BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                              Senator Isadore Hall, III
                                        Chair
                                2015 - 2016  Regular 

          Bill No:           AB 1767          Hearing Date:    6/28/2016
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          |Author:    |Bigelow                                              |
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          |Version:   |3/17/2016    Amended                                 |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Arthur Terzakis                                      |
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          SUBJECT: Alcoholic beverages:  tied-house restrictions:   
          advertising


           DIGEST:    This bill expands the specified conditions under  
          which designated alcoholic beverage licensees may purchase  
          advertising space or time in connection with events held on the  
          premises of an exposition, park, stadium or arena owned by the  
          on-sale licensee to include circumstances in which the premises  
          are "leased" by the on-sale licensee.  

          ANALYSIS:
          
          Existing law:
          
          1)Establishes the Department of Alcoholic Beverage Control (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  







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            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,  
            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, the  
            Forum in the City of Inglewood, Levi's Stadium in the City of  
            Santa Clara, and other venues].

          This bill expands the specified conditions under which  
          designated alcoholic beverage licensees may purchase advertising  
          space or time in connection with events held on the premises of  
          an exposition, park, stadium or arena owned by the on-sale  
          licensee to include circumstances in which the premises are  
          "leased" by the on-sale licensee.  

          Background

          Purpose of AB 1767.  According to the author's office, this bill  
          is intended to expand existing tied-house exceptions to  
          circumstances in which the on-sale licensee is not actually the  
          owner of a stadium or arena in which the paid-for advertising is  
          allowed.  The author's office notes that due to the evolving  
          ownership structure of sports and entertainment venues, it is  








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          rare that the on-sale licensee is the owner of the venue.  Thus,  
          this bill will ensure that existing tied-house exceptions remain  
          intact even if there is a change in ownership. 

          Prior/Related Legislation
          
          AB 1971 (Cooper, 2016) creates a stand-alone tied-house  
          exception in the ABC Act to allow holders of manufacturer  
          licenses, as specified, to purchase advertising from retail  
          licensees at outdoor stadiums and indoor arenas, subject to  
          specified conditions.  (Pending in Senate Appropriations  
          Committee)

          AB 866 (Garcia, 2016) 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 outdoor stadiums with  
          specified seating capacities located in the Cities of Inglewood  
          and San Diego, specifically, the future home of the National  
          Football League Los Angeles Rams and Petco Park, home of the San  
          Diego Padres Major League Baseball team.  (Pending on Senate  
          floor) 

          SB 557 (Hall, Chapter 420, Statutes of 2015) extended an  
          existing tied-house exception 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  
          located in San Diego County.

          SB 462 (Wolk, Chapter 315, Statutes of 2015) among other things,  
          extended an existing tied-house exception 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.

          AB 600 (Bonta, Chapter 139, Statutes of 2014) extended an  
          existing tied-house exception 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.  
           
           SB 351 (Negrete-McLeod, 2007) would have extended an existing  
          tied-house exception pertaining to the general prohibition  
          against advertising arrangements between retail, wholesale and  
          manufacturer licensees so that alcoholic beverage manufacturers  
          may purchase advertising from on-sale retail licensees in order  
          to promote "safe ride home programs" at specified stadiums and  
          arenas. (Placed on Assembly inactive file)  
          
           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 (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.
           
           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.









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          SB 1647 (Perata, Chapter 275, Statutes of 2004) extended an  
          existing tied-house exception pertaining to the general  
          prohibition against advertising arrangements between retail,  
          wholesale and manufacturer licensees to the Oakland Coliseum in  
          Alameda County.
           
           SB 1189 (Costa, Chapter 47, Statutes of 2002) extended an  
          existing tied-house exception pertaining to the general  
          prohibition against advertising arrangements between retail,  
          wholesale and manufacturer licensees to the Visalia Oaks Stadium  
          in Visalia and the California Speedway in Fontana. 

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          No


            SUPPORT:  

          None received

          OPPOSITION:

          Alcohol Justice

          ARGUMENTS IN OPPOSITION:  Writing in opposition, Alcohol Justice  
          believes that "AB 1767 will increase catastrophic  
          alcohol-related harms and costs to the state because it erodes  
          the separation of the three tiers, especially by promoting  
          alcohol advertising by big producers in sports stadiums and  
          entertainment venues where vast quantities of over-consumption  
          already take place."