BILL ANALYSIS                                                                                                                                                                                                    Ó




           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                        SB 557|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                   THIRD READING 


          Bill No:  SB 557
          Author:   Hall (D)
          Amended:  4/6/15  
          Vote:     21  

           SENATE GOVERNMENTAL ORG. COMMITTEE:  7-0, 4/28/15
           AYES:  Hall, Block, Hernandez, Hill, Hueso, Lara, McGuire
           NO VOTE RECORDED:  Berryhill, Gaines, Galgiani, Vidak

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 5/11/15
           AYES:  Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

           SUBJECT:   Alcoholic beverages:  advertising:  promotions


          SOURCE:    Author
          
          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. 








                                                                     SB 557  
                                                                    Page  2




          2)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.

          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)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.     









                                                                     SB 557  
                                                                    Page  3



          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.

          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 four hours in duration; (d) no more  
          than two such events may be held per calendar year at any single  
          location of an off-sale retailer; (e) the licensee must provide  
          notification to the Department of 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 the  
          Department of 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 Legislation
          
          AB 2184 (Hall, Chapter 480, Statutes of 2012) created, until  
          January 1, 2016, a new tied-house exception in the ABC Act that  








                                                                     SB 557  
                                                                    Page  4



          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


          According to the Senate Appropriations Committee, potentially  
          $95,000 annually for one personnel year in the Trade Enforcement  
          Unit at the Department of ABC (Special).

          SUPPORT:  (Verified  5/11/15)

          Distilled Spirits Council of the United States
          Family Winemakers of California
          Southern Wine & Spirits Wholesalers, Inc.
          Wine Institute
          Young's Market Company

          OPPOSITION:  (Verified  5/11/15)

          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."  
          

          Prepared by:Arthur Terzakis / G.O. / (916) 651-1530
          5/13/15 16:55:45


                                   ****  END  ****










                                                                     SB 557  
                                                                    Page  5