BILL ANALYSIS Ó
AB 1767
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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in 1933 repealed the 18th Amendment and ended the era of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