BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Isadore Hall, III Chair 2015 - 2016 Regular Bill No: AB 1971 Hearing Date: 6/14/2016 ----------------------------------------------------------------- |Author: |Cooper | |-----------+-----------------------------------------------------| |Version: |2/16/2016 Introduced | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Arthur Terzakis | | | | ----------------------------------------------------------------- SUBJECT: Alcoholic beverages: tied-house restrictions: advertising DIGEST: This bill creates a stand-alone tied-house exception in the Alcoholic Beverage Control (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. 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 AB 1971 (Cooper) Page 2 of ? 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: 1)Provides 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 seats; b) The outdoor stadium or fully enclosed arena is not owned AB 1971 (Cooper) Page 3 of ? 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 marketed 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, distilled spirits manufacturer, or the distilled spirits manufacturer's agent that purchased the advertising space or time. 2)Makes it explicit that this bill includes all stadiums and arenas licensed prior to the effective date of this bill. Background Purpose of AB 1971. The author's office notes that over the past 20 years, numerous individual exceptions to the tied-house laws have been enacted to allow manufacturers or suppliers to pay for advertising or become sponsors of specific entertainment venues. In recent years advertising arrangements between cities, stadiums, major tenants, and owners have become more fluid and ever changing. Because the Department of ABC continues to have the authority to investigate any complaints of alcohol related violations at these stadiums, the ABC believes that it is no longer necessary to make legislative changes to address every advertising arrangement. This bill creates a general exception allowing holders of manufacturer licenses to purchase advertising from retail licensees at indoor arenas and outdoor stadiums with fixed seating capacities in excess of 1,500 seats. This bill essentially allows the exemption for similar situated facilities without requiring specific and separate legislation for each facility. Technical amendments. 1)On page 2, lines 5 & 6, strike "distilled spirits rectifier" and add "rectifier" AB 1971 (Cooper) Page 4 of ? 2)On page 2, lines 27 & 28, strike "distilled spirits rectifier" and add "rectifier" Prior/Related Legislation 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 in Senate Appropriations Committee) AB 1767 (Bigelow, 2016) 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. (Pending in this Committee) 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 the County of San Diego. 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). AB 1971 (Cooper) Page 5 of ? 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 AB 1971 (Cooper) Page 6 of ? Sports and Entertainment District, adjacent to STAPLES Center. 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: Department of Alcoholic Beverage Control OPPOSITION: Alcohol Justice ARGUMENTS IN OPPOSITION: Alcohol Justice states that "granting yet another regulatory exemption for a segment of the alcohol industry only further erodes fair and effective alcohol regulation in California. The state already suffers more than $22 billion in alcohol-related harm and over 10,000 alcohol-related deaths annually. We believe AB 1971 will ultimately increase those catastrophic alcohol-related harms and costs in the state."