BILL ANALYSIS Ó
SB 557
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Date of Hearing: July 8, 2015
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Adam Gray, Chair
SB
557 (Hall) - As Amended June 29, 2015
SENATE VOTE: 39-0
SUBJECT: Alcoholic beverages: tied-house restrictions:
advertising.
SUMMARY: Extends an existing tied-house exception in the
Alcoholic Beverage Control Act (Act) pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees to include a fairgrounds
with a horse racetrack and equestrian and sports facilities (Del
Mar Fairgrounds) in San Diego County. Specifically, this bill :
1) Allows a beer manufacturer, the holder of a winegrower's
license, a distilled spirits rectifier, a distilled spirits
manufacturer, or distilled spirits manufacturer's agent may
purchase advertising space and time from, or on behalf of, an
on-sale retail licensee at a fairgrounds (22nd District
Agricultural Association) with a horse racetrack and equestrian
and sports facilities located in San Diego County, subject to
specified conditions.
2) Make legislative findings and declarations as to the
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necessity of a special statute for the County of San Diego.
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)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.
3)Prohibits paid advertising by winegrowers, beer manufacturers
and distilled spirits producers in cases where a retail licensee
also owns a sports or entertainment venue. Over the years
numerous exceptions to this prohibition have been added to the
ABC Act [e.g., Sleep Train Arena (formerly known as ARCO Arena)
in Sacramento, Oakland Coliseum in Oakland, Arrowhead Pond Arena
in Anaheim, Kern County Arena in Bakersfield, the National
Orange Show Event Center in San Bernardino, California Speedway
in Fontana, Grizzly Stadium in downtown Fresno, Raley Field in
West Sacramento, HP Pavilion in San Jose, the Home Depot Center
in the City of Carson, Levi's Stadium in the City of Santa
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Clara, and other venues].
4)Provides a narrow tied-house exception that expressly
authorizes, under specified conditions, a beer manufacturer,
holder of a winegrower's license, California winegrower's agent,
distilled spirits manufacturer, holder of a distilled spirits
rectifiers general license, or a distilled spirits
manufacturer's agent to purchase advertising space or time from
a fully enclosed venue (ClubNokia) with box office sales and
attendance by the public on a ticket basis only, with a
patronage capacity in excess of 2,000, but not more than 3,000,
located in Los Angeles County within the area subject to the Los
Angeles Sports and Entertainment District Specific Plan adopted
by the City on September 6, 2001, where the owner of the venue
is not the on-sale retail licensee. (Business & Professions
Code Section 25503.42)
5) Defines a state-supported fair organization as any fair that
conducts an annual fair and submits an annual statement of
operations to the CDFA. The generic term of "fairs" refers to
District Agricultural Associations (DAA's), county fairs, citrus
fairs, and the California State Fair.
FISCAL EFFECT: Unknown
COMMENTS:
Purpose of the bill : The author's office notes that this measure
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would amend ABC tied-house provisions to include the Del Mar
Fairgrounds on the list of exemptions in the law, thereby
allowing the fairgrounds to develop certain alcoholic beverage
sponsorships with various manufacturers and distributors. The
author's office points out that existing law precludes any
signage paid for by an alcoholic beverage manufacturer or
distributor unless such an exception is created. The author's
office emphasizes that such an exemption would put the
fairgrounds and the racetrack on an even playing field with
other arenas and stadiums in California and help support efforts
to make horse racing and other events economically viable.
This Tied-house exemption is narrowly crafted and similar to
those granted to the Los Angeles Forum in the City of Inglewood,
the Los Angeles County Fair in Los Angeles County, the National
Orange Show in San Bernardino, a theme or amusement park located
in Orange County (Disneyland), the California Speedway in
Fontana, the Indian Wells Tennis Club in Riverside County,
non-profit theatre organizations, and maritime museums, among
others.
Background : The network of California fairs includes 77 fair
organizations divided into four categories: 52 DAA's - state
government entities, 22 county fairs - County government or
not-for-profit organizations, 2 citrus fruit fairs -
not-for-profit organizations and the California Exposition and
State Fair (Cal Expo) - a state agency. California's 77 fairs
are located throughout the Golden State and host fairs from
early spring to the fall of each year.
The California Department of Food & Agriculture (CDFA) is
responsible for the oversight of California's agricultural
industry, including the network of California fairs. The
Division of Fairs and Expositions (F&E), provides fiscal and
policy oversight of the network of California fairs and ensures
the best use of available funding and services.
An annual fair is just one of many year-round activities for
fair organizations in California. Fair officials must facilitate
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use of the fairgrounds for interim events sponsored by community
groups and private entities as well as manage ongoing
maintenance and capital improvement projects. As a result, the
fair network creates the opportunity for small-to medium-sized
businesses and nonprofit community groups to make money from
these year-round activities. These interim events further boost
jobs, incomes and tax revenues in every county throughout the
state. While the California fair network makes it possible for
this economic activity to occur, fair organizations are public,
not-for-profit entities that exist to promote industries of the
state and provide a community gathering place. They do not
receive state general fund monies in support of these efforts.
Tied-house law : Tied-House Law refers to the statutory scheme
restricting any cross-ownership among the three independent
tiers of the alcohol industry: a) manufacturers; b)
distributors/wholesalers; and, c) retailers. The term
"Tied-House" refers to a practice which was common in this
country prior to prohibition, and is still occurring in England
today, where a bar or "public house" is tied to the products of
a particular manufacturer. The original rationale for
Tied-house restrictions are in place to promote the state's
interest in maintaining an orderly market, to prohibit the
vertical integration of the alcohol industry, to protect the
public from predatory marketing practices, and to prevent the
intemperate consumption of alcoholic beverages. In order to
further these policy goals, the Legislature has generally
prohibited forms of cross-ownership between manufacturers and
retailers, and discouraged manufacturers from providing anything
of value to distributors or retailers, be it free goods,
services or advertising.
Numerous exceptions to these restrictions have been enacted
through the years in those specific instances where the
Legislature determined that the public's interests were
protected. Generally, the business community is interested in
removing unnecessary business regulations and creating
conditions that facilitate investment and expansion
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opportunities for companies that have some degree of ownership
in multiple segments of the industry. However, the Legislature
traditionally does not grant exemptions that favors the products
of the entity seeking the exemption, or exemptions that unfairly
compromise the role of the distributors.
In support : According to the 22nd DAA, current law prohibits
the fair from being able to sell sponsorship-marketing rights to
alcoholic beverage manufacturers for events on the fairgrounds
and from accepting money from alcoholic beverage manufacturers
in exchange for marketing products on the premises. The revenue
from these sponsorship agreements enables the DAA to function
and provide services for the public, including facility
maintenance and holding an annual fair. This bill is needed to
continue to facilitate events of general public interest where
alcohol is sold and the fair is allowed to receive money for
sponsorship and advertising from alcohol manufacturers.
Related legislation : AB 527 (Dodd) of 2015. Would allow
alcohol manufacturers and distributors to sponsor events or
purchase advertising space and time from, or on behalf of, a
live entertainment marketing company that is a wholly owned
subsidiary of a live entertainment company that has its
principal place of business in the County of Napa, under
specified conditions. (Pending in Senate Appropriations
Committee)
Prior legislation : SB 600 (Bonta), Chapter 139, Statutes of
2014. Extends an existing "Tied-house" exception in the ABC Act
pertaining to the general prohibition against advertising
arrangements between retail, wholesale and manufacturer
licensees to include an outdoor stadium with a fixed seating
capacity of at least 68,000 seats located in the City of Santa
Clara (Levi's Stadium - San Francisco 49ers new stadium).
SB 324 (Wright), Chapter 164, Statutes of 2013. Provided a
"Tied-house" exception to the ABC Act pertaining to the general
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prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees and the Los Angeles Forum
in the City of Inglewood.
AB 776 (Aghazarian) Chapter 221, Statutes of 2007. Created a
new "Tied-house" exception by authorizing a beer manufacturer to
sponsor or purchase advertising space and time from, or on
behalf of, an off-sale retail licensee that is an owner or
co-owner of a professional sports team (California Cougars
indoor soccer team) that plays its home games, in an arena with
a fixed seating capacity of 10,000 seats (Stockton Arena)
located in San Joaquin County.
AB 663 (Galgiani) Chapter 745, Statutes of 2007. Extended an
existing "Tied-house" exception pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees to include an outdoor
professional sports facility with a fixed seating capacity of at
least 4,200 (Banner Island Ballpark) located in San Joaquin
County.
AB 1442 (Horton) Chapter 617, Statutes of 2005. Extended an
existing "Tied-house" exception pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees to the Home Depot Center, a
sports and athletic complex within the City of Carson in Los
Angeles and the Nokia Theater, located within the Los Angeles
Sports and Entertainment District, adjacent to Staples Center.
AB 3085 (Governmental Organization Committee), Chapter 437,
Statutes of 2004. Provided the Los Angeles County Fair with an
exemption from tied-house laws so that so that alcohol
manufacturers may purchase advertising from, or on behalf of,
the on-sale licensees at this venue.
SB 1647 (Perata) Chapter 275, Statutes of 2004. Extended an
existing "Tied-house" exception pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licenses to the Oakland Coliseum in
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Alameda County.
SB 1189 (Costa) Chapter 47, Statutes of 2002. Extended an
existing "Tied-house" exception pertaining to the general
prohibition against advertising arrangements between retail,
wholesale and manufacturer licenses to the Visalia Oaks Stadium
in Visalia and the California Speedway in Fontana.
REGISTERED SUPPORT / OPPOSITION:
Support
Del Mar Fairgrounds (22nd District Agricultural Association)
Del Mar Thoroughbred Club
Family Winemakers of California
Opposition
None on file
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Analysis Prepared by:Eric Johnson / G.O. / (916)
319-2531