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
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          |Author:    |Hall                                                 |
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          |Version:   |4/22/2015                                            |
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          |Urgency:   |No                     |Fiscal:      |No              |
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          |Consultant:|Arthur Terzakis                                      |
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          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  







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            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"  








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            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  








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          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