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