BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:  April 20, 2016


                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION


                                  Adam Gray, Chair


          AB 1767  
          (Bigelow) - As Amended March 17, 2016


          SUBJECT:  Alcoholic beverages:  tied-house restrictions:   
          advertising


          SUMMARY:  Would permit designated alcohol licensees to purchase  
          advertising space or time, on the premises of an exposition,  
          park, stadium, or arena  leased by  the on-sale licensee, as  
          defined.





          EXISTING LAW:  


          1)  The enactment of the 21st Amendment to the U.S. Constitution  
          in 1933 repealed the 18th Amendment and ended the era of  
          Prohibition.  Accordingly, states were granted the authority to  
          establish alcoholic beverage laws and administrative structures  
          to regulate the sale and distribution of alcoholic beverages.  













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          2)  Establishes Department of Alcoholic Beverage Control (ABC)  
          and grants it exclusive authority to administer the provisions  
          of the Alcoholic Beverage Control Act (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.


          3)  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.


          4)  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.


          5)  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.


          6)  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,  








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          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).


          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 would expand existing tied-house exceptions to  
          circumstances in which the on-sale licensee is not actually the  
          owner of the venue (stadium or arena) in which the paid-for  
          advertising is permitted. 


          Due to the evolving ownership structures of larger sports and  
          entertainment venues, it is rare that the on-sale licensee is  
          the owner of the venue. However, this measure would ensure that  
          existing tied-house exceptions are able to continue in effect  
          even if the ownership of the venue changes.


           Tied-house law  : 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.  








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          Tied-house Law refers to the statutory scheme restricting any  
          cross-ownership among the three independent tiers of the alcohol  
          industry: a) manufacturers; b) distributors/wholesalers; and, c)  
          retailers.  The term "Tied-house" refers to a practice which was  
          common in this country prior to prohibition, and is still  
          occurring in England today, where a bar or "public house" is  
          tied to the products of a particular manufacturer.  


          Over the years, numerous exceptions to this prohibition have  
          been added to the ABC Act encompassing various venues throughout  
          the state.  Generally, the business community is interested in  
          removing unnecessary business regulations and creating  
          conditions that facilitate investment and expansion  
          opportunities for companies that have some degree of ownership  
          in multiple segments of the industry.  


           Related legislation  :  AB 2096 (Low) of 2016.  Adds leased  
          premises to a specified condition in law that allows designated  
          licensees to purchase advertising space or time from, or on  
          behalf of, an on-sale retail licensee in connection with events  
          which are held on the premises of an exposition park, stadium,  
          or arena owned by the on-sale licensee.  (Pending in Assembly  
          G.O. Committee)


           Prior legislation  :  SB 557 (Hall), Chapter 420, Statutes of  
          2015.  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 a fairgrounds with a horse racetrack and  
          equestrian and sports facilities (Del Mar Fairgrounds) in San  
          Diego County.  


          AB 527 (Dodd), Chapter 517, Statutes of 2015.  Created a new  








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          tied-house exception in the 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, food, beverage,  
          culinary, or other cultural entertainment events at venues  
          located solely in the County of Napa, under specified  
          conditions.   


          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  
          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,  








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          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  
          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. 


          REGISTERED SUPPORT / OPPOSITION:




          Support


          None on file




          Opposition


          None on file








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