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: 9/4/15 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:
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 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 on
the premises of a permanent retail licensee located at the San
Diego County Fairgrounds in the City of Del Mar, under specified
conditions.
Senate Floor Amendments of 9/4/15 are largely a technical
redraft to address concerns raised by the Department of ABC
relative to implementation and enforcement of this bill.
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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;
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
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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 &
Professions Code Section 25503.42)
This bill:
1)Provides that an authorized licensee, as defined, may sponsor
events promoted by, and may purchase advertising space and
time from, or on behalf of, a live entertainment marketing
company in connection with events organized and conducted by
the live entertainment company on the premises of a permanent
retail licensee located at the San Diego County Fairgrounds,
in the City of Del Mar, subject to the following conditions:
a) The live entertainment marketing company operates and
promotes live artistic, musical, sports, or cultural
entertainment events only.
b) The events will take place over a period of no more than
four consecutive days during which approximately 100 acts
will perform before approximately 20,000 or more patrons.
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c) 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.
d) Any authorized licensee sponsoring an event or
purchasing advertising space or time, pursuant to this
section, must obtain written verification of compliance
with this subdivision prior to such sponsorship or the
purchase of advertising space or time.
e) Any on-sale licensee operating at the San Diego County
Fairgrounds must serve other brands of beer, wine, or
distilled spirits distributed by a competing wholesaler in
addition to any brand manufactured, distributed, or owned
by the authorized licensee sponsoring an event or
purchasing advertising space or time pursuant to this
section.
f) An agreement pursuant to this section shall not be
conditioned directly or indirectly on the purchase, sale,
or distribution of any alcoholic beverage manufactured or
distributed by any authorized licensee sponsoring or
purchasing advertising space or time pursuant to this
section.
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 authorized licensee and
the live entertainment marketing company.
3)Makes it a misdemeanor for any authorized licensee 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 authorized licensee
to license suspension or revocation.
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4)Makes it a misdemeanor for any on-sale retail licensee to
solicit or coerce, directly or indirectly, a licensed
wholesaler to solicit an authorized licensee 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)Defines "authorized licensee" to mean the following licensees:
beer manufacturer, out-of-state beer manufacturer's
certificate, winegrower, winegrower's agent, importer,
rectifier, distilled spirits manufacturer, distilled spirits
rectifier general, distilled spirits manufacturer's agent.
Also, specifies, except for a licensee that holds only a beer
and wine importer general license or a distilled spirits
importer general license, "importer" does not include the
holder of any importer license that does not also hold at
least one other license specified as an authorized licensee.
7)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 County 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
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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 alcoholic beverage licensee on its
premises. This bill will enable Horsepower Entertainment to
enter into a contractual agreement with any authorized alcoholic
beverage licensee interested in purchasing advertising time or
space at the festival. This bill subjects Horsepower
Entertainment to certain requirements, as specified, and also
requires the on-sale licensee operating at the San Diego County
Fairgrounds to serve other brands of beer, wine, or distilled
spirits distributed by a competing wholesaler in addition to any
brand manufactured, distributed, or owned by the authorized
licensee sponsoring an event or purchasing advertising space or
time.
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 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
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conditions. (Enrolled and presented to the Governor on 9/3/15)
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
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)
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT: (Verified 9/8/15)
KAABOO Entertainment (source)
Family Winemakers of California
OPPOSITION: (Verified 9/8/15)
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
9/8/15 15:00:06
AB 1320
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