Amended in Assembly June 29, 2015

Senate Bill No. 796

Introduced by Committee on Governmental Organization (Senators Hall (Chair), Berryhill, Block, Gaines, Galgiani, Hernandez, Hill, Hueso, Lara, McGuire, and Vidak)

March 12, 2015

An act to begin insert amend Sections 25502.2, 25503.28, 25600.1, and 25600.2 of, and to end insert add Section 23405.4 begin delete to end delete begin insert to, end insert the Business and Professions Code, relating to alcoholic beverages.

LEGISLATIVE COUNSEL’S DIGEST

SB 796, as amended, Committee on Governmental Organization. Alcoholic begin delete beverage licenses: private equity funds. end delete begin insert beverages: licenses: advertising: contests and sweepstakes. end insert

begin delete

The

end delete

begin insert (1) end insert begin insert   end insert begin insert The end insert begin insert end insert Alcoholic Beverage Control Act specifies the rules and procedures for the issuance and transfer of alcoholic beverage licenses by the Department of Alcoholic Beverage Control. The act requires the department to make a thorough investigation to determine whether the applicant for a license and the premises for which a license is applied qualify for a license.

This bill would provide that the Department of Alcoholic Beverage Control is not required to qualify for a license a person who is an investor in a private equity fund that holds an interest in an alcoholic beverage license, subject to specified conditions, and would authorize the department to require the manager of the private equity fund to execute an affidavit confirming compliance with the requirements of this provision.

begin insert

(2) The Alcoholic Beverage Control Act includes tied-house restrictions, which prohibit specified licensees from furnishing, giving, or lending money or other thing of value, directly or indirectly, to a person engaged in operating, owning, or maintaining an off-sale licensed premises. Existing law 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.

end insert begin insert

This bill would delete the sunset date of the above provision, thereby extending the provision indefinitely.

end insert begin insert

(3) Existing law authorizes a beer manufacturer to sell, at the licensed premises of production, specified beer and wine to consumers under described conditions, and limits the beer manufacturer to six branch locations that may be used for the sale of alcoholic beverages to consumers for consumption off the licensed premises.

end insert begin insert

This bill would prohibit a beer manufacturer, regardless of the number of beer manufacturer licenses that are held by the beer manufacturer alone, under common ownership with any other licensed beer manufacturer, or under common ownership with any officer, director, employee, or agent of that beer manufacturer that is operating as an on-sale retailer, from exercising, alone or in common, any combination of specified described retail privileges that would result in that beer manufacturer exercising retail privileges at more than six locations.

end insert begin insert

(4) The Alcoholic Beverage Control Act prohibits any licensee from giving any premium, gift, or free goods in connection with the sale or distribution of any alcoholic beverage, except as provided. Existing law permits an authorized licensee, as defined, to conduct a consumer contest, as defined, and conduct or sponsor consumer sweepstakes, as defined, offering the chance to win prizes, if specified conditions are met, including that alcoholic beverages or anything redeemable are not awarded as a prize.

end insert begin insert

This bill would authorize the inclusion of alcoholic beverages as part of a prize in a consumer contest or sweepstakes where the inclusion is an incidental part of a prize package.

end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 23405.4 is added to the Business and
Professions Code, to read:

23405.4.  

(a) The department is not required to qualify for a
license a person who is an investor in a private equity fund that
holds an interest in a license, provided all of the following
conditions are satisfied:

(1) The private equity fund’s interest in the license is limited to
a passive investment, so that neither the private equity fund nor
any manager, employee, or agent of the private equity fund has
any involvement in, or control over, the management of the
licensed business or of the licensee.

(2) The private equity fund advisors are registered under the
federal Investment Advisors Act of 1940, and the private equity
fund advisors are subject to, and comply with, Section 275.204(b)-1
of Title 17 of the Code of Federal Regulations.

(3) An investor shall not, directly or indirectly, hold more than
10-percent interest in the private equity fund.

(4) An investor in the private equity fund shall not have any
control, directly or indirectly, over the investment decisions of the
private equity fund.

(b) For purposes of this section, private equity fund means an
investment company that makes investments in equity or debt
securities of another company that does not provide investors with
redemption rights in the ordinary course. A private equity fund
does not include a hedge fund, liquidity fund, real estate fund,
securitized asset fund, or venture capital fund.

(c) The department may require the manager of the private
equity fund to execute an affidavit confirming compliance with
the requirements of this section. If the manager does not have
personal knowledge of any of the facts necessary to execute the
affidavit, the manager shall make a diligent inquiry and may
thereafter execute the affidavit upon information and belief. The
manager of the private equity fund shall promptly notify the
department in writing if any of the facts attested to change.

(d) This section is not intended to allow a person, by reason of
his or her investment in a private equity fund, to hold an interest
in a license issued by the department if that interest is not otherwise
permitted under this division.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 25502.2 of the end insert begin insert Business and Professions Code end insert
begin insert is amended to read: end insert

25502.2.  

(a) A person employed or engaged by an authorized
licensee may appear at a promotional event at the premises of an
off-sale retail licensee for the purposes of providing autographs
to consumers at the promotional event only under the following
conditions:

(1) A purchase from the off-sale retail licensee is not required.

(2) A fee is not charged to attend the promotional event.

(3) Autographing may only be provided on consumer advertising
specialities given by the authorized licensee to a consumer or on
any item provided by the consumer.

(4) The promotional event does not exceed four hours in
duration.

(5) There are no more than two promotional events per calendar
year involving the same authorized licensee at a single premises
of an off-sale retail licensee.

(6) The off-sale retail licensee may advertise the promotional
event to be held at its licensed premises.

(7) An authorized licensee may advertise in advance of the
promotional event only in publications of the authorized licensee,
subject to the following conditions:

(A) The advertising only lists the name and address of the
off-sale retail licensee, the name of the alcoholic beverage product
being featured at the promotional event, and the time, date, and
location of the off-sale retail licensee location where the
promotional event is being held.

(B) The listing of the off-sale retail licensee’s name and address
is the only reference to the off-sale retail licensee in the
advertisement and is relatively inconspicuous in relation to the
advertisement as a whole, and the advertisement does not contain
any pictures or illustrations of the off-sale retail licensee’s premises
or laudatory references to the off-sale retail licensee.

(8) A wholesaler does not directly or indirectly underwrite,
share in, or contribute to any costs related to the promotional event,
except that a beer and wine wholesaler that holds at least six
distilled spirits wholesaler licenses may directly or indirectly
underwrite, share in, or contribute to any costs related to a
promotional event for which the wholesaler employs or engages
the person providing autographs to consumers at the promotional
event.

(9) The authorized licensee notifies the department in writing
of the promotional event at least 30 days in advance of the
promotional event.

(10) The authorized licensee maintains records necessary to
establish its compliance with this section.

(b) For purposes of this section, “authorized licensee” means a
manufacturer, winegrower, manufacturer’s agent, California
winegrower’s agent, rectifier, importer, brandy manufacturer,
brandy importer, or wholesaler.

begin delete

(c) This section shall remain in effect only until January 1, 2016,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2016, deletes or extends that date.

end delete

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 25503.28 of the end insert begin insert Business and Professions Code end insert
begin insert is amended to read: end insert

25503.28.  

(a)  begin insert (1) end insert begin insert   end insert Notwithstanding any other provision of this
division, the holder of no more than six on-sale licenses, or any
officer, director, employee, or agent of that licensee, may own a
licensed beer manufacturer begin delete holding a license pursuant to paragraph
(a) of subdivision (1) of Section 23320, end delete begin insert that exercises retail
privileges pursuant to Section 23357 end insert and may serve on the board
of directors and as an officer or employee of a licensed beer
manufacturer.

begin insert

(2) A beer manufacturer, regardless of the number of beer
manufacturer licenses that are held by the beer manufacturer
alone, under common ownership with any other licensed beer
manufacturer, or under common ownership with any officer,
director, employee, or agent of that beer manufacturer that is
operating as an on-sale retailer as described by this section, shall
not exercise, alone or in common, any combination of retail
privileges described in this section or subdivision (c) of Section
23389 that would result in that beer manufacturer exercising retail
privileges at more than six locations, regardless of whether the
retail privileges are exercised pursuant to this section, to
subdivision (c) of Section 23389, or to any combination of retail
privileges described under both of those sections. This section
shall not limit the number of licensed beer manufacturer branch
locations or the exercise of retail privileges at those branch
locations as authorized by Section 23357.

end insert

(b) An on-sale licensee specified in subdivision (a) shall
purchase no alcoholic beverages for sale in this state other than
from a wholesale or winegrower licensee, except for any alcoholic
beverages manufactured by the licensed beer manufacturer at a
single location contiguous or adjacent to the premises of the on-sale
licensee.

(c) The Legislature finds that it is necessary and proper to
require a separation between manufacturing interests, wholesale
interests, and retail interests in the production and distribution of
alcoholic beverages in order to prevent suppliers from dominating
local markets through vertical integration and to prevent excessive
sales of alcoholic beverages produced by overly aggressive
marketing techniques. The Legislature further finds that the
exception established by this section to the general prohibition
against tied interests must be limited to its expressed terms so as
not to undermine the general prohibition, and intends that this
section be construed accordingly.

begin delete

(d) This section shall become operative on January 1, 1998.

end delete

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 25600.1 of the end insert begin insert Business and Professions Code end insert
begin insert is amended to read: end insert

25600.1.  

(a) An authorized licensee may conduct consumer
contests, subject to the following conditions:

(1) (A) Entry or extra chances in a contest shall not be made
available via the purchase of an alcoholic beverage.

(B) Entry into or participation in a contest shall be limited to
persons 21 years of age or older.

(C) No contest shall involve consumption of alcoholic beverages
by a participant.

(D) A contest may not be conducted for the benefit of any
permanent retail licensee.

(2) (A) Closures, caps, cap liners, corks, labels, cartons, cases,
packaging, or other similar material shall not be used as an entry
to a contest or as a means of determining the amount or size of the
prize or the winner in a contest, except as provided in
subparagraphs (D) and (F).

(B) The authorized licensee shall provide an alternative means
of entry that does not require a visit to a licensed premises.

(C) Except as provided in subparagraph (D), removable entry
forms shall not be used on alcoholic beverage labels, containers,
packaging, cases, or cartons.

(D) Removable entry forms that are neck hangers shall be used
only on bottles of wine or distilled spirits, and shall not require
purchase of the product. Removable neck hangers shall be used
only if other entry forms are available at the point of sale or if an
alternative means of entry is also available.

(E) Entry forms may be provided through electronic or other
media, including point of sale.

(F) Codes that may be scanned or electronically entered by a
consumer where the authorized licensee has permanently affixed
the codes as part of the original alcoholic beverage label, container,
packaging, case, or carton, and where the codes are not removable
and not required to be removed are permitted as a form of entry.

(G) All permitted means of entry, including the use of electronic
or scanner codes, shall clearly indicate that no purchase is required
to enter.

(3) A contest shall not provide for the instant or immediate
awarding of a prize or prizes. Instant or immediate notification to
the consumer that he or she is a winner is permissible.

(4) Except for providing a means of entry, a contest authorized
by this section shall not be conducted at the premises of a retail
licensee or the premises of a winegrower or beer manufacturer
operating under a duplicate license for a branch office.

(5) Alcoholic beverages or anything redeemable for alcoholic
beverages shall not be awarded as a contest prize. This paragraph
shall not prohibit a contest in which the prize is cash or cash
begin delete equivalent or end delete begin insert equivalent, end insert the awarding of cash or cash begin delete equivalent. end delete
begin insert equivalent, or the inclusion of alcoholic beverages as an incidental
part of a prize package. end insert

(6) A retail licensee shall not serve as the agent of an authorized
licensee by collecting or forwarding entries or awarding prizes to,
or redeeming prizes for, a contest winner.

(7) A licensee that is not an authorized licensee shall not directly
or indirectly underwrite, share in, or contribute to, the costs of a
contest authorized by this section or serve as the agent of an
authorized licensee to collect or forward entries or to furnish any
prize to a contest winner.

(8) (A) Advertising of a contest shall comply with the signage
and advertising restrictions contained in this chapter, Chapter 15
(commencing with Section 25500), and any regulations issued by
the department.

(B) Advertising or promotion of a contest shall not identify or
refer to any retail licensee.

(C) A retail licensee shall only advertise or promote a contest
authorized by this section in the manner specified in subparagraph
(A).

(D) Advertising or promotion of a contest shall only be
conducted on the premises of a retail licensee when such
advertisement or promotion involves a minimum of three
unaffiliated retail licensees. For purposes of this subparagraph,
“unaffiliated retail licensees” shall not include any retail licensee
owned or controlled in whole or in part by an authorized licensee
or any officer, director, or agent of that licensee.

(E) Placement of signs or other advertising of a contest in a
licensed retail premises shall not be conditioned upon the
following:

(i) The placement of any product within the licensed premises
or the restriction, in any way, of the purchase of a product by a
licensee, the removal of a product from the sales area of a licensed
premises, or the resetting or repositioning of a product within the
licensed premises.

(ii) The purchase or sale of any product produced, imported,
distributed, represented, or promoted by an authorized licensee or
its agent.

(F) An agreement, whether written or oral, entered into, by, and
between a retail licensee and an authorized licensee or its agent
that precludes the advertisement or promotion of a contest on the
premises of the retail licensee by another authorized licensee is
prohibited.

(9) Contest prizes shall not be awarded to an authorized licensee,
retail licensee, or wholesale licensee or agent, officer, employee,
or family member of an authorized licensee, retail licensee, or
wholesale licensee. For the purposes of this paragraph, “family
member” means a spouse, parent, sibling, child, son-in-law,
daughter-in-law, and lineal descendants, including those by
adoption. An authorized licensee shall maintain all records
pertaining to a contest for three years following the completion of
a contest. This section shall not apply to contests conducted by an
authorized licensee as part of a sales incentive program for
wholesale licensees or their employees or an authorized licensee’s
employees.

(b) Nothing in this section shall preclude licensees from
sponsoring contests as permitted by regulations of the department.

(c) For purposes of this section:

(1) (A) “Authorized licensee” means a winegrower, beer and
wine importer general, beer manufacturer, out-of-state beer
manufacturer certificate holder, distilled spirits manufacturer,
distilled spirits manufacturer’s agent, distilled spirits importer
general, distilled spirits general rectifier, rectifier, out-of-state
distilled spirits shipper’s certificate holder, brandy manufacturer,
and brandy importer. An authorized licensee may conduct a
consumer contest pursuant to this section regardless of whether
the licensee holds any additional license not included in this
paragraph.

(B) An “authorized licensee” shall not include a beer and wine
wholesaler, a beer and wine importer general, or distilled spirits
importer general that only holds a wholesaler’s or retailer’s license
as an additional license.

(2) “Contest” means a game, contest, puzzle, or similar activity
that holds out or offers to participants the opportunity to receive
or compete for gifts, prizes, gratuities, or other things of value as
determined by skill, knowledge, or ability rather than upon random
selection. Skill, knowledge, or ability does not include the
consumption or use of alcoholic beverages.

(d) Nothing in this section authorizes conducting any contest
where consumers are entitled to an allotment or accumulation of
points based on purchases made over a period of time that can be
redeemed for prizes, things of value, or additional contest entries.

(e) A prize awarded for a contest conducted pursuant to this
section shall not be subject to the monetary limitation imposed by
Section 25600 or a regulation of the department.

(f) An authorized licensee that violates this section, in addition
to any other penalty imposed by this division, may be prohibited
by the department from offering a contest to California residents
for a period of 12 months.

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 25600.2 of the end insert begin insert Business and Professions Code end insert
begin insert is amended to read: end insert

25600.2.  

(a) An authorized licensee may conduct or sponsor
consumer sweepstakes, subject to the following conditions:

(1) (A) No entry fee may be charged to participate in a
sweepstakes authorized by this subdivision. Entry or extra chances
in a sweepstakes shall not be made available via the purchase of
an alcoholic beverage.

(B) Entry into or participation in a sweepstakes shall be limited
to persons 21 years of age or older.

(C) No sweepstakes shall involve consumption of alcoholic
beverages by a participant.

(D) Subject to subparagraph (B), any sweepstakes offered in
California shall be open to all residents of California.

(E) A sweepstakes may not be conducted for the benefit of any
permanent retail license.

(2) (A) Closures, caps, cap liners, corks, labels, cartons, cases,
packaging, or other similar material shall not be used as an entry
to a sweepstakes or as a means of determining the amount or size
of the prize or the winner in a sweepstakes, except as provided in
subparagraphs (D) and (F).

(B) The authorized licensee shall provide an alternative means
of entry that does not require a visit to a licensed premises.

(C) Except as provided in subparagraph (D), removable entry
forms shall not be used on alcoholic beverage labels, containers,
packaging, cases, or cartons.

(D) Removable entry forms that are neck hangers shall be used
only on bottles of wine or distilled spirits, and shall not require
purchase of the product. Removable neck hangers shall be used
only if other entry forms are available at the point of sale or if an
alternative means of entry is also available.

(E) Entry forms may be provided through electronic or other
media, including point of sale.

(F) Codes that may be scanned or electronically entered by a
consumer where the authorized licensee has permanently affixed
the codes as part of the original alcoholic beverage label, container,
packaging, case, or carton and where the codes are not removable
and not required to be removed are permitted as a form of entry.

(G) All permitted means of entry, including the use of electronic
or scanner codes, shall clearly indicate that no purchase is required
to enter.

(H) All sweepstakes entries shall provide the entrant with an
equal odds of winning.

(3) A sweepstakes shall not provide for the instant or immediate
awarding of a prize or prizes. Instant or immediate notification to
the consumer that he or she is a winner is permissible.

(4) Except for providing a means of entry, a sweepstakes
authorized by this section shall not be conducted at the premises
of a retail licensee or the premises of a winegrower or beer
manufacturer operating under a duplicate license for a branch
office.

(5) Alcoholic beverages or anything redeemable for alcoholic
beverages shall not be awarded as a sweepstakes prize. This
paragraph shall not prohibit a sweepstakes in which the prize is
cash or cash begin delete equivalent or end delete begin insert equivalent, end insert the awarding of cash or cash
begin delete equivalent. end delete begin insert equivalent, or the inclusion of alcoholic beverages as
an incidental part of a prize package. end insert

(6) A retail licensee shall not serve as the agent of an authorized
licensee by collecting or forwarding entries or awarding prizes to,
or redeeming prizes for, a sweepstakes winner. The matching of
entries with numbers or pictures on the point-of-sale materials at
retail licensed premises is permitted only if entrants are also offered
the opportunity to use an alternative means to determine
prize-winning status. An authorized licensee may furnish and
maintain a deposit box on a retail licensed premises for the
collection and forwarding of sweepstakes entry forms.

(7) A licensee that is not an authorized licensee shall not directly
or indirectly underwrite, share in, or contribute to, the costs of a
sweepstakes authorized by this section or serve as the agent of an
authorized licensee to collect or forward entries or to furnish any
prize to a sweepstakes winner.

(8) (A) Advertising of a sweepstakes shall comply with the
signage and advertising restrictions contained in this chapter,
Chapter 15 (commencing with Section 25500), and any regulations
issued by the department.

(B) Advertising or promotion of a sweepstakes shall not identify
or refer to a retail licensee.

(C) A retail licensee shall only advertise or promote a
sweepstakes authorized by this section in the manner specified in
subparagraph (A).

(D) Advertising or promotion of a sweepstakes shall only be
conducted on the premises of a retail licensee when such
advertisement or promotion involves a minimum of three
unaffiliated retail licensees. For purposes of this subparagraph,
“unaffiliated retail licensees” shall not include a retail licensee
owned or controlled in whole or in part by an authorized licensee
or any officer, director, or agent of that licensee.

(E) Placement of signs or other advertising of a sweepstakes in
a licensed retail premises shall not be conditioned upon the
following:

(i) The placement of a product within the licensed premises or
the restriction, in any way, of the purchase of a product by a
licensee, the removal of a product from the sales area of a licensed
premises, or the resetting or repositioning of a product within the
licensed premises.

(ii) The purchase or sale of a product produced, imported,
distributed, represented, or promoted by an authorized licensee or
its agent.

(F) An agreement, whether written or oral, entered into, by, and
between a retail licensee and an authorized licensee that precludes
the advertisement or promotion of a sweepstakes on the premises
of the retail licensee by another authorized licensee or its agent is
prohibited.

(9) Sweepstakes prizes shall not be awarded to an authorized
licensee, retail licensee, or wholesale licensee or agent, officer,
employee, or family member of an authorized licensee, retail
licensee, or wholesale licensee. For the purposes of this paragraph,
“family member” means a spouse, parent, sibling, child, son-in-law,
daughter-in-law, and lineal descendants, including those by
adoption. An authorized licensee shall maintain all records
pertaining to a sweepstakes for three years following the
completion of a sweepstakes.

(b) For purposes of this section:

(1) (A) “Authorized licensee” means a winegrower, beer and
wine importer general, beer manufacturer, out-of-state beer
manufacturer certificate holder, distilled spirits manufacturer,
distilled spirits manufacturer’s agent, distilled spirits importer
general, distilled spirits general rectifier, rectifier, out-of-state
distilled spirits shipper’s certificate holder, brandy manufacturer,
and brandy importer. An authorized licensee may conduct, sponsor,
or participate in a sweepstakes pursuant to this section regardless
of whether the licensee holds an additional license not included in
this paragraph.

(B) An “authorized licensee” shall not include a beer and wine
wholesaler, a beer and wine importer general, or distilled spirits
importer general that only holds a wholesaler’s or retailer’s license
as an additional license.

(2) “Sweepstakes” means a procedure, activity, or event for the
distribution of anything of value by lot, chance, or random selection
where the odds for winning a prize are equal for each entry.

(c) Nothing in this section authorizes conducting sweepstakes
where consumers are entitled to an allotment or accumulation of
points based on purchases made over a period of time that can be
redeemed for prizes, things of value, or additional sweepstakes
entries.

(d) A prize awarded for a sweepstakes conducted pursuant to
this section shall not be subject to the monetary limitation imposed
by Section 25600 or a regulation of the department.

(e) An authorized licensee that violates this section, in addition
to any other penalty imposed by this division, may be prohibited
by the department from offering a sweepstakes to California
residents for a period of 12 months.