BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                              Senator Isadore Hall, III
                                        Chair
                                2015 - 2016  Regular 

          Bill No:           AB 2913          Hearing Date:    6/28/2016
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          |Author:    |Committee on Governmental Organization               |
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          |Version:   |6/13/2016    Amended                                 |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Arthur Terzakis                                      |
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          SUBJECT: Alcoholic beverages:  licensees:  tied-house  
          restrictions


           DIGEST:    This bill makes minor clarifying and technical  
          changes to certain provisions of the Alcoholic Beverage Control  
          (ABC) Act.

          ANALYSIS:
          
          Existing law:
          
          1)Establishes 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)Authorizes licensees, as specified, to sponsor or otherwise  
            participate in an event conducted by, and for the benefit of,  
            a nonprofit organization in which retail and nonretail  
            licensees are involved as sponsors or participants, subject to  
            specified conditions.

          3)Authorizes a nonretail licensee to advertise or communicate  
            sponsorship or participation in the event and provides that  
            advertising or communication may include, but is not limited  







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            to, initiating, sharing, reposting, or otherwise forwarding a  
            social media post by a permanent retail licensee or a  
            nonretail licensee, as specified.  The law also prohibits a  
            retail licensee from receiving any advertising, sale, or  
            promotional benefit from any permanent retail licensee in  
            connection with the sponsorship or participation.

          4)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.

          5)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.

          6)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:









          AB 2913 (Committee on Governmental Organization)  Page 3 of ?
          
          
          1)Modifies certain provisions that allow a retail or nonretail  
            licensee to sponsor or participate in an event conducted by,  
            and for the benefit of, a nonprofit corporation as follows:

             a)   Clarifies that a nonretail licensee, instead of a retail  
               licensee, may not receive any advertising, sale, or  
               promotional benefit from any permanent retail licensee in  
               connection with the event.  

             b)   Clarifies how a nonretail licensee can advertise or  
               communicate sponsorship or participation in the event.

          2)Replaces the term "distilled spirits rectifier" with  
            "rectifier" in several provisions of the ABC Act to correctly  
            reflect there is no statutory definition for a "distilled  
            spirits rectifier."
          Background

          Purpose of AB 2913.  This bill is the annual Assembly  
          Governmental Organization Committee "clean-up" bill that makes  
          clarifying, technical, and non-controversial changes to existing  
          statutes.
           
          According to the Committee, this bill corrects a drafting error  
          in AB 776 (Cooper) of 2015.  Specifically, AB 776 authorized  
          licensed alcoholic beverage manufacturers and retailers to  
          participate together in sponsoring and promoting events  
          conducted by, and for the benefit of, nonprofit organizations,  
          subject to certain conditions.  As enacted, AB 776 inadvertently  
          prohibited a "retail" licensee from receiving, directly or  
          indirectly, any advertising, sale or promotional benefit from  
          any permanent retail licensee in connection with the sponsorship  
          or participation.  This bill would correct the oversight and  
          instead would prohibit a "nonretail" licensee from receiving,  
          directly or indirectly, any advertising, sale, or promotional  
          benefit from any permanent retail licensee in connection with  
          the sponsorship or participation.  In addition, this bill makes  
          a clarifying change with respect to the manner upon which a  
          nonretail licensee may advertise or communicate sponsorship or  
          participation in the event by deleting the word "initiating"  
          from that provision.

          Furthermore, this bill addresses the use of the term "distilled  
          spirits rectifier" in statute.  Existing law provides for: a  
          rectifier (Type 07), wine rectifier (Type 08), and a distilled  








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          spirits rectifier's general license (Type 24).  The old ABC  
          handbook indicates that a Type 07 is often incorrectly referred  
          to as a distilled spirits rectifier however there is no  
          statutory definition for a "distilled spirits rectifier."  

          Prior/Related Legislation
          
          AB 1971 (Cooper, 2016) creates a stand-alone tied-house  
          exception in the 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.   (Pending in Senate Appropriations  
          Committee)

          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) 

          AB 776 (Cooper, Chapter 519, Statutes of 2015) among other  
          things, authorized licensees to sponsor or otherwise participate  
          in an event conducted by, and for the benefit of, a nonprofit  
          organization subject to specified conditions, including that a  
          nonretail or retail licensee may choose to participate in any  
          level of sponsorship.

          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 San Diego County. 








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          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).
           
           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 an arena with a  
          fixed seating capacity in excess of 13,000 seats in the City of  
          Inglewood.  

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          Yes


            SUPPORT:  

          None on file

          OPPOSITION:

          None on file