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, 2010) |SENATE: |27-6 |(August 18, 2010) |
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(vote not relevant)
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|COMMITTEE VOTE: |18-0 |(August 26, 2010) |RECOMMENDATION: |concur |
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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.
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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
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).
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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 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.
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20) Prohibits the manufacturer, wholesaler, or designated
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 not
authorized to provide any free samples of alcoholic beverages.
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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.
8)Defines an "on-sale" license as authorizing the sale of all types
of alcoholic beverages: namely, beer, wine and distilled spirits,
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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
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.
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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 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
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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 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
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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 furnishing
tastings of alcoholic beverages to consumers subject to certain
limitations. (Died on Senate Appropriations Suspense File)
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
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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.
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: 0006783