BILL ANALYSIS
SB 1293
Page 1
SENATE THIRD READING
SB 1293 (Chesbro)
As Amended August 25, 2000
Majority vote
SENATE VOTE :Vote not relevant
GOVERNMENTAL ORGANIZATION 13-4
APPROPRIATIONS 15-1
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|Ayes:|Wesson, Strickland, |Ayes:|Migden, Campbell, |
| |Battin, Brewer, Briggs, | |Ackerman, Aroner, Brewer, |
| |Calderon, Cardenas, | |Cedillo, Corbett, Kuehl, |
| |Granlund, Lempert, | |Papan, Romero, Shelley, |
| |Longville, Vincent, | |Thomson, Wesson, Wiggins, |
| |Wiggins, Wright | |Wright |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Cardoza, Machado, |Nays:|Maldonado |
| |Maldonado, Reyes | | |
| | | | |
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SUMMARY : Imposes specified restrictions on the labeling of
wines produced in Napa Valley. Specifically, this bill :
1)Makes various findings and declarations with respect to the
necessity of preserving the integrity of the "Napa"
appellation and states legislative intent to assure consumers
that wines produced or sold in this state with brand names or
advertising referring to Napa appellations in fact qualify for
the Napa Valley or Napa County appellation of origin.
2)Provides that no wine produced, bottled, or sold in California
may use, in a brand name or on any label, any of the names of
viticultural significance that include Napa or any appellation
of origin that is located within Napa County, or any similar
name to the above that is likely to cause confusion as to the
origin of the wine, and includes on the label or advertising
that appellation or a viticultural area appellation of origin
that is located entirely within Napa County. This does not
include wines that qualify under federal and state law for
either a Napa Valley or Napa County Appellation of origin.
3)Authorizes the Department of Alcoholic Beverage Control (ABC)
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to suspend or revoke the license of a winemaker who violates
the provisions of this bill. Also, permits ABC to seize and
dispose of any wine labeled in violation of this bill.
4)Makes it explicit that the provisions of this bill apply only
to wine that is produced, bottled, or labeled after January 1,
2001.
EXISTING LAW :
1)Authorizes ABC to regulate and license the manufacture and
sale of alcoholic beverages within California.
2)Provides that any Napa County wine labeled with a viticultural
area appellation of origin established pursuant to federal
law, shall bear the designation "Napa Valley" on the label in
conjunction with any of the appellations wholly contained
within Napa Valley.
3)Provides that every person who, with intent to defraud, either
forges or counterfeits the label of any wine or uses the label
of any wine belonging to someone else without his or her
consent, is guilty of a misdemeanor. The ABC is authorized to
seize any wine labeled in violation of this provision.
FISCAL EFFECT : Potential minor and absorbable enforcement costs
to the ABC.
COMMENTS : The Federal Alcohol Administration Act establishes
broad federal regulatory authority over the interstate trade in
alcohol beverage products. The Secretary of the Treasury,
through the Bureau of Alcohol, Tobacco, and Firearms (BATF),
administers an extensive code of regulations governing, among
other things, the contents of wine labels, including brand
names, the name and address of the bottling winery, and
indications of the wine's origin, as well as the use of such
information in advertising.
Under federal regulations, an "appellation of origin" is a
geographic designation referring to the place where the grapes
used to make a specified percentage of the wine were grown. For
American wines, an appellation of origin includes the names of
states (e.g., California) and
counties identified with the word "county" (e.g., Napa County)
as well as all designated American "viticultural areas." An
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American Viticultural Area (AVA) is a grape growing region
distinguishable by geographical area features, as recognized by
the BATF pursuant to specified
criteria and procedures. These criteria and procedures, and a
complete list of AVA's, are set forth in Part 9 of Title 27 of
the Code of Federal Regulations. In brief, BATF may recognize
an AVA area if it is locally or nationally known for grape
growing, has particular and definable boundaries, and has
geographic features distinguishing it as a grape-growing area.
"Napa Valley" is an AVA, as are the many sub-appellations of
Napa County. California currently has 81 viticultural areas
recognized by the BATF.
In certain circumstances, wine labels must bear an appellation
of origin. For example, a label must bear an appellation of
origin if the label states either the grape type (varietal) used
in the wine or the year in which the grapes were harvested
(vintage). Popular varietals include: chardonnay, cabernet
sauvignon, merlot, zinfandel, pinot noir, sauvignon blanc,
riesling and pinot grigio. Virtually all bottled, cork-finished
wines bear an appellation of origin. The regulations mandate
that the appellation appear in direct conjunction with and in
lettering substantially as conspicuous as the varietal or other
class or type designation.
The regulations specify the conditions for use of each type of
appellation of origin. A wine qualifies for a state or county
appellation of origin if at least 75% of the volume derives from
grapes grown in the area indicated by the appellation of origin.
Thus, under BATF regulations the appellation of origin
"California" signifies that at least 75% of the wine in the
bottle was made from grapes grown anywhere in the state of
California. Similarly, the appellation of origin "Napa County"
signifies that at least 75% of the wine in the bottle was made
from grapes grown
anywhere in Napa County. To qualify for an appellation of
origin consisting of an AVA, at least 85% of the wine must
derive from grapes grown in the indicated area. Thus, the
appellation of origin "Napa Valley" signifies that at least 85%
of the wine in the bottle was made from grapes grown anywhere in
Napa Valley. The regulations do not require disclosure of the
place of origin of the remaining portion of the wine.
Federal regulations require the wine label to bear a "brand
name." Brand names for wines frequently consist of, or contain,
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a geographic term, either real or fictional. These places may
or may not have any relationship to the origin of the wine. The
regulations provide that, in general, "a brand name of
viticultural significance may not be used unless the wine meets
the appellation of origin requirements for the geographic area
named." This prohibition is subject to an important exception
. If a brand name was in use before July 7, 1986, it is
considered "grandfathered." Grandfathered brand names of
viticultural significance may be used for wines that do not meet
the appellation of origin requirements for the geographic area
named, provided the wine is labeled with a true appellation of
origin consisting of a county or viticultural area (if
the brand name refers to a geographic area smaller than a
state) or a state or lesser appellation (if the brand name
refers to a state). As a result of the federal grandfathering
rule, a number of well known brands (e.g., Napa Ridge, Monterey
Vineyards, Napa Creek) of viticultural significance have long
been in production using grapes from areas other than the area
referred to by the brand.
Federal regulations additionally require that the name and
address of the "bottling winery" appear on the wine label,
accompanied, in certain circumstances, by a phrase such as
"bottled by." There is no requirement that the bottling winery
be located in the geographic area where the wine was made or the
grapes were grown. Federal law also provides that wine may not
be sold or shipped in interstate commerce unless it bears a
label that BATF has previously approved. A certificate of label
approval is obtained by submitting an application to the BATF.
The application must include an exact replica of the label as
well as other information regarding the wine covered by the
label.
This measure is sponsored by the Napa Valley Vintners
Association (NVVA), a nonprofit trade organization representing
177 member wineries, ranging from small, family-owned operations
with as little as 200-case annual production, to large, publicly
traded wineries producing several million cases per year. NVVA
notes that for more than a century, Napa Valley has been widely
recognized for producing grapes and wines of the highest
quality. NVVA points out that both consumers and the wine
industry understand the name Napa County and the viticultural
area appellations of origin contained within Napa County as
denoting that the wine was created with distinctive grapes grown
in Napa Valley.
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NVVA is concerned that Napa Valley's reputation is being
diminished by wines that do not predominately originate in the
appellation. NVVA indicates that there are dozens of
grandfathered Napa Valley geographic brand names that exist and
can be used to bottle and sell wine made with grapes from
another area. NVVA is concerned that if something is not done
to address this issue, Napa Valley's name and reputation will
erode. NVVA emphasizes that the purpose of this measure is
simply a truth in advertising issue.
This situation has recently been exacerbated by the business
activities of Bronco Wine Company, the leading purchaser of many
of the grandfathered brands. Supporters fear that this company,
which is based in Ceres, California, and owns brand names such
as, Domaine Napa, Napa Creek, Napa Ridge, and Rutherford
Vintners, could legally flood the market with wines made mostly
from grapes grown outside Napa Valley, yet marketed under "Napa"
brand names.
Supporters, including the Napa Valley Winegrowers Alliance,
contend this bill closes the loophole that has been used by the
Bronco Company and in turn will provide consumers with a very
important benefit by requiring that a wine label accurately
reflect the contents in the bottle, in terms of where the grapes
came from that were used to produce the wine. This, the
Alliance indicates, will help protect the reputation for high
quality wines that the Napa Valley has gained throughout the
world.
Opponents of this measure argue that there is no demonstrated
need to treat "Napa" wines differently than other California
appellations. Opponents argue that this bill would
effectively eliminate many valuable brand names , such as "Napa
Ridge" and others (see above), which traditionally have been
used with coastal and other California appellation wines.
Opponents suggest that these brands simply could not be produced
with Napa grapes without enormous price increases and reductions
in quantity. Opponents further believe that this measure would
harm brand owners and the grape growers from whom the brands are
sourced and furthermore potentially deprive consumers of brands
they enjoy. Opponents also state that this measure is at
variance with federal regulations regarding geographic brand
names, which "grandfathered" all brand names in use as of the
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adoption of those regulations. This, in the opponent's opinion,
protected the legitimate interests of brand owners, growers and
consumers by maintaining the continuity of existing brands.
Opponents argue that any legislation aimed at eliminating
geographic brand names should have appropriate provisions for
the "grandfathering" of existing brands (as in the federal
regulations), or, at a minimum, a sufficient phase-in period
(such as 10 years) to mitigate harm to owners, growers and
consumers from loss of established brands.
Finally, opponents raise several constitutional questions
regarding the legality of this legislation, especially with
regard to:
) The bill's purported application to wine labeled for sale
outside California may be deemed an undue burden on interstate
commerce;
2)The bill may be preempted by the extensive scheme of federal
law and regulation of wine labeling and advertising with
respect to geographic terms;
3)The bill's effect on existing brands could be held to be an
unconstitutional taking under the Fifth and Fourteenth
Amendments, and the bill's impact on sourcing arrangements
with growers may additionally constitute an unconstitutional
impairment of a vintner's ability to contract; and,
4)The bill may infringe brand owners' legitimate First Amendment
commercial-speech rights to identify and advertise their
products.
Some of these concerns may have been supported by a recently
released Legislative Counsel Opinion (RN# 15903) that raises
federal preemption concerns relating to the legislation's impact
on interstate wine sales.
AB 683 (Wiggins), pending consideration before the Senate
Appropriations Committee, would in a similar fashion restrict
the manner by which Napa wines could be labeled.
Analysis Prepared by : George Wiley / G. O. / (916) 319-2531
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