BILL ANALYSIS Ó
AB 1971
Page 1
Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Adam Gray, Chair
AB 1971
(Cooper) - As Introduced February 16, 2016
SUBJECT: Alcoholic beverages: tied-house restrictions:
advertising
SUMMARY: Creates a new section in the Alcoholic Beverage
Control Act (Act) to allow holders of manufacturer's licenses,
as defined, to purchase advertising and space from, retail
licensees at indoor arenas and outdoor stadiums with fixed
seating capacities in excess of 1,500, subject to specified
conditions. Specifically, this bill:
1) Specifies that a beer manufacturer, the holder of a
winegrowers license, a distilled spirits rectifier, a distilled
spirits manufacturer, or distilled spirits manufacturer's agent
may purchase advertising time and space from, or on behalf of,
an on-sale retail licensee subject to all of the following
conditions:
(a) The on-sale licensee is the owner, manager, agent of the
owner, assignee of the owner's
advertising rights, or the major tenant of the owner of any
outdoor stadium or fully enclosed
arena with a fixed seating capacity in excess of 1,500. This
subdivision includes all stadiums and
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arenas licensed prior to the effective date of the measure
adding this section.
(b) The outdoor stadium or fully enclosed arena, as described,
is not owned by a community
college district.
(c) The advertising space or time is purchased only in
connection with events to be held on the
premises of the outdoor stadium or fully enclosed arena.
(d) The on-sale licensee serves other brands of beer
distributed by a competing beer
wholesaler in addition to the brand manufactured or marked by
the beer manufacturer, other
brands of wine distributed by a competing wine wholesaler in
addition to the brand produced by
the winegrower, and other brands of distilled spirits
distributed by a competing distilled
spirits wholesaler in addition to the brand manufactured or
marketed by the distilled spirits
rectifier, the distilled spirits manufacturer, or the distilled
spirits manufacturer's agent that
purchased the advertising space or time.
EXISTING LAW:
1)Establishes the Department of Alcoholic Beverage Control (ABC)
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.
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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
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].
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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)
FISCAL EFFECT: Unknown
COMMENTS:
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
Act encompassing various venues throughout the state.
This bill will create a stand-alone tied-house exception
applicable to the general prohibition against advertising
arrangements between retail, wholesale and manufacturer
licensees at any stadium or fully enclosed arena in the state.
This exception would include current stadiums and arenas
licensed prior to the effective date of this measure and any
future enclosed arena or outdoor stadium with a fixed seating
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capacity in excess of 1,500.
According to the author's office, at many arenas and stadiums,
the owner of the facility is also the alcoholic beverage retail
licensee or leases the alcoholic beverage concessions to a third
party. Alcoholic beverage manufacturers are prohibited from
purchasing advertising from retail licensees and are prohibited
from paying for placing advertising in licensed retail premises.
Over the years, numerous exceptions to these tied-house laws
have been enacted to allow manufacturers or suppliers to pay for
advertising or become sponsors of these facilities (outdoor
stadium or fully enclosed arena). Numerous facilities
throughout the state have specifically been exempt from this
prohibition within Business and Professions Code Section
25503.6. Each facility has been the subject of legislation to
obtain its specific exemption. Moreover, similarly situated
facilities must seek legislation to obtain an exemption specific
to the particular facility and their proposed business models.
During the 2014 legislative session two pieces of legislation
(AB 600 Bonta and AB 1424 (G.O. Committee) were required to
address the advertising arrangement desired for Levi Stadium in
Santa Clara, California. The author states this bill will
create consistency in the privileges afforded to similarly
situated licensees throughout the state.
Currently, there are two major professional sporting venues,
AT&T Park in San Francisco and Petco Park in San Diego, with
retail ABC licenses where alcohol manufacturers or suppliers are
advertising without this specific statutory authorization since
their opening in 2000 and 2004 respectively. Each of these
venues seat over 41,000 spectators and hold hundreds of events
annually without this exception with no apparent detriment to
the attending public, the three-tier system, or public interest.
The author further states although this proposal will add more
exceptions to the ABC Act, this addition does not harm the
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public interest, grants the same privileges to similarly
situated licensees, and facilitates business investments in
local communities.
In support : Writing in support, ABC states, "Numerous
exceptions to the tied-house laws have been enacted to allow
manufacturers or suppliers to pay for advertising or become
sponsors of entertainment venues. In recent years, advertising
arrangements between cities, stadiums, arenas, major tenants,
and owners have become more fluid and ever changing. Making
legislative changes to address every advertising arrangement is
not necessary as ABC continues to have the authority to
investigate any complaints of alcohol related violations at
these stadiums." ABC has the authority to suspend, revoke, or
deny a license if it determines that granting or continuance of
the license would be contrary to public welfare or morals.
Prior legislation : AB 1320 (Maienschein), Chapter 527, Statutes
of 2015. Creates a new 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,
or cultural entertainment events solely at the San Diego County
Fairgrounds in Del Mar, under specified conditions.
SB 600 (Bonta), Chapter 139, Statutes of 2014. Extended a
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 (Levi's Stadium) with a fixed seating capacity of at
least 68,000 seats located in the City of Santa Clara.
SB 324 (Wright), Chapter 164, Statutes of 2013. Provided a
tied-house exception to the ABC Act pertaining to the general
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prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees and the Los Angeles Forum
in the City of Inglewood.
AB 813 (John A. Pérez), Chapter 647, Statutes of 2009. Created
a tied-house exception by allowing 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.
SB 520 (Governmental Organization Committee), Chapter 349,
Statutes of 2007. Provided a tied-house exception allowing
certain alcohol manufacturers and distributors to sponsor events
or purchase advertising space from a live entertainment company
that has its principal place of business in the County of Los
Angeles.
AB 776 (Aghazarian) Chapter 221, Statutes of 2007. Created a
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 a
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) located in San Joaquin County.
AB 3046 (Chavez) Chapter 587, Statutes of 2006. Extended a
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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 a
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.
SB 1647 (Perata) Chapter 275, Statutes of 2004. Extended a
tied-house exception pertaining to the general prohibition
against advertising arrangements between retail, wholesale and
manufacturer licenses to the Oakland Coliseum in Alameda County.
SB 1189 (Costa) Chapter 47, Statutes of 2002. Extended a
tied-house exception pertaining to the general prohibition
against advertising arrangements between retail, wholesale and
manufacturer licenses to the Visalia Oaks Stadium in Visalia and
the California Speedway in Fontana.
REGISTERED SUPPORT / OPPOSITION:
Support
Department of Alcoholic Beverage Control
AB 1971
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Opposition
None on file
Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531