BILL ANALYSIS Ó
AB 2135
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Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Adam Gray, Chair
AB 2135
(Levine) - As Amended April 11, 2016
SUBJECT: Alcoholic beverages: revenue sharing
SUMMARY: Would specify that a written agreement regarding the
sharing or splitting of gross revenue from the sale of alcoholic
beverages between a licensee and a California fair, as defined,
in connection with the sale of alcoholic beverages fair time
activities is not the exercise of a license privilege or
performance of an act for which a license is required.
Specifically, this bill:
1) Provides that a written agreement regarding the sharing or
splitting of gross revenue from the sale of alcoholic beverages
between a licensee and a district agricultural association, the
California Exposition and State Fair, a county fair, or a citrus
fruit fair, in connection with the sale of alcoholic beverages
during a state or county fair is not the exercise of a license
privilege or performance of an act for which a license is
required, unless the agreement, or any other related agreement
or understanding, results in an unlicensed person exercising
control or undue influence over a licensee or the operation of a
licensed business.
EXISTING LAW:
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1) Article XX Section 22 of the California Constitution: The
State of California, subject to the internal revenue laws of the
United States, shall have the exclusive right and power to
license and regulate the manufacture, sale, purchase, possession
and transportation of alcoholic beverages within the State, and
subject to the laws of the United States regulating commerce
between foreign nations and among the states shall have the
exclusive right and power to regulate the importation into and
exportation from the State, of alcoholic beverages. In the
exercise of these rights and powers, the Legislature shall not
constitute the State or any agency thereof a manufacturer or
seller of alcoholic beverages.
2) Establishes the Department of Alcoholic Beverage Control
(ABC) and grants it exclusive authority to administer the
provisions of the Alcoholic Beverage Control Act (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.
3) Existing law, known as the "Tied-house" law or "three-tier"
system, separates the alcoholic beverage industry into three
component parts of manufacturer (the first tier), wholesaler
(the second tier), and retailer (the third tier). The original
policy rationale for this body of law was to prohibit the
vertical integration of the alcohol industry and to protect the
public from predatory marketing practices. Tied-house laws
generally prohibit suppliers and retailers from sharing common
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owners and legally restrict alcohol beverage suppliers' ability
to gain control over retailers through indirect means.
Generally, other than exemptions 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.
4) Prohibits an alcoholic beverage supplier from paying money,
or giving or furnishing anything of value, for the privilege of
placing or painting a sign or advertisement, or window display,
on or in premises selling alcoholic beverages at retail.
5) States in order to offer and/or profit from retail sell of
alcohol in California you must have a liquor license. There are
many types of liquor licenses that can be obtained and they each
serve their own purpose. On-Sale General-authorizes the sale of
all types of alcoholic beverages (namely, beer, wine and
distilled spirits), for consumption on the premises, and the
sale of beer and wine for consumption off the premises; Off-Sale
General-authorizes the sale of all types of alcoholic beverages
for consumption off the premises in original, sealed containers;
On-Sale Beer and Wine-authorizes the sale of all types of wine
and malt beverages (e.g., beer, porter, ale, stout and malt
liquor) for consumption on and off the premises; Off-Sale Beer
and Wine-authorizes the sale of all types of wine and malt
beverages for consumption off the premises in original, sealed
containers; and On-Sale Beer-authorizes the sale of malt
beverages for consumption on and off the premises.
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6) Defines a state-supported fair organization as any fair that
conducts an annual fair and submits an annual statement of
operations to the California Department of Food and Agriculture
(CDFA). The generic term of "fairs" refers to District
Agricultural Associations (DAA's), county fairs, citrus fairs,
and the California State Fair. The network of California fairs
includes 77 fair organizations. California's fairs are located
throughout the Golden State from early spring to the fall of
each year.
FISCAL EFFECT: Unknown
COMMENTS:
Purpose of the bill : Existing law defines a state-supported
fair organization as any fair that conducts an annual fair and
submits an annual statement of operations to the California
Department of Food and Agriculture. The generic term of "fair"
refers to a District Agricultural Association (DAA), county
fair, citrus fair, and the California State Fair. According to
the author's office, this bill would permit a fair to share in
the revenue from the sale of alcoholic beverages pursuant to a
concessionaire agreement.
The author's office notes that it has become commonplace for
fair operators to seek to enhance revenues by entering into
concession agreements that include a sharing of revenue from the
sale of alcoholic beverages on the fairgrounds. Revenue sharing
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is common with respect to non-alcohol products, but under the
comprehensive licensing scheme in the ABC Act, such activities
can result in the exercising of license privileges by
non-licensees, which is prohibited.
An Attorney General Opinion in 1966 (47 Ops. Cal. Atty. Gen.
182) determined that it would be a violation of the ABC Act for
a licensee to share revenue from the sale of alcoholic beverages
with a non-licensee, or otherwise allow a non-licensee to
exercise control over the licensed business. Additionally, the
State Constitution prohibits any agency of the state from being
established as a licensed seller of alcohol, which means that an
individual fair cannot hold an ABC license. AB 2135 would
clarify such revenue sharing agreements is not considered the
exercising of license privileges, as defined in the ABC Act.
REGISTERED SUPPORT / OPPOSITION:
Support
Department of Alcoholic Beverage Control
Opposition
None on file
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Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531