spirits
manufacturer's agent who, through coercion or other illegal
means, induces the holder of a wholesaler's license to fulfill
those contractual obligations entered into pursuant to these
provisions guilty of a misdemeanor.
3) Makes an on-sale retail licensee, as described, who solicits
or coerces a holder of a wholesaler's license to solicit a beer
manufacturer, holder of a winegrower's license, winegrower's
agent, holder of an importer's general license, distilled
spirits manufacturer, holder of a distilled spirits rectifiers
general license, or a distilled spirits manufacturer's agent to
purchase advertising time or space pursuant to these provisions
guilty of a misdemeanor.
EXISTING LAW:
1) Establishes the Department of Alcoholic Beverage Control
(ABC) and grants it exclusive authority to administer the
provisions of the ABC 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 for this purpose.
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2) Existing law, known as the "Tied-house" law or "three-tier"
system, separates the alcoholic beverage industry into three
component parts of manufacturer (the first tier), wholesaler
(the second tier), and retailer (the third tier). The original
policy rationale for this body of law was to prohibit the
vertical integration of the alcohol industry and to protect the
public from predatory marketing practices.
3) Generally prohibits suppliers and retailers from sharing
common owners and legally restrict alcohol beverage suppliers'
ability to gain control over retailers through indirect means.
Generally, other than exemptions 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.
4) Prohibits paid advertising by winegrowers, beer
manufacturers and distilled spirits producers in cases where a
retail licensee also owns a sports or entertainment venue. Over
the years numerous exceptions to this prohibition have been
added to the ABC Act
5) Grants a Tied-house exception to any holder of a beer
manufacturer's or winegrower's license authorizing the purchase
of advertising from, or on behalf of, an on-sale licensee if the
on-sale licensee is the owner, manager, agent of the owner,
assignee of the owner's advertising rights, or the major tenant
of the owner of any of the following:
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a) An outdoor stadium or a fully enclosed arena with a fixed
seating capacity in excess of
10,000 seats located in Sacramento County or Alameda County;
b) A fully enclosed arena with a fixed seating capacity in
excess of 18,000 seats located in
Orange County or Los Angeles County;
c) An outdoor stadium or fully enclosed arena with a fixed
seating capacity in excess of
8,500 seats located in Kern County;
d) An exposition park of not less than 50 acres that includes
an outdoor stadium with a fixed
seating capacity in excess of 8,000 seats and a fully enclosed
arena with an attendance
capacity in excess of 4,500 people, located in San Bernardino
County;
e) An outdoor stadium with a fixed seating capacity in excess
of 10,000 seats located in Yolo
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County;
f) An outdoor stadium and a fully enclosed arena with fixed
seating capacities in excess of
10,000 seats located in Fresno County;
g) An athletic and entertainment complex of not less than 50
acres that includes within its
boundaries an outdoor stadium with a fixed seating capacity of
at least 8,000 seats and a
second outdoor stadium with a fixed seating capacity of at least
3,500 seats located within
Riverside County;
h) An outdoor stadium with a fixed seating capacity in excess
of 1,500 seats located in Tulare
County;
i) A motorsports entertainment complex of not less than 50
acres that includes within its
boundaries an outdoor speedway with a fixed seating capacity of
at least 50,000 seats,
located within San Bernardino County;
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j) An exposition park, owned or operated by a bona fide
nonprofit organization, of not less
than 400 acres with facilities including a grandstand with a
seating capacity of at least 8,000
people, at least one exhibition hall greater than 100,000 square
feet, and at least four
exhibition halls, each greater than 30,000 square feet, located
in the City of Pomona or the
City of La Verne in Los Angeles County;
k) An outdoor soccer stadium with a fixed seating capacity of
at least 25,000 seats, an
outdoor tennis stadium with a fixed capacity of at least 7,000
seats, an outdoor track and field
facility with a fixed seating capacity of at least 7,000 seats,
and an indoor velodrome with a
fixed seating capacity of at least 2,000 seats, all located
within a sports and athletic complex
built before January 1, 2005, within the City of Carson in Los
Angeles County;
l) An outdoor professional sports facility with a fixed
seating capacity of at least 4,200 seats
located within San Joaquin County;
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m) A fully enclosed arena with a fixed seating capacity in
excess of 13,000 seats in the City of
Inglewood; and
n) An outdoor stadium with a fixed seating capacity of at
least 68,000 seats located in the
City of Santa Clara.
6) Defines a state-supported fair organization as any fair that
conducts an annual fair and submits an annual statement of
operations to the CDFA. The generic term of "fairs" refers to
District Agricultural Associations (DAA's), county fairs, citrus
fairs, and the California State Fair.
FISCAL EFFECT: Unknown
COMMENTS:
Purpose of the bill : According to the author's office, this
bill amends ABC "Tied-house" provisions to include state-or
county-owned fairgrounds on the list of exemptions in the law,
thereby allowing these fairs to develop certain alcoholic
beverage sponsorships with various manufacturers and
distributors.
The author's office points out that existing law precludes any
signage paid for by an alcoholic beverage manufacturer or
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distributor unless such an exception is created. The author's
office emphasizes that such an exemption which would put the
network of California fairs on an even playing field with other
entertainment business in California and help support the
industry's efforts to make fairs more economically sustainable.
This Tied-house exemption is narrowly crafted and similar to
those granted to the Los Angeles Forum in the City of Inglewood,
the Los Angeles County Fair in Los Angeles County, the National
Orange Show in San Bernardino, a theme or amusement park located
in Orange County (Disneyland), the California Speedway in
Fontana, the Indian Wells Tennis Club in Riverside County,
non-profit theatre organizations, and maritime museums, among
others.
Background : The network of California fairs includes 77 fair
organizations divided into four categories: 52 DAA's - state
government entities, 22 county fairs - County government or
not-for-profit organizations, 2 citrus fruit fairs -
not-for-profit organizations and the California Exposition and
State Fair (Cal Expo) - a state agency. California's 77 fairs
are located throughout the Golden State and host fairs from
early spring to the fall of each year.
The California Department of Food & Agriculture (CDFA) is
responsible for the oversight of California's agricultural
industry, including the network of California fairs. The
Division of Fairs and Expositions (F&E), provides fiscal and
policy oversight of the network of California fairs and ensures
the best use of available funding and services.
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An annual fair is just one of many year-round activities for
fair organizations in California. They must facilitate use of
the fairgrounds for interim events sponsored by community groups
and private entities as well as manage ongoing maintenance and
capital improvement projects. As a result, the fair network
creates the opportunity for small-to medium-sized businesses and
nonprofit community groups to make money from these year-round
activities. These interim events further boost jobs, incomes
and tax revenues in every county throughout the state. While
the California fair network makes it possible for this economic
activity to occur, fair organizations are public, not-for-profit
entities that exist to promote industries of the state and
provide a community gathering place. They do not receive state
general fund monies in support of these efforts.
Tied-house law : Tied-House Law refers to the statutory scheme
restricting any cross-ownership among the three independent
tiers of the alcohol industry: a) manufacturers; b)
distributors/wholesalers; and, c) retailers. The term
"Tied-House" refers to a practice which was common in this
country prior to prohibition, and is still occurring in England
today, where a bar or "public house" is tied to the products of
a particular manufacturer. The original rationale for
Tied-house restrictions are in place to promote the state's
interest in maintaining an orderly market, to prohibit the
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vertical integration of the alcohol industry, to protect the
public from predatory marketing practices, and to prevent the
intemperate consumption of alcoholic beverages. In order to
further these policy goals, the Legislature has generally
prohibited forms of cross-ownership between manufacturers and
retailers, and discouraged manufacturers from providing anything
of value to distributors or retailers, be it free goods,
services or advertising.
Numerous exceptions to these restrictions have been enacted
through the years in those specific instances where the
Legislature determined that the public's interests were
protected. Generally, the business community is interested in
removing unnecessary business regulations and creating
conditions that facilitate investment and expansion
opportunities for companies that have some degree of ownership
in multiple segments of the industry. However, the Legislature
traditionally does not grant exemptions that favors the products
of the entity seeking the exemption, or exemptions that unfairly
compromise the role of the distributors.
Related legislation : AB 527 (Dodd) of 2015. Would allow
alcohol manufacturers and distributors to sponsor events or
purchase advertising space and time from, or on behalf of, a
live entertainment marketing company that is a wholly owned
subsidiary of a live entertainment company that has its
principal place of business in the County of Napa, under
specified conditions. (Pending in Assembly Appropriations
Committee)
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Prior legislation : SB 600 (Bonta), Chapter 139, Statutes of
2014. Extends an existing "Tied-house" exception in the ABC Act
pertaining to the general prohibition against advertising
arrangements between retail, wholesale and manufacturer
licensees to include an outdoor stadium with a fixed seating
capacity of at least 68,000 seats located in the City of Santa
Clara (Levi's Stadium - San Francisco 49ers new stadium).
SB 324 (Wright), Chapter 164, Statutes of 2013. Provided a
"Tied-house" exception to the ABC Act pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees and the Los Angeles Forum
in the City of Inglewood.
AB 776 (Aghazarian) Chapter 221, Statutes of 2007. Created a
new "Tied-house" exception by authorizing a beer manufacturer to
sponsor or purchase advertising space and time from, or on
behalf of, an off-sale retail licensee that is an owner or
co-owner of a professional sports team (California Cougars
indoor soccer team) that plays its home games, in an arena with
a fixed seating capacity of 10,000 seats (Stockton Arena)
located in San Joaquin County.
AB 663 (Galgiani) Chapter 745, Statutes of 2007. Extended an
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existing "Tied-house" exception pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees to include an outdoor
professional sports facility with a fixed seating capacity of at
least 4,200 (Banner Island Ballpark) located in San Joaquin
County.
AB 1442 (Horton) Chapter 617, Statutes of 2005. Extended an
existing "Tied-house" exception pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees to the Home Depot Center, a
sports and athletic complex within the City of Carson in Los
Angeles and the Nokia Theater, located within the Los Angeles
Sports and Entertainment District, adjacent to Staples Center.
AB 3085 (Governmental Organization Committee), Chapter 437,
Statutes of 2004. Provided the Los Angeles County Fair with an
exemption from tied-house laws so that so that alcohol
manufacturers may purchase advertising from, or on behalf of,
the on-sale licensees at this venue.
SB 1647 (Perata) Chapter 275, Statutes of 2004. Extended an
existing "Tied-house" exception pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licenses to the Oakland Coliseum in
Alameda County.
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SB 1189 (Costa) Chapter 47, Statutes of 2002. Extended an
existing "Tied-house" exception pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licenses to the Visalia Oaks Stadium
in Visalia and the California Speedway in Fontana.
REGISTERED SUPPORT / OPPOSITION:
Support
KAABOO Entertainment
Opposition
None on file
Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531
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