BILL ANALYSIS Ó
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
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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
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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.
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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
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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.
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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
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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
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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
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Support
KAABOO Entertainment
Family Winemakers of California
Opposition
None on file
Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531