BILL ANALYSIS                                                                                                                                                                                                    



                                                                    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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