BILL ANALYSIS Ó
SB 796
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Date of Hearing: July 15, 2015
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Adam Gray, Chair
SB
796 (Committee on Governmental Organization) - As Amended June
29, 2015
SENATE VOTE: 34-0
SUBJECT: Alcoholic beverages: licenses: advertising: contests
and sweepstakes.
SUMMARY: Makes various changes to the Alcoholic Beverage
Control Act (Act). Specifically, this bill:
1) Provides that the Department of Alcoholic Beverage Control
(ABC) 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.
2) Deletes the January 1, 2016 sunset date of an existing
provision of the 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
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certain conditions.
3) Prohibits 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.
4) Authorizes 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.
EXISTING LAW:
1) Establishes ABC and grants it exclusive authority to
administer the provisions of the 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) Requires ABC, upon receipt of an application for a license
or for a transfer of a license and the applicable fee, to make a
thorough investigation to determine whether the applicant and
the premises for which a license is applied qualify for a
license and whether the provisions of the Act have been complied
with. (B & P Code Section 23958)
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3) Requires any corporation, limited partnership, or limited
liability company holding a license to manufacture, distill,
rectify, or sell alcoholic beverages to report any change in the
ownership, management, or control of the entity to ABC. (B & P
Code Sections 23405, 23405.1, and 23405.2)
4) Extends the reporting requirements referenced in item #3
above to any corporation, limited partnership, or limited
liability company that holds, directly or indirectly, 10% or
more of the ownership of a license to manufacture, distill,
rectify, or sell alcoholic beverages. (B & P Code Section
23405.3)
5) 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.
6) 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
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specified conditions.
7) 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.
8) 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.
9) 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.
FISCAL EFFECT: Unknown
COMMENTS:
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Currently, ABC is required to make a thorough investigation of
all applicants for a license, which includes among many things,
identifying all individuals who have an interest regardless of
percentage interest. The department is also required to qualify
and obtain fingerprints for all individuals who hold more than
10% or more interest in the license. The only exception to that
qualification requirement is for publicly traded companies.
This bill would add a new section in the Act, by creating an
exception to the current requirement that ABC must identify and
potentially qualify any person or entity who is an investor in a
private equity fund that holds any interest in an alcohol
license. Private equity funds tend to be passive investments
and often times the individual investors are not aware of
specific investments made by the fund. Investors in private
equity funds do not have day-to-day involvement or influence
over the decisions and operations of the ABC licensed business.
In turn, identifying and qualifying these investors has become a
cumbersome and burdensome process for the department with no
advancement of the original intent of the law. ABC has heard
anecdotal information that this onerous requirement discourages
investors and unnecessarily prolongs the ABC licensing process.
The bill deletes the January 1, 2016 sunset date of an existing
provision of the 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.
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For several years, 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. Additionally, AB 2184 included a January 1, 2016 sunset
clause. AB 2184 of 2012 provided a service that many consumers
enjoy - namely, collectibles. In addition, AB 2184 granted
licensed suppliers the authority to engage in brand awareness
events involving autographs at licensed off-sale retail
establishments.
In light of the fact that 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.
The bill also incorporates a change in the Act due to a
compromise between the California Craft Brewer Association
(CCBA) and California Beer and Beverage Distributors (CBBD), the
purpose of which is to maintain on-sale retail privileges for
beer manufacturers, as they grow larger to avoid the forced
divestiture of an existing licensed business. Currently, if a
Type 23 licensed beer manufacturer grows their production beyond
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a 60,000-barrel threshold, and thus becomes a Type 01 licensed
beer manufacturer, they concurrently lose their existing
privilege to hold six (6) on-sale retail licenses under B&P Code
Section 25503.28. In this instance, the beer manufacturer is
forced to divest themselves of their existing on-sale retail
stores. This loss of privilege creates unnecessary hardships on
businesses as they are forced to make a determination of whether
to either grow their volume production past 60,000 bbl/year or
maintain their on-sale retail privileges afforded to them as a
Type 23 under B&P Code Section 25503.28.
These retail privileges are in addition to the six (6) on-sale
and off-sale licenses provided to both Type 01s and Type 23s
under B&P Code Section 23389 related to duplicate branch office
licenses. Type 23s essentially get six (6) on-sale licenses in
addition to six (6) on-sale/off-sale licenses for a total of 12
retail related licenses. Type 01s are limited to only the six
(6) on-sale/off-sale licenses under BPC 23389 and are denied the
six (6) on-sale/off-sale licenses under 25503.28.
Lastly, SB 778 (Padilla, Chapter 778 of 2012) allowed authorized
licensees to conduct consumer contests and conduct or sponsor
consumer sweepstakes offering the chance to win prizes.
"Contests" are authorized under B & P Section 25600.1 and
"sweepstakes" are authorized under B & P Section 25600.2. These
two statutes use similar language in their numerous provisions
and restrictions, except where otherwise noted. An authorized
licensee may conduct consumer contests or sweepstakes, subject
to specified conditions. Currently, one of those conditions
reads as follows: "Alcoholic beverages or anything redeemable
for alcoholic beverages shall not be awarded as a contest or
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sweepstakes prize. This paragraph shall not prohibit a contest
or sweepstakes in which the prize is cash or cash equivalent or
the awarding of cash or cash equivalent."
The proposed change would permit "the inclusion of alcoholic
beverages as an incidental part of a prize package." For
example, a bottle of wine as part of a gift bag that includes an
assortment of fruit and other such items.
REGISTERED SUPPORT / OPPOSITION:
Support
Family Winemakers of California
Wine Institute
Opposition
None on file
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Analysis Prepared by:Eric Johnson / G.O. / (916)
319-2531