BILL ANALYSIS                                                                                                                                                                                                    Ó



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

          Bill No:           SB 557           Hearing Date:    4/28/2015
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          |Author:    |Hall                                                 |
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          |Version:   |4/6/2015                                             |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Arthur Terzakis                                      |
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          SUBJECT: Alcoholic beverages:  advertising:  promotions


          DIGEST:    This bill deletes the January 1, 2016 repeal of an  
          existing provision of the Alcoholic Beverage Control (ABC) Act  
          that authorizes wine, beer and spirits producers to participate  
          in promotional events held at off-sale retail licensed locations  
          for the purpose of providing autographs on bottles or other  
          items to consumers, subject to certain conditions. 

          ANALYSIS:
          
          Existing law:
          
          1)Establishes the 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)(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  
            body of law was to: (a) promote the state's interest in an  
            orderly market; (b) prohibit the vertical integration and  







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            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)Provides that no licensee shall, directly or indirectly, give  
            any premium, gift, free goods, or other thing of value in  
            connection with the sale, distribution, or sale and  
            distribution of alcoholic beverages, and no retailer shall,  
            directly or indirectly, receive any premium, gift, free goods  
            or other thing of value from a supplier of alcoholic  
            beverages, except as authorized by the Department of ABC. 

          4)Authorizes, until January 1, 2016, the appearance of a person  
            employed or engaged by an authorized licensee at a promotional  
            event held at the premises of an off-sale retail licensee for  
            the purposes of providing autographs, subject to specified  
            conditions.  

          This bill:

          1)Deletes the January 1, 2016 sunset date referenced above  
            relating to autographing alcoholic beverage bottles, thereby  
            extending this privilege indefinitely.

          2)Also, makes technical changes to existing provisions of law  
            that prohibit paid advertising by winegrowers, beer  
            manufacturers and distilled spirits producers in cases where a  
            retail licensee also owns a sports or entertainment venue.      


          Background

          Purpose of SB 557:  For several years the Department of ABC had  
          taken the position that supplier promotional appearances are  
          "things of value" and that autographing alcoholic beverage  
          bottles and other items constituted a "premium, gift or free  
          goods" in violation of the ABC Act.  In 2012, AB 2184 (Hall) was  
          enacted which authorized alcoholic beverage suppliers to  
          participate in promotional events held at off-sale licensed  
          premises involving autographs.








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          AB 2184 also established conditions under which a celebrity  
          brand owner or a winemaker or a brewer may go about autographing  
          bottles and other products for consumers at such promotional  
          events.  Key components of this law include the following: (a)  
          consumers may not be required to purchase anything from the  
          retailer to get an autograph; (b) no fee to attend the event;  
          (c) the event may not exceed 4-hours in duration; (d) no more  
          than 2 such events may be held per calendar year at any single  
          location of an off-sale retailer; (e) the licensee must provide  
          notification to ABC at least 30 days prior to the event; (f) the  
          retailer where the autographing will occur may advertise the  
          event but the brand owner who will be doing the autographing may  
          not; and, (g) the licensee must maintain records establishing  
          compliance.  Additionally, AB 2184 included a January 1, 2016  
          sunset clause.

          The author of SB 557 notes that AB 2184 of 2012 provided a  
          service that many consumers enjoy - namely, collectibles.  Also,  
          AB 2184 granted licensed suppliers the authority to engage in  
          brand awareness events involving autographs at licensed off-sale  
          retail establishments.  

          The author of SB 557 believes that in light of the fact that ABC  
          has not reported any problems with AB 2184 of 2012, it makes  
          sense to remove the sunset, thereby extending the bottle signing  
          privilege indefinitely.   

          Prior/Related Legislation
          
          AB 2184 (Hall), Chapter 480, Statutes of 2012.  Created, until  
          January 1, 2016, a new tied-house exception in the ABC Act that  
          authorized wine, beer and spirits producers to participate in  
          promotional events held at off-sale retail licensed locations  
          for the purpose of providing autographs on bottles or other  
          items to consumers, subject to certain conditions. 

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


            SUPPORT:  

          Distilled Spirits Council of the United States
          Family Winemakers of California








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          Southern Wine & Spirits Wholesalers, Inc.
          Wine Institute
          Young's Market Company

          OPPOSITION:

          None received

          ARGUMENTS IN SUPPORT:    Proponents point out that existing law  
          (AB 2184 of 2012) provided alcoholic beverage producers a  
          valuable tool to help build brand awareness and loyalty by means  
          of promotional events and autographs.  Proponents emphasize that  
          "sunsets provide a trial period to evaluate the efficacy of a  
          new statute.  Since passage of AB 2184 in 2012, the lack of  
          enforcement actions by the Department of ABC underscores the  
          effectiveness of the statute's built-in safeguards."