BILL ANALYSIS Ó SB 327 Page 1 Date of Hearing: July 15, 2015 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Adam Gray, Chair SB 327 (Hall) - As Amended April 22, 2015 SENATE VOTE: 35-0 SUBJECT: Alcoholic beverages: licensees: tied-house restrictions. SUMMARY: Consolidates two similar tied-house exceptions (one pertaining to "on-sale" retailers and the other to "off-sale" retailers) within the Alcoholic Beverage Control Act (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. Specifically, 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" retailers within the exception previously applicable only to "on-sale" licensed retailers. SB 327 Page 2 2)Makes other minor conforming changes. EXISTING LAW: 1)Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the 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)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). (Referred to as the "tied-house" law or "three-tier" system.) 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. 3)Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, SB 327 Page 3 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 two 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. SB 327 Page 4 FISCAL EFFECT: Unknown COMMENTS: Purpose of the bill . 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 bill 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 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 importers to respond to consumer inquiries as to where their products may be found to include any "electronic" inquiries from consumers. SB 327 Page 5 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. REGISTERED SUPPORT / OPPOSITION: Support California Beer & Beverage Distributors Opposition None on file SB 327 Page 6 Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531