BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2135


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          ASSEMBLY THIRD READING


          AB  
          2135 (Levine)


          As Amended  April 11, 2016


          Majority vote


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          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Governmental    |21-0 |Gray, Bigelow, Alejo, |                    |
          |Organization    |     |Bonta, Campos,        |                    |
          |                |     |Cooley, Cooper, Daly, |                    |
          |                |     |Gallagher, Cristina   |                    |
          |                |     |Garcia, Eduardo       |                    |
          |                |     |Garcia, Gipson,       |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Roger Hernández,      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Jones-Sawyer, Levine, |                    |
          |                |     |Linder, Maienschein,  |                    |
          |                |     |Salas, Steinorth,     |                    |
          |                |     |Waldron, Wilk         |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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                                                                    AB 2135


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          SUMMARY:  Specifies 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:  


          1)California Constitution Article XX Section 22:  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.










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          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 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  








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            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. 


          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:  None.  This bill is keyed non-fiscal by  
          Legislative Counsel.


          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.  








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          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  
          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.  This bill would  
          clarify such revenue sharing agreements is not considered the  
          exercising of license privileges, as defined in the ABC Act.




          Analysis Prepared by:                                             
                          Eric Johnson / G.O. / (916) 319-2531  FN:  
          0002791


















                                                                    AB 2135


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