BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1320|
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THIRD READING
Bill No: AB 1320
Author: Maienschein (R)
Amended: 8/18/15 in Senate
Vote: 27 - Urgency
SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 6/29/15
AYES: Hall, Berryhill, Block, Gaines, Glazer, Hernandez, Hill,
Hueso, Lara, McGuire, Runner, Vidak
NO VOTE RECORDED: Galgiani
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 76-0, 5/26/15 (Consent) - See last page for
vote
SUBJECT: Alcoholic beverages: tied-house restrictions:
advertisingAlcoholic beverages: tied-house
restrictions: advertising.
SOURCE: KAABOO Entertainment
DIGEST: This bill creates a new tied-house exception in the
Alcoholic Beverage Control (ABC) Act that authorizes certain
alcoholic beverage licensees to sponsor a limited number of
events promoted by or to purchase advertising space and time
from, or on behalf of, a live entertainment marketing company
that conducts live artistic, musical, sports, or cultural
entertainment events solely at the San Diego County Fairgrounds
in Del Mar, under specified conditions.
Senate Floor Amendments of 8/18/15 include "rectifier" to the
list of licensees that can purchase advertising; modify certain
license terms so that they conform to existing ABC Act language;
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and, add an urgency clause.
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. 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.
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
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)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 (formerly known as
ARCO Arena) in Sacramento, Oakland Coliseum in Oakland,
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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,
Levi's Stadium in the City of Santa Clara, and other venues].
5)Provides a narrow tied-house exception that expressly
authorizes, under specified conditions, a beer manufacturer,
holder of a winegrower's license, California winegrower's
agent, distilled spirits manufacturer, holder of a distilled
spirits rectifiers general license, or a distilled spirits
manufacturer's agent to purchase advertising space or time
from a fully enclosed venue (ClubNokia) with box office sales
and attendance by the public on a ticket basis only, with a
patronage capacity in excess of 2,000, but not more than
3,000, located in Los Angeles County within the area subject
to the Los Angeles Sports and Entertainment District Specific
Plan adopted by the City on September 6, 2001, where the owner
of the venue is not the on-sale retail licensee. (Business &
Professions Code Section 25503.42)
This bill:
1)Authorizes a holder of a beer manufacturer license, holder of
an out-of-state beer manufacturer's certificate, holder of a
winegrower's license, winegrower's agent, holder of a
rectifier license, holder of a distilled spirits rectifier's
general license, distilled spirits manufacturer, distilled
spirits manufacturer's agent or holder of a beer and wine
importer's general license or distilled spirits importer's
general license that, unless it holds one of the other
authorized licenses specified in this section, does not also
hold a wholesale or retail license as an additional license
(these entities will hereafter be referred to as "alcoholic
beverage suppliers") to sponsor events promoted by or to
purchase advertising space and time from, or on behalf of, a
live entertainment marketing company subject to the following
conditions:
a) The live entertainment marketing company operates and
promotes live artistic, musical, sports, or cultural
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entertainment events only.
b) All of the live events are conducted at the San Diego
County Fairgrounds, in the City of Del Mar, and the events
will typically occur over a period of no more than four
consecutive days during which approximately 100 acts will
perform before approximately 20,000 or more patrons.
c) The live entertainment marketing company shall not
conduct more than three of these types of events within a
calendar year.
d) 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% 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.
e) Any on-sale licensee operating at a venue where live
events are performed pursuant to a sponsorship or where
advertising is purchased must serve other brands of beer,
wine, or distilled spirits distributed by a competing
wholesaler in addition to any brand manufactured or
distributed by the owning, sponsoring, or advertising
alcoholic beverage supplier.
f) An agreement for the sponsorship of or for the purchase
of advertising space and time during a live event shall not
be conditioned directly, or indirectly, in any way, on the
purchase, sale, or distribution of any alcoholic beverage
manufactured or distributed by the owning, advertising, or
sponsoring alcoholic beverage supplier by the live
entertainment marketing company.
2)Provides that any sponsorship of events or purchase of
advertising space or time must be conducted pursuant to a
written contract entered into by the alcoholic beverage
supplier and the live entertainment marketing company.
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3)Makes it a misdemeanor for an alcoholic beverage supplier to
coerce or induce, directly or indirectly, a licensed
wholesaler to fulfill the contractual obligations entered into
pursuant to the above provisions. Also, subjects the
alcoholic beverage supplier (licensee) to license suspension
or revocation.
4)Makes it a misdemeanor for the on-sale retail licensee to
solicit or coerce, directly or indirectly, an alcoholic
beverage supplier to purchase advertising time or space and
subjects the on-sale retail licensee to license suspension or
revocation.
5)Contains boiler plate language (legislative findings and
declarations) relative to the necessity of requiring a
separation between manufacturing interests, wholesale
interests, and retail interests in the production and
distribution of alcoholic beverages.
6)Contains an urgency clause, to take effect immediately.
Background
Purpose of AB 1320. As noted above, existing tied-house laws
prohibit an alcoholic beverage supplier, or any officer,
director or agent of an alcoholic beverage supplier, from
providing anything of value to an on-sale retailer licensee, be
it free goods, money, services or advertising. Over the years,
numerous exceptions to this prohibition have been added to the
ABC Act encompassing various venues throughout the state.
This bill creates a stand-alone tied-house exception applicable
to Horsepower Entertainment Company, which is holding the KAABOO
festival - a three-day event to be held in September 2015 at the
San Diego Fairgrounds in Del Mar that will combine a diverse mix
of music, culinary offerings, libations, art exhibitions,
comedy, dancing and other amenities. Due to the fact that
Horsepower Entertainment's ownership includes an interest in a
Napa winery (Jamieson Ranch Vineyards) it cannot sponsor the
festival on the grounds of the San Diego County Fair which has
an on-sale licensee (caterer) on its premises. This bill will
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enable Horsepower Entertainment to enter into a contractual
agreement with an alcoholic beverage supplier interested in
purchasing advertising at the festival. This bill subjects
Horsepower Entertainment to certain requirements, as specified,
and also requires the on-sale licensee operating at the venue
where the live events are performed to serve other brands of
beer, wine, or distilled spirits distributed by a competing
wholesaler in addition to any brand manufactured or distributed
by the owning, sponsoring, or advertising alcoholic beverage
supplier.
According to the author's office, "the KAABOO festival is an
entertainment experience with world-class music, dancing,
incredible cuisine, craft libations, inspiring contemporary art,
and more. In contrast to typical festivals, KAABOO will offer
local and regional delicacies, a contemporary art fair, salon
and golf simulator in addition to the more than 100 music acts.
KAABOO has committed to donate $1 for every ticket sold to San
Diego area charitable partners."
Additionally, the author's office indicates that the festival is
expected to have a significant economic impact on the Del Mar
region - local restaurants, lodging and other businesses are
expected to benefit from the increased tourism that will be
generated.
Related/Prior Legislation
SB 462 (Wolk, 2015) 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 a specified entertainment
complex, known as the Green Music Center, located on the campus
of Sonoma State University. Additionally, this bill adds a new
section of law to the ABC Act that allows alcoholic beverage
licensees, as specified, to make monetary or alcoholic beverage
contributions to the Green Music Center under certain
conditions. (Pending on the Assembly Floor)
AB 527 (Dodd, 2015) creates a new tied-house exception that
authorizes alcoholic beverage suppliers to sponsor events or
purchase advertising space and time from, or on behalf of, a
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live entertainment marketing company that is a wholly owned
subsidiary of a non-publicly traded live entertainment company
that has its principal place of business in Napa County, subject
to specified restrictions. (Pending on the Senate Floor)
AB 600 (Bonta, Chapter 139, Statutes of 2014) extended 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 - new
home of the San Francisco 49ers).
SB 324 (Wright, Chapter 164, Statutes of 2013) extended an
existing tied-house exception pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees to include a fully enclosed
arena with a fixed seating capacity in excess of 13,000 seats
(the Forum) in the City of Inglewood.
AB 813 (John A. Perez, Chapter 647, Statutes of 2009) created a
new tied-house exception that authorized the owner of a venue
(Club Nokia) in Los Angeles to engage in a sponsorship agreement
with an alcoholic beverage supplier for the privilege of placing
advertising in the on-sale licensee's premises, subject to
specified conditions.
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
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least 4,200 (Banner Island Ballpark - home of the Stockton Ports
Class A baseball team) located in San Joaquin County.
AB 3046 (Chavez, Chapter 587, Statutes of 2006) extended an
existing tied-house exception pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees to the HP Pavilion in Santa
Clara County.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT: (Verified 8/19/15)
KAABOO Entertainment (source)
OPPOSITION: (Verified 8/19/15)
None received
ASSEMBLY FLOOR: 76-0, 5/26/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla,
Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau,
Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,
Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Grove, Hadley, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Bloom, Chávez, Harper, Mathis
Prepared by:Arthur Terzakis / G.O. / (916) 651-1530
8/19/15 20:34:35
**** END ****
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