BILL ANALYSIS
Bill No: AB
605
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
AB 605 Author: Portantino
As Proposed to be Amended: June 22, 2010
Hearing Date: June 22, 2010
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages
DESCRIPTION
AB 605 adds new provisions to the Alcoholic Beverage
Control (ABC) Act that authorize the Department of ABC to
issue to the holder of an "off-sale" retail license an
"instructional tasting license" for the purpose of
furnishing tastings of alcoholic beverages to consumers,
subject to certain limitations. Specifically, this
measure:
1. Authorizes the Department of ABC to issue an
"instructional tasting" license to the holder of an
off-sale retail license for premises operated in
conjunction with the off-sale licensed premise; cost of
the license is set at $300 with an annual renewal fee of
$261. [Excludes the following off-sale licensees: (a)
retail locations that sell gasoline, unless the licensee
operates a fully enclosed off-sale retail area of at
least 10,000 square feet and (b) retail locations with a
total of under 5,000 square feet of interior space,
unless the annual gross sales of alcoholic beverages at
the licensed location comprise at least 75% of the total
gross sales of all products sold at the licensed
premises.]
2. Makes it explicit that existing provisions of the ABC
Act relating to notices and protest for the issuance of
regular alcoholic beverage licenses apply to the issuance
of instructional tasting licenses [including notification
AB 605 (Portantino) continued
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to nearby schools and churches and notification by mail
to local residents within 500 feet of premises and
newspaper publication] but explicitly excludes provisions
of existing law for the issuance of licenses relating to
zoning restrictions, limitations on the number of
licensed premises, public convenience or necessity
process, and regulations relating to submission of
architectural design of licensed premises.
3. Provides that the instructional tasting license
authorizes the holder to allow alcoholic beverage
manufacturers, wholesalers, or their respective
designated representatives to conduct instructional
events for consumers on the subject of wine, beer, or
distilled spirits, including tastes of such alcoholic
beverages, subject to the following conditions: (a) no
more than ounce of distilled spirits is offered in one
tasting; (b) no more than one ounce of wine is offered in
one tasting; (c) no more than three ounces of beer is
offered in one tasting; and, (d) no more than three
tastings may be offered to an individual in one day.
Also, limits such events to a single type of alcoholic
beverage, limits the alcoholic beverages to be tasted to
those products the off-sale licensee is authorized to
sell, and provides no charge of any sort shall be made
for the tastings.
4. Provides that the instructional tasting events must be
held in an area of the off-sale licensed premises where
alcoholic beverages are actually exposed and offered for
sale, or contiguous areas related to such sales and
provides that the area where the tasting activity is
conducted must be separated by temporary or permanent
barriers and display signage prohibiting anyone under 21
years of age from entering the area. [Also, makes it
explicit that the instructional events must be held
within the "interior" of the existing licensed premises
and can only take place between the hours of 10:00 a.m.
and 9:00 p.m.]
5. Requires the off-sale retail licensee to monitor the
instructional event area and prohibits the off-sale
retail licensee from conducting any on-sale retail sales
to consumers attending the event.
6. Provides that no more than one instructional event may
AB 605 (Portantino) continued
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occur per day, per licensed premises and prohibits a
retailer who holds an on-sale beer and wine license or an
on-sale general license from allowing a product
manufacturer or wholesaler, or their designated
representative from conducting a tasting under the
privileges of the on-sale license at the same time.
7. Provides that, except, for one unique situation,
instructional events are to be conducted by alcoholic
beverage manufacturers and wholesalers, or their
designated representatives, either with product that they
bring to the event (only wine and spirits suppliers may
bring the product to the event) or purchase from the
off-sale licensee at the retailer original invoice price.
Any unused alcoholic beverages remaining from the
tasting must be removed from the off-sale licensed
premises by the authorized licensee or its designated
representative.
8. Permits the licensed retailer to conduct an
instructional event only when a product manufacturer or
wholesaler, or their designated representative, are
unable to conduct an event they've scheduled (e.g.,
illness, stuck in traffic, missed flight, etc.) In that
instance, the retailer must supply the product being
tasted and provide or pay for a person to staff the event
who is over 21 years of age.
9. Provides that beer and wine wholesalers may conduct
instructional events for consumers, but may not serve
tastes of beer unless the beer and wine wholesaler is
also a beer manufacturer, an out-of-state beer
manufacturer, or holds more than six distilled spirits
wholesale licenses. [This provision is intended to allow
distilled spirits wholesalers with beer products to serve
beer at an instructional event for beer products.]
10. Contains provisions that allow advertisement of the
instructional event by the supplier or wholesaler, that
mirror those in the ABC Act applicable to wineries (e.g.,
"Meet the Winemaker" dinners).
11. Prohibits the product manufacturer or wholesaler, and
their respective designated representative from providing
any free goods, gifts, premiums or other things of value
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in connection with the instructional tastings, except as
otherwise authorized by the ABC Act. [Equipment,
materials, and utensils that may be required during the
instructional event may be provided free of charge to the
licenseholder.]
12. Stipulates that any collusive agreement between an
off-sale retailer and product supplier or wholesaler to
exclude competitors is explicitly prohibited and will
result in the suspension of the instructional tasting
license by the retailer and loss of the tasting privilege
by the supplier/wholesaler for six months to one year.
[This penalty is in addition to any other remedies
available to the department under the ABC Act.]
EXISTING LAW
Existing law establishes the Department of 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.
The ABC Act permits an on-sale retail licensee of wine or
distilled spirits to conduct "instructional" consumer
tastings on the licensed retail premise provided the
following conditions are met: (1) no more than ounce of
distilled spirits is offered in one tasting; (2) no more
than one ounce of wine is offered in one tasting; and, (3)
no more than three tastings are offered to an individual in
one day. An instruction may include the history, nature,
values and characteristics of the product being offered,
and the methods of presenting and serving the product.
Existing law authorizes beer manufacturers and wholesalers
to offer beer samples (not to exceed 8 ounces per person,
per day) to individuals of legal drinking age at on-sale
retail licensed premises under specified conditions.
Existing law permits a licensed winegrower, manufacturer,
importer, or wholesaler to provide samples of the alcoholic
beverages which are authorized to be sold by the licensee
in accordance with rules prescribed by the ABC. A retail
licensee, however, is not authorized to provide any free
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samples of alcoholic beverages. Moreover, ABC regulations
provide that samples of alcoholic beverages may only be
given away to licensees or employees of licensees who are
in a position to purchase the product or who are in need of
additional information about the product, as specified.
Existing law authorizes distilled spirits manufacturers to
conduct tastings and provide distilled sprits without
charge for events sponsored by nonprofit organizations.
Only persons affiliated with the nonprofit organization,
including up to three guests, may attend. No distilled
spirits may be sold or solicited for sale at the tasting,
and the organization must obtain a permit from ABC prior to
the event.
Existing law authorizes licensed winegrowers to conduct
winetastings featuring their products either on or off the
winegrower's premises, as provided for in rules and
regulations adopted by ABC. With regard to winetastings
held off the premises of the wine manufacturer, ABC Rule 53
provides that a winegrower may conduct winetastings at
unlicensed premises with specified restrictions, including
that such events may not be open to the public.
Winetastings may additionally be sponsored by nonprofit or
private organizations with attendance restricted to guests
of the organization. For nonprofit events held at premises
licensed by ABC, the tastings must be held in an area
separate from the portion of the premises where alcohol
sales are being conducted, and no consumption of alcoholic
beverages other than what is being tasted is permitted.
Finally, no winetasting may be given for the benefit of any
retail licensee, and no retail licensee may participate in
a winetasting directly or indirectly, except as provided
for by ABC rule or regulation.
Existing law, known as the "tied-house" law, separates the
alcoholic beverage industry into three component parts of
manufacturer, wholesaler, and retailer. The original
policy rationale for this body of law was to prohibit the
vertical integration of the alcohol industry and to protect
the public from predatory marketing practices. Generally,
other than exemptions granted by the Legislature, the
holder of one type of license is not permitted to do
business as another type of licensee within the
"three-tier" system.
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Existing law defines an "on-sale" license as authorizing
the sale of all types of alcoholic beverages: namely, beer,
wine and distilled spirits, for consumption on the premises
(such as at a restaurant or bar). An "off-sale" license
authorizes the sale of all types of alcoholic beverages for
consumption off the premises in original, sealed
containers.
Existing law contains various provisions regulating the
application for, the issuance of, the suspension of, and
the conditions imposed upon, alcoholic beverage licenses by
ABC.
ABC is required to notify the appropriate sheriff, chief of
police, district attorney, city or county planning agency,
and legislative body of an application for the issuance or
transfer of a liquor license, and prohibits ABC from
issuing or transferring a license until at least 30 days
after these notices are provided. ABC may extend that 30
day period for a period not to exceed an additional 20 days
if a proper written request is made by any local law
enforcement agency.
Existing law authorizes a local jurisdiction to provide for
a reasonable amortization period or imposition of
conditions on legal nonconforming uses pursuant to a
validly enacted zoning ordinance, for off-sale retail
licenses. An existing off-sale retail license holder has up
to six months to conform to a newly imposed condition.
Existing law authorizes a local jurisdiction to enter into
a negotiated agreement for a longer amortization period
with an off-sale retail license holder.
BACKGROUND
Purpose of AB 605: According to the author's office,
tastings are a traditional means of allowing responsible
adult consumers to sample and learn about the wide variety
of alcoholic beverage products available in the
marketplace. The author's office points out that a
majority of states permit tastings at "off-sale" retail
premises for wine, spirits and beer products as part of
consumer education programs. Specifically, 37 states
permit such tastings for wine products, 31 states permit it
for spirits products, and more than half the states in the
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country allow off-sale tastings for beer.
The author's office notes that beer, wine and distilled
spirits tastings are authorized in California under the ABC
Act at "on-sale" licensed premises, such as bars and
restaurants. The author's office also acknowledges that
existing law recognizes the basic merits of the "off-sale"
retail instructional tasting opportunity for wine, spirits
and beer but contends that current law is simply unworkable
for the vast majority of off-sale licensed retailers
because it only permits tastings by way of a cumbersome,
expensive and rigid licensing process. The author's office
points out that currently, off-sale retailers who wish to
have tastings of beer and wine offered in-store must obtain
a Type 42 on-sale beer and wine license. In addition,
off-sale retailers who wish to have tastings of spirits
must obtain an expensive Type 48 on-sale general license.
(Type 48 licenses are subject to quota restrictions, thus
an on-sale general license would very likely not be
available.)
Thus, the author's office believes that the law needs to be
changed so as to be practical and usable. This proposal (AB
605) is intended to allow a licensed off-sale retailer to
apply to the ABC for an annual instructional tasting
license to permit suppliers and wholesalers to conduct
instructional events, including tastes of beer, wine, or
distilled spirits, in conjunction with the retailer, at the
retailer's off-sale licensed premises.
The author's office notes that under the provisions of AB
605, samples of wine, beer, or distilled spirits may be
part of the instructional event, but must be limited to not
more than three tastings to any individual of legal
drinking age in one day. In terms of quantity, a single
tasting of wine cannot exceed 1 ounce, a single tasting of
spirits cannot exceed ounce, and a single tasting of beer
cannot exceed 3 ounces. No product can be sold as part of
the tasting to any consumer for immediate consumption on
the off-sale retail premises. Only one instructional event
may be conducted by one supplier or wholesaler per day at
any individual premises of an off-sale retail licensee.
Only a single type of alcoholic beverage may be tasted at
an instructional event and only products that are
authorized to be sold by the off-sale retailer may be
tasted.
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The author's office emphasizes that AB 605 creates an
alternative way of conducting tastings which includes not
only wine and beer but, also, distilled spirits. It
provides a regulated approach to authorizing the giving
away of alcoholic beverage samples or tastes that requires
an off-sales licensee to acquire a separate license to
serve alcohol beverage samples in the premises. The new
tasting license requires that a portion of the off-sales
premises be cordoned-off as a tasting area. Within the
boundaries of that designated area, a licensee may serve
samples. The amount of the samples that can be given are
the same as those stipulated in current law for tastings at
an on-sale licensees' premises: three one-ounce tastes of
wine, three ounce tastes of distilled spirits, or three
three-ounce tastes of beer.
Proponents state that AB 605 has been carefully crafted to
ensure that regulatory safeguards have been built into the
process for obtaining an instructional tasting license.
Additionally, the rationale for excluding the applicability
of some of the licensing provisions was to make the
licensing process for an instructional tasting license less
costly and burdensome for the retail community, and to
exclude provisions of law that are not relevant to
off-premise tastings and would only be unduly burdensome.
For example, the premises have already been approved for
alcohol-related business pursuant to the original off-sale
license for purposes of zoning laws. Adding occasional
instructional events would not substantially change the
mode or character of the retail operation.
Proponents also note that the full provisions relating to
notices and protests are specifically included to give
local governmental bodies the power to decide whether the
issuance of the instructional tasting license is proper.
Proponents claim that the notice and protest mechanism
allows local residents and local governments to object to
the issuance of the license and request that ABC conduct a
public hearing on the issues raised by the protesting
parties.
Arguments in Opposition: Opponents argue that AB 605 is
simply an irresponsible means of giving away alcoholic
beverages to as many potential customers as possible, in
the hopes they will desire more than just the free drink.
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Potentially, it could initiate a whole new marketing
strategy among alcoholic beverage competitors, staging
hundreds of these "free sample" events throughout the state
on any given day.
Writing in opposition, the Marin Institute states, "AB 605
is just over-the-top, over-reaching, alcohol industry
pandering that is way too dangerous for the health and
safety of California residents."
Also writing in opposition, the California Council on
Alcohol Policy states, "the cost of enforcement is
prohibitive to the ABC and to local government. Local law
enforcement agencies are facing severe cutbacks in
personnel due to revenue shortfalls, and therefore will not
be able to monitor these 'tasting' activities. ABC is
already working through reductions and does not have the
personnel to enforce this new program."
The California Council on Alcohol Problems views AB 605 as
a radical and extremely provocative bill that would
legalize the consumption of alcohol at every grocery
market, liquor store and even corner gas
station/convenience stores in California, under the guise
of "tasting events."
ABC Concerns: The Department of ABC has issued an "oppose
unless amended" position. The ABC contends that AB 605
explicitly exempts this new license category from the
provisions of existing law for the issuance of general
licenses relating to local zoning restrictions, limitations
on the number of licensed premises within counties, public
convenience or necessity process, and regulations relating
to submission of architectural designs. ABC believes the
bill severely impacts local governments' ability to prevent
issuance of the license. ABC also believes that local
governments should have the ability to weigh-in with the
full weight and force under their zoning authority that is
essential for them to determine which business locations
this type of activity should be allowed within their
communities. In addition, ABC believes the license may not
serve the public convenience or necessity for various
reasons such as being located in a high crime area. While
AB 605 allows the public and local governments to file a
protest under the procedures provided by existing law, by
exempting the above-listed specific provisions, raising
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them as grounds for protest may not be valid.
Furthermore, ABC believes that the bill severely limits the
public's ability to be made aware that their local grocery
store or mini mart has applied to conduct tastings.
Although the bill allows the public to protest, if the
public is not made aware of a license application, it
becomes difficult to protest. The bill exempts these
licenses from the 500 foot notification, publication of
notice in a newspaper, or notification of nearby schools
and churches by ABC.
Staff Comments: The author will offer amendments in
Committee on June 22nd to address some of the concerns
raised by ABC and opponents. Those proposed amendments are
reflected in the description referenced above (items 1-12).
Specifically, the author intends to:
Exclude retail locations that sell gas and
convenience stores from eligibility to obtain an
instructional tasting license. [See item #1 above]
Expand notification requirements in response to
ABC's concerns about limited notification by striking
reference to Business and Professions Code Section
23770 (p.2, line 7) and replacing it with Section
23790 - this will effectively include notification to
nearby schools and churches. Also, reference to
Sections 23985.5 and 23986 (p.3, line 3) will be
stricken, with the effect of now including the
applicability of those provisions (e.g., notification
by mail to local residents within 500 feet of premise
and newspaper publication). [See item #2 above)
Clarify that an instructional tasting event can
only take place within the "interior" of the existing
licensed premises and include specific hours during
which such events can take place (between 10:00 a.m.
and 9:00 p.m.) [See item #4 above]
Make it explicit that no charge of any sort shall
be made for the tastings. [See item #3 above]
As of this writing, it is unknown if the proposed
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amendments will remove any of the listed opposition.
PRIOR/RELATED LEGISLATION
SB 639 Calderon 2009-10 Session. Would have added a new
provision to the Alcoholic Beverage Control (ABC) Act
authorizing ABC to issue an "on-sale tasting license" to
the holder of any off-sale retail license for the purpose
of furnishing tastings of alcoholic beverages to consumers
subject to certain limitations. (Died on Senate
Appropriations Suspense File)
SB 995 (Maldonado) 2007-08 Session. Would have permitted
winegrowers, distilled spirits manufacturers, distilled
spirits rectifiers general, or distilled spirits importers
general, out-of-state distilled spirits shippers, and
authorized agents of any of the above to instruct consumers
on the premises of an off-sale licensee regarding wine and
distilled spirits, respectively, as provided. Also, would
have allowed the instruction to include the furnishing of
tastings under specified conditions and would have limited
the amount of instructions that include tastings per year
and require the winegrowers, distilled spirits
manufacturers, distilled spirits rectifiers general, or
distilled spirits importers general, out-of-state distilled
spirits shippers, and authorized agents to notify the
Department of ABC when instructions with tastings would
occur, as provided. (Held in Senate G.O. Committee at
author's request.)
AB 2613 (Plescia) 2007-08 Session. Would have authorized
winegrowers, distilled spirits manufacturers, as well as
rectifiers, importers and shippers of these beverages to
offer tastings of wine or distilled spirits at off-sale
retail licensed premises (grocery stores and liquor stores)
in a segregated area. Also, would have required
verification of age at entrance to the segregated area and
placed limits on tastings (one-quarter ounce of spirits and
one ounce of wine) and limited tastings to three per person
each day. (Held in Assembly Appropriations Committee)
AB 2293 (De Leon) Chapter 638, Statutes of 2008. Added a
new provision to the ABC Act that permits distilled spirits
manufacturers and winegrowers to provide their product
offerings directly to consumers (free of charge) during
invitation-only events on premises for which a caterer's
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permit authorization has been issued.
SB 1548 (Murray) Chapter 670, Statutes of 2006. Authorized
beer manufacturers and wholesalers to offer beer samples
(not to exceed 8 ounces per person, per day) to individuals
of legal drinking age at on-sale retail licensed premises
under specified conditions.
AB 2285 (V. Brown) Chapter 248, Statutes of 1998. Allowed
on-sale retail licensees to offer limited tastings of wine
or distilled spirits at the licensed establishment.
SB 993 (Burton) Chapter 544, Statutes of 1997. Among other
things, authorized a licensed distilled spirits
manufacturer to conduct tastings of distilled spirits on
the licensed premises under specified conditions.
SUPPORT: As of June 18, 2010:
California Retailers Association (sponsor)
California Beer and Beverage Distributors
Distilled Spirits Council of the United States
Family Winemakers of California
Southern Wine & Spirits of America, Inc.
Albertson's
Anheuser Busch
DIAGEO
Young's Market Company
Wine & Spirits Wholesalers of California, Inc.
Wine Institute
OPPOSE: As of June 18, 2010:
Alcohol Policy Network
California Council on Alcohol Policy
California Council on Alcohol Problems
OPPOSE: (continued)
Department of Alcoholic Beverage Control
Marin Institute
FISCAL COMMITTEE: Senate Appropriations Committee
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