BILL ANALYSIS
AB 605
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 605 (Portantino)
As Amended August 2, 2010
Majority vote
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|ASSEMBLY: | |(May 21, 2009) |SENATE: |27-6 |(August 18, |
| | | | | |2010) |
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(vote not relevant)
Original Committee Reference: G.O.
SUMMARY : Creates a new type of license (instructional tasting
license) that allows the tasting of beer, wine, and distilled
spirits at off-sale licensed premises. Specifically this bill :
1)Authorizes the Department of Alcoholic Beverage Control (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 license holder to prominently display signage
prohibiting minors from entering the instructional tasting
event area.
5)Prohibits a license holder 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 Consumer Price Index adjustments, and
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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% 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 and requires local
governing bodies to determine public convenience or necessity
when there is undue concentration. However, it expressly
authorizes ABC to deny the issuance of an instructional
tasting license in an area of undue concentration.
10) Specifies that existing laws that require the posting of
notices and authorizes protests and hearings 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 eight 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
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allowing a manufacturer, wholesaler, or designated
representative from conducting a tasting 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 license holder to advertise an instructional
tasting event at the license holder'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
license holder 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.
EXISTING LAW :
1)Establishes 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.
2)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: a) no more than one-fourth ounce of
distilled spirits is offered in one tasting; b) no more than
one ounce of wine is offered in one tasting; and, c) 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.
3)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.
4)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
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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.
5)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.
6)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.
7)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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8)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
FISCAL EFFECT : According to the Senate Appropriations
Committee, potentially $300,000 in special enforcement to
be offset by fee revenue into the ABC Fund.
COMMENTS :
Purpose of the bill : According to the author, 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
country allow off-sale tastings for beer.
The author 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
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 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 a 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 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
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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 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 distilled spirits shall
not exceed one-fourth of one ounce and a single tasting of wine
shall not exceed one ounce. A beer tasting shall be limited to
not more than the tasting of eight ounces of beer per person per
day. 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.
The author 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.
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
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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.
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
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 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
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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. ABC states they rarely receive 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.
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. 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."
Prior 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
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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 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 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.
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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.
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
FN: 0006265