BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1971|
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THIRD READING
Bill No: AB 1971
Author: Cooper (D)
Amended: 8/1/16 in Senate
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 6/14/16
AYES: Hall, Bates, Block, Gaines, Galgiani, Glazer, Hernandez,
Hill, Hueso, Lara, McGuire, Vidak
NO VOTE RECORDED: Berryhill
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 78-0, 5/12/16 (Consent) - See last page for
vote
SUBJECT: Alcoholic beverages
SOURCE: Author
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. This bill also creates a new
section in the ABC Act that requires the Department of ABC to
utilize an audio recording as the official record of any
administrative hearings and clarifies the procedure for
requesting a transcript where the hearing was audio recorded.
Additionally, this bill revises the fee for a brewery event
permit, as specified.
ANALYSIS:
Existing law:
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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. The ABC Act also grants the Department authority to
hear appeals of licensing and enforcement actions.
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
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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].
5)Authorizes a licensee under an on-sale general license or an
on-sale beer and wine license to apply to the Department of
ABC for an event permit that allows the sale of alcoholic
beverages under that license for consumption on property
adjacent to the licensed premises and owned or under the
control of the licensee. A licensed beer manufacturer may
also apply for a brewery event permit that allows the sale of
beer produced by that beer manufacturer for consumption on
property contiguous and adjacent to the licensed premises of
the manufacturer. The fee for an event permit issued to an
on-sale general licensee or an on-sale beer and wine licensee
is $110 for permits issued during the 2004 calendar year and
indexed for inflation thereafter, and the fee for a brewery
event permit issued during the 2017 calendar year is $110 and
indexed for inflation thereafter, as specified.
6)Authorizes the Department of ABC to conduct administrative
hearings for, among other things, violations of the Act by a
licensee. Additionally, the law allows a licensee to appeal
specified decisions to the ABC Appeals Board, authorizes a
person to request a transcript of a hearing from the
department for a case on appeal, and allows a party to an
appeal to request the right to appear before the board for
argument.
This bill:
1)Provides that a beer manufacturer, the holder of a winegrowers
license, a 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;
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b) The outdoor stadium or fully enclosed arena 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 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
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.
3)Requires that an audio record be kept as the official record
of any administrative hearing conducted by the Department of
ABC. Also, requires the Department of ABC to provide an audio
recording, when one has been made, of a hearing to the ABC
Appeals Board and each party in lieu of a transcript for a
case on appeal and requires an audio record to be kept of an
argument before the ABC Appeals Board.
4)Prohibits the Department of ABC from creating an official
record of any administrative hearing by videographic recording
and provides that this type of recording is inadmissible in
any proceeding before the ABC Appeals Board.
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
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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.
This bill also addresses an inconsistency in existing law
relative to certain ABC permit fees. Specifically, existing law
(Business and Professions Code Section 23399.65) allows a
licensed beer manufacturer to apply to the Department of ABC for
a brewery event permit (Type 77 license). The brewery event
permit mirrors, in most respects, the existing event permit for
on-sale licensees (also a Type 77) as set forth in Section
23399. As initially proposed, the intent was for the fee for
this new permit to be consistent with the fee for the on-sale
event permit. However, due to a drafting error, the fee for a
brewery event permit was erroneously set at one hundred ten
dollars ($110) although the on-sale event permit fee has been
set to $127.
Additionally, this bill is intended to address a problem
identified by ABC staff relative to stenographic reporting
provisions. According to ABC staff, existing law requires the
Department to utilize a stenographic reporter for all
administrative hearings, unless each of the parties consents to
an electronic record. However, respondents in ABC hearings
generally do not consent to an electronic record because the use
of a stenographic reporter adds 50-75 day delays to the appeals
process waiting for preparation of the transcript. Delayed
appeals, delay the imposition of penalties (fines, suspensions,
license revocation), and potentially endanger the public.
Stenographic reporter appearance fees alone cost the Department
$200-500 per day, per hearing, with more spent by the ABC
Appeals Board, the Department, and the parties for transcripts
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and copies of transcripts. Based upon the number of hearings
held annually, the costs for court reporters simply to appear
can exceed $42,000. In addition, it is estimated that the
Department spends in excess of $47,000 annually to prepare
transcripts of hearings.
Furthermore, existing law requires that a Department
Administrative Law Judge (ALJ) issue a proposed decision within
30 days of the hearing. The expense and time associated with
the preparation of a transcript from a stenographic record
prohibits the Department from routinely providing transcripts
prior to the issuance of a proposed decision. As a result, ALJs
prepare decisions without the benefit of a copy of the record.
Existing law requires both the ABC Appeals Board and the
judicial branch to give deference to the ALJs findings of fact,
yet those findings must be reached without the ability to review
testimonial evidence.
Existing law also requires the ABC Appeals Board to hear oral
argument on an appeal where a party requests it. The statute
does not require a record of said hearing. According to ABC
staff, the lack of clear statutory direction creates two
problems. First, there is no mandate to create a record of the
hearing. The ABC Appeals Board currently does not record, by
audio or stenographic reporter, its hearings. Second, to the
extent that a record is created, the lack of authority for the
record may create issues on appeal.
The proposed solution recommended by ABC staff is to: (a) create
a new section of law that requires the Department to utilize
audio recordings for administrative hearings and prohibit video
recordings at such hearings; (b) amend existing law to clarify
the procedure for requesting a transcript where the hearing was
audio recorded; and (c) amend existing law to require the ABC
Appeals Board to create a record of oral argument hearings and
authorize such record to be by audio recording.
ABC staff note that other agencies have been exempted from the
stenographic reporting provisions.
Alcohol Justice has expressed opposition to the provisions in AB
1971 that would allow certain alcoholic beverage suppliers to
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purchase advertising from retail licensees at outdoor stadiums
and indoor arenas. Alcohol Justice states "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."
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 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 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).
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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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT: (Verified 8/3/16)
Department of Alcoholic Beverage Control
OPPOSITION: (Verified 8/3/16)
Alcohol Justice
ASSEMBLY FLOOR: 78-0, 5/12/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon,
Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,
Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Burke, Jones-Sawyer
Prepared by:Arthur Terzakis / G.O. / (916) 651-1530
8/3/16 19:24:10
**** END ****
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