BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1320


                                                                    Page  1





          Date of Hearing:  April 30, 2015


                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION


                                  Adam Gray, Chair


          AB 1320  
          (Maienschein) - As Amended April 28, 2015


          SUBJECT:  Alcoholic beverages:  tied-house restrictions:   
          advertising


          SUMMARY:  Provides a Tied-house exception allowing specific  
          alcohol licensees to sponsor events or purchase advertising  
          space and time from, or on behalf of, a live entertainment  
          marketing company for live artistic, musical, sports, or  
          cultural entertainment events which are conducted at the San  
          Diego County Fairgrounds, located in the City of Del Mar in the  
          County of San Diego, under specified conditions.  Specifically,  
          this bill:  


          1)  Provides a beer manufacturer, holder of a winegrower's  
          license, winegrower's agent, holder of an importer's general  
          license that does not also hold a wholesale or retail license as  
          an additional license, distilled spirits manufacturer, holder of  
          a distilled spirits rectifier's general license, or a distilled  
          spirits manufacturer's agent may sponsor events promoted by, and  
          may purchase advertising space and time from, or on behalf of, a  
          live entertainment marketing company.


          2)  Provides that the live entertainment marketing company  
          operate and promotes live artistic, musical, sports, or cultural  








                                                                    AB 1320


                                                                    Page  2





          entertainment events only.


          3)  Provides all of the live artistic, musical, sports, or  
          cultural entertainment events are conducted at the San Diego  
          County Fairgrounds, located in the City of Del Mar in the County  
          of San Diego, and the events will typically occur over a period  
          of three or more consecutive days during which approximately 100  
          acts will perform before approximately 20,000 or more patrons.  
          The live entertainment marketing company shall not conduct more  
          than three of these types of events within a calendar year.


          4)  States the live entertainment marketing company is a  
          Delaware limited liability company that is under common  
          ownership, management, or control by a private equity firm that  
          may also have common ownership, management, or control of a  
          licensed California winery, provided the winery represents not  
          more than 25 percent of the assets under common ownership,  
          management, or control by the private equity firm or its  
          subsidiaries, and the live entertainment marketing company  
          exercises no control over the operations of the winery.


          5)  Provides that any on-sale licensee operating at a venue  
          where live artistic, musical, sports, or cultural entertainment  
          events are performed pursuant to a sponsorship described in this  
          section or where advertising is purchased, as described, shall  
          serve other brands of beer, distilled spirits, and wine  
          distributed by a competing wholesaler in addition to any brand  
          manufactured or distributed by the owning, sponsoring, or  
          advertising 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  
          rectifier's general license, or a distilled spirits  
          manufacturer's agent.


          6)  Provides that any sponsorship of events or purchase of  








                                                                    AB 1320


                                                                    Page  3





          advertising space or time conducted, as defined, shall be  
          conducted pursuant to a written contract entered into by the  
          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  
          rectifier's general license, or a distilled spirits  
          manufacturer's agent and the live entertainment marketing  
          company.


          7)  Contains language to address coercion or other illegal  
          means, relating to the purchase of advertising time or space  
          pursuant to this bill.





          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 or occupation taxes for this purpose.


          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.  










                                                                    AB 1320


                                                                    Page  4








          3)  Tied-house laws generally prohibit 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)  The Act prohibits an alcoholic beverage supplier from paying  
          money, or giving or furnishing anything of value, for the  
          privilege of placing or painting a sign or advertisement, or  
          window display, on or in premises selling alcoholic beverages at  
          retail.  





          5)  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 (e.g., Sleep Train Arena in Sacramento,  
          Oakland Coliseum in Oakland, Arrowhead Pond Arena in Anaheim,  
          Kern County Arena in Bakersfield, the National Orange Show Event  
          Center in San Bernardino, California Speedway in Fontana,  
          Grizzly Stadium in downtown Fresno, Raley Field in West  
          Sacramento, HP Pavilion in San Jose, the Home Depot Center in  
          the City of Carson and other venues).


          6)  Provides a Tied-house exception allowing certain alcohol  








                                                                    AB 1320


                                                                    Page  5





          manufacturers and distributors to sponsor events or purchase  
          advertising space from a live entertainment company that has its  
          principal place of business in the County of Los Angeles, as  
          defined. 


          7)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).


          FISCAL EFFECT:  Unknown


          COMMENTS:  


           Purpose of the bill  :  According to the author's office, this  
          bill creates a narrow exemption to the tied-house rules to  
          enable an event by KAABOO to be successfully conducted at the  
          San Diego Fairgrounds in Del Mar.  





          Stadiums, speedways and other concert venues have also had to  
          have tied-house exceptions made in order to both sell alcoholic  
          beverages and accept money for advertising.  An additional  
          exemption is needed in order for KAABOO music festival to do the  
          same, as KAABOO Entertainment's owners happen to have an  
          ownership interest in a winery. Without this exemption, KAABOO  
          music festival will be unable to secure important sponsorships  
          from beverage manufacturers and this along with limitations on  
          retail sales would mean the festival could not operate.











                                                                    AB 1320


                                                                    Page  6







          The KAABOO festival is expected to have a significant beneficial  
          economic impact on the Del Mar region. Local restaurants,  
          lodging and parking will all benefit from the increased tourism  
          in the Del Mar area.  The festival is expected to generate  
          approximately $1.5 million in sales tax.  





           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)





           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  








                                                                    AB 1320


                                                                    Page  7





          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  
          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  








                                                                    AB 1320


                                                                    Page  8





          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.





          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:










                                                                    AB 1320


                                                                    Page  9







          Support


          KAABOO Entertainment


          Family Winemakers of California




          Opposition


          None on file




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