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
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          |Author:    |Cooper                                               |
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          |Version:   |2/16/2016    Introduced                              |
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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 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."