BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1320


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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          1320 (Maienschein)


          As Amended  August 18, 2015


          2/3 vote. Urgency


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          |ASSEMBLY:  |76-0  |(May 26, 2015) |SENATE: |39-0  |(August 24,      |
          |           |      |               |        |      |2015)            |
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          Original Committee Reference:  G.O.


          SUMMARY:  Creates a new tied-house exception in the Alcoholic  
          Beverage Control Act (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.


          The Senate amendments:


          1)Include "rectifier" to the list of licensees that can purchase  
            advertising; modify certain license terms so that they conform  
            to existing Act language. 










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          2)Add an urgency clause, to take effect immediately.


          EXISTING LAW:  


          1)Establishes the Department of Alcoholic Beverage Control and  
            grants it exclusive authority to administer the provisions of  
            the 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  








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            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,  
            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  
            and Professions Code Section 25503.42)


          AS PASSED BY THE ASSEMBLY, this bill created a specific  
          tied-house exception to allow 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  
          conducted at the San Diego County Fairgrounds in Del Mar.


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.


          COMMENTS:  This bill as amended in the Senate is consistent with  
          Assembly actions.









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          Background


          Purpose of this bill:  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 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  








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          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) of the current  
          legislative session, 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) of the current legislative session, 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 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).








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          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. Pérez), 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  
          least 4,200 (Banner Island Ballpark - home of the Stockton Ports  
          Class A baseball team) located in San Joaquin County.  


          AB 3046 (Chávez), 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.








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          Analysis Prepared by:                                             
                          Eric Johnson / G.O. / (916) 319-2531  FN:  
          0001532