BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 605|
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THIRD READING
Bill No: AB 605
Author: Portantino (D)
Amended: 8/2/10 in Senate
Vote: 21
PRIOR SENATE VOTES NOT RELEVANT
SENATE GOVERNMENTAL ORG. COMMITTEE : 8-1, 6/22/10
AYES: Wright, Harman, Calderon, Denham, Negrete McLeod,
Padilla, Price, Yee
NOES: Florez
NO VOTE RECORDED: Oropeza, Wyland
SENATE APPROPRIATIONS COMMITTEE : 8-1, 8/2/10
AYES: Kehoe, Alquist, Corbett, Emmerson, Leno, Price,
Wyland, Yee
NOES: Ashburn
NO VOTE RECORDED: Walters, Wolk
ASSEMBLY FLOOR : Not relevant
SUBJECT : Alcoholic beverages: instructional tasting
events
SOURCE : Author
DIGEST : This bill creates a new type of license
(instructional tasting license) that allows the tasting of
beer, wine, and distilled spirits at off-sale licensed
premises.
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ANALYSIS : Existing law 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 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
or occupation taxes 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 one-fourth
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 eight 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
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
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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.
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.
This bill:
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1. Authorizes ABC to issue an instructional tasting license
to the holder of an off-sale retail license at the
premises of the off-sale retail license.
2. Requires, at all times during an instructional tasting
event, the instructional tasting event area to be
separated from the remainder of the off-sale licensed
premises by wall, rope, cable, cord, chain, fence, or
other permanent or temporary barrier.
3. Prohibits minors from entering the instructional tasting
area.
4. Requires the licenseholder to prominently display
signage prohibiting minors from entering the
instructional tasting event area.
5. Prohibits a licenseholder from allowing any consumer to
leave the instructional tasting area with an open
container of alcohol.
6. Prohibits instructional tasting events from taking place
before 10:00 a.m. or after 9:00 p.m.
7. Establishes the fees for the instructional tasting
license at $300 initial and $261 annual renewal. It
makes the annual renewal fee subject to CPI adjustments,
and requires that the fees be deposited into the ABC
Fund.
8. Makes the following off-sale licensees ineligible for an
instructional tasting license: retail locations that
sell gasoline unless the licensee operates a fully
enclosed off-sale retail area of at least 10,000 square
feet and retail locations with a total of under 5,000
square feet of interior space unless the gross sales at
the licensed location comprise on a calendar quarterly
basis at least 75 percent of the total gross sales of
all products sold at the licensed premises.
9. Exempts the instructional tasting license from existing
laws that limit the number of licensed premises (Article
2 commencing with Section 23815 of Chapter 5 of the
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Business and Professions Code [BPC]) and requires local
governing bodies to determine public convenience or
necessity when there is undue concentration (Section
23958.4). However, it expressly authorizes ABC to deny
the issuance of an instructional tasting license in an
area of undue concentration. (NOTE: Cities and
counties across the state apply Section 23958.4
differently. Some ignore it and let ABC decide, some
simply draft a letter with a positive or negative
finding, and some have a full application processes with
scheduled hearings, etc. It does occasionally delay
applications.)
10.Specifies that existing laws that require the posting of
notices (Article 2 commencing with Section 23985) and
authorizes protests and hearings (Article 3 commencing
with Section 24011) of Chapter 6 of the ABC Act shall
apply. Although not specifically stated, existing laws
that give local governments the ability to prevent
issuance of the license through zoning or ordinances
would also apply. And, the premises designation would
be the same as that of the off-sale licensed premises.
11.Provides that the instructional tasting license
authorizes the holder to allow alcoholic beverage
manufacturers, wholesalers, or their designated
representatives to conduct instructional tasting events
for consumers on the subject of wine, beer, or distilled
spirits limited to not more than three tastings per
person per day. A single tasting of distilled spirits
shall not exceed one-fourth of one ounce and a single
tasting of wine shall not exceed one ounce. A single
tasting of beer shall not exceed 8 ounces. This mirrors
existing law for tastings at on-sale premises.
12.Limits an instructional tasting event to a single type
of alcoholic beverage (distilled spirits, wine or beer).
13.Prohibits an alcoholic beverage manufacturer, wholesaler
or designated representative from conducting more than
one instructional event per day per licensed premises
and prohibits a retailer who also holds an on-sale
license from allowing a manufacturer, wholesaler, or
designated representative from conducting a tasting
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under the privileges of the on-sale license on the same
day and at the same location.
14.Prohibits a retailer from conducting an instructional
tasting event unless the authorized licensee (or its
designated representative) is unable to conduct an event
previously advertised and scheduled. In this 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.
15.Provides that, except for situations described in the
previous bullet, instructional tasting events are to be
conducted by alcoholic beverage manufacturers,
wholesalers, or their designated representatives, either
with product that they bring to the event or purchase
from the off-sale licensee at the retailer original
invoice price. Any unused alcoholic beverage remaining
from the tasting must be removed from the off-sale
licensed premises by the authorized licensee or its
designated representative.
16.Authorizes a beer and wine wholesaler to conduct an
instructional tasting event, but prohibit the beer and
wine wholesaler from serving tastes of beer unless the
beer and wine wholesaler also held a beer manufacturer's
license, an out-of-state beer manufacturer's certificate
or more than six distilled spirits wholesaler's
licenses.
17.Prohibits charging for the tastings.
18.Allows alcoholic beverage manufacturers, wholesalers, or
designated representatives to advertise the
instructional tasting events with same limitations in
existing law for "Meet the Winemaker" dinners at on-sale
retail premises (BPC Section 25503.4).
19.Allows the licenseholder to advertise an instructional
tasting event at the licenseholder's own expense using
flyers, newspaper ads, Internet communications, and
interior signage.
20.Prohibits the manufacturer, wholesaler, or designated
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representative from providing any free goods, gifts,
premiums or other things of value in connection with the
instructional tastings, except equipment, material, and
utensils as may be required for use in connection with
the instructional tasting event.
21.Prohibits a manufacturer, wholesaler, or designated
representative from entering into a collusive scheme
with a licenseholder to exclude competitors. Doing so
would result in suspension of the retailer's license and
suspension of the privilege of the manufacturer,
wholesaler, or designated representative to conducting
tastings for six months to one year.
Background
According to the Department of ABC analysis, currently,
on-sale beer and wine public premises licenses (Type 42)
are regularly applied for and issued to locations adjacent
to and operating in conjunction with off-sale licensed
premises (Type 20 or Type 21). Nearly all of these
existing dual-licensed operations are for the purpose of
beer and/or wine tasting as a small portion of the larger
off-sale business. The number of Type 42 licenses allowed
to be issued by ABC is not limited by statute, making the
license relatively inexpensive to obtain ($300 application
and $261 annual renewal fee). Type 20/42 and 21/42
combination licenses have, for the most part, met the needs
of suppliers and retailers in terms of on-site consumer
tasting of beer and wine products.
The above-described license combination, however, requires
two separate licensed premises and does not allow for the
service or tasting of distilled spirits products. If an
off-sale general retail licensee (Type 21) wishes to
conduct or allow tastings of distilled spirits, he or she
must obtain an on-sale general public premises license
(Type 48). However, current law (Business and Professions
Code section 23793) generally prohibits the original
issuance of such licenses. In some counties, on-sale
general licenses are sold between parties for as much as
$250,000.
Throughout the state, there are approximately 221 on-sale
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beer and wine public premises (Type 42) licenses issued at
locations adjacent to and in conjunction with off-sale
general (Type 21) licensed premises. And, there are
approximately 202 on-sale beer and wine public premises
(Type 42) licenses issued at locations adjacent to and in
conjunction with off-sale beer and wine (Type 20) public
premises. Nearly all of these 423 dual-licensed businesses
exist for the purpose of beer and wine tasting as a portion
of the larger off-sale operations. Although applications
for such businesses are occasionally protested by local
citizens or law enforcement officials, the protests
generally center on issues related to the off-sale
operation. The Department rarely receives complaints
related to the on-sale aspect of dual-licensed operations.
Over the past two fiscal years (08-09 and 09-10) ABC has
only filed 22 accusations on dual-licensed operations, and
of those only two accusations were for violations
associated with the on- sale licenses.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
Administration/ ---potentially $300
annually Special*
enforcement offset by fee revenue---
* Alcoholic Beverage Control Fund
TSM:mw 8/4/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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