BILL ANALYSIS Ó
SB 557
Page 1
SENATE THIRD READING
SB
557 (Hall)
As Amended June 29, 2015
Majority vote
SENATE VOTE: 39-0
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Governmental |19-0 |Gray, Linder, | |
|Organization | |Achadjian, Alejo, | |
| | |Bigelow, Campos, | |
| | |Cooley, Cooper, Daly, | |
| | |Cristina Garcia, | |
| | |Eduardo Garcia, | |
| | |Jones-Sawyer, Levine, | |
| | |Mayes, Perea, Salas, | |
| | |Steinorth, Waldron, | |
| | |Wilk | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |17-0 |Gomez, Bigelow, | |
| | |Bloom, Bonta, | |
| | |Calderon, Chang, | |
| | |Daly, Eggman, | |
| | |Gallagher, | |
SB 557
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| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Holden, Jones, Quirk, | |
| | |Rendon, Wagner, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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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 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
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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 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
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Plan adopted by the City of Los Angeles on September 6, 2001,
where the owner of the venue is not the on-sale retail
licensee. (Business and 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: According to the Assembly Appropriations
Committee, minor and absorbable enforcement costs to ABC.
COMMENTS:
Purpose of the bill: The author's office notes that this
measure 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,
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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 and 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 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.
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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
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.
Related legislation: AB 527 (Dodd) of the current legislative
session. Creates a new tied-house exception in the Act that
authorizes certain alcoholic beverage licensees to sponsor a
limited number of events promoted by or to purchase advertising
space and time from, or on behalf of, a live entertainment
marketing company that conducts live artistic, musical, sports,
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food, beverage, culinary, or other cultural entertainment events
at venues located solely in the County of Napa, under specified
conditions. (Pending on Senate Floor)
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
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.
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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.
Analysis Prepared by:
Eric Johnson / G.O. / (916) 319-2531 FN:
0001586