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 ----------------------------------------------------------------- |Author: |Committee on Governmental Organization | |-----------+-----------------------------------------------------| |Version: |6/13/2016 Amended | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Arthur Terzakis | | | | ----------------------------------------------------------------- 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 AB 2913 (Committee on Governmental Organization) Page 2 of ? 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 AB 2913 (Committee on Governmental Organization) Page 4 of ? 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. AB 2913 (Committee on Governmental Organization) Page 5 of ? 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