BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Isadore Hall, III Chair 2015 - 2016 Regular Bill No: SB 327 Hearing Date: 4/28/2015 ----------------------------------------------------------------- |Author: |Hall | |-----------+-----------------------------------------------------| |Version: |4/22/2015 | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |No | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Arthur Terzakis | | | | ----------------------------------------------------------------- SUBJECT: Alcoholic beverages: licensees: tied-house restrictions. DIGEST: This bill consolidates two similar tied-house exceptions (one pertaining to "on-sale" retailers and the other to "off-sale" retailers) within the Alcoholic Beverage Control (ABC) Act, which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers. ANALYSIS: Existing law: 1)Establishes the Department of Alcoholic Beverage Control (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)(Referred to as the "tied-house" law or "three-tier" system), separates the alcoholic beverage industry into three component parts, or tiers, of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). The original policy rationale for this SB 327 (Hall) Page 2 of ? 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)Provides that the listing of the names, addresses, telephone numbers, email addresses, or Internet Web site addresses, of 2 or more unaffiliated off-sale retailers selling beer, wine, or distilled spirits and operating and licensed as bona fide public eating places selling the beer, wine, or distilled spirits produced, distributed, or imported by a nonretail industry member in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement to the listed off-sale retailer, if specified conditions are met. 5)Includes similar provisions applicable to "on-sale" licensed premises, except that those provisions also extend the exception described in item #4 above to others forms of "electronic" media. 6)Defines an "on-sale" license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An "off-sale" license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers. This bill: 1)Deletes an existing tied-house exception pertaining to the listing of "off-sale" licensed retailers as a thing of value or prohibited inducement and instead includes "off-sale" SB 327 (Hall) Page 3 of ? retailers within the exception previously applicable only to "on-sale" licensed retailers. 2)Makes other minor conforming changes. Background Tied-house: Tied-house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the "house" of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer's products. Existing tied-house laws generally prohibit a manufacturer, importer or wholesaler from furnishing, giving, or lending any money or other thing of value to any person engaged in operating, owning, or maintaining any off-sale or on-sale licensed retail premise. Existing law also provides two separate tied-house exceptions (one pertaining to "on-sale" retailers and the other to "off-sale" retailers) relative to the listing of a licensed retailer as a thing of value or prohibited inducement. Purpose of SB 327: The author's office states that under existing law a response to a direct inquiry from a consumer received by telephone, by mail, by electronic Internet inquiry or in person does not constitute a thing of value or prohibited inducement to the listed on-sale or off-sale retailer. This measure is simply intended to recast existing ABC statutes by consolidating into a single statute the "on-sale" and "off-sale" tied-house exceptions pertaining to direct inquiries. Prior/Related Legislation AB 2349 (Nestande), Chapter 374, Statutes of 2012. Provided that the listing of names, addresses, telephone numbers, or email addresses in other forms of electronic media do not constitute a thing of value. Also, revised the direct inquiry provisions to remove the requirement that the unaffiliated on-sale retailer operate and be licensed as a bona fide public eating place. SB 1096 (Wiggins), Chapter 285, Statutes of 2010. Among other things, revised the direct inquiry provisions in the ABC Act pertaining to the authority of producers, wholesalers and SB 327 (Hall) Page 4 of ? importers to respond to consumer inquiries as to where their products may be found to include any "electronic" inquiries from consumers. SB 1423 (Chesbro), Chapter 205, Statutes of 2000. Authorized wineries and brandy manufacturers to advertise the name and location of restaurants that sell their products. SB 1233 (Chesbro), Chapter 666, Statutes of 1999. Allowed for the limited dissemination of information regarding the off-sale availability of alcoholic beverages. FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No SUPPORT: California Beer & Beverage Distributors OPPOSITION: None received