BILL ANALYSIS
SB 1323
Page 1
Date of Hearing: August 4, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1323 (Walters) - As Amended: April 27, 2010
Policy Committee: Governmental
Organization Vote: 21 - 0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill expands a current tied-house exception in current law
which authorizes certain Alcoholic Beverage Control Act
licensees to provide free alcohol to consumers during
invitation-only promotional events. Specifically, this bill
provides this exception to:
1)Distilled spirits manufacturers' agents
2)Holders of a distilled spirits importer's general license
3)Holders of a distilled spirits rectifier's general license
4)Holders of an out-of-state distilled spirit's shipper's
certificate
FISCAL EFFECT
This bill would give 500 additional licensees the authority to
host promotional events. If half of the licensees hold one
event per year as a result of this expansion and 5% result in a
Department of Alcoholic Beverage Control (ABC) investigation and
administrative hearing, annual costs could exceed $180,000 per
year (ABC fund), based on actual costs provided from a prior
investigation of a manufacturer who illegally hosted a
promotional event, and the average cost of an ABC investigation
and administrative hearing. Those costs would be partially
offset by revenue generated by the $200 event permit fee.
COMMENTS
1)Rationale . The intent of this legislation is to expand an
existing tied-house exception which allows alcohol beverage
manufacturers to hold private promotional events where they
SB 1323
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provide food, entertainment and free alcohol to the guests.
2)Continuing Policy Concerns . As with the original implementing
legislation, AB 2293 (De Leon; Chapter 638, Statutes of 2008),
committee staff has concerns about allowing individuals who
have liquor licenses to provide unlimited amounts of free
alcohol in order to promote their products. This policy
represents a significant departure from existing tied-house
exceptions. In fact, this is the only exception in the
Alcoholic Beverage Control Act that allows an unlimited amount
of alcohol to be given away free to consumers. Wine and
distilled spirits tastings limit the amount of alcohol that
can be provided for free to consumers. Under all other
circumstances, no more than one-quarter ounce of distilled
spirits may be offered at one tasting, no more than one ounce
of wine may be offered, and no more than three tastings may be
offered to an individual in one day. The committee may wish to
consider whether or not it is good public policy to further
expand this existing tied-house exception.
3)Tied-house law . The tied-house laws, developed after
prohibition, sought to break up and separate the liquor
industry by categorizing and regulating each aspect of the
business. It is essentially divided into manufacturing,
wholesaling, and retailing. Each category is independent of
the other with specific laws ensuring that the relationship
between manufacturers, distributors and retailers remains
distinct. 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.
The current Tied House laws are specific about who can sell
alcoholic beverage products to whom. Generally, manufacturers
must sell their products through wholesalers so that there is
no direct contact between the manufacturer and the retailer or
the consumer.
4)Related Legislation . AB 2293 (De Leon; Chapter 638, Statutes
of 2008), authorized a manufacturer, winegrower, rectifier, or
distiller or any authorized agent of that person to provide,
free of charge, entertainment, food, and distilled spirits,
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wine, or nonalcoholic beverages to consumers at an
invitation-only event in connection with the sale or
distribution of wine or distilled spirits. Several conditions
were placed on these events including the limitation of 400
attendees per event, a prohibition of persons under age 21,
and a maximum duration of four hours. The authorization will
sunset on January 1, 2014.
In 2008, AB 2613 (Plescia), authorized winegrowers, distilled
spirits manufacturers, as well as distillers, importers and
shippers of these beverages to offer tastings of wine or
distilled spirits at off-sale retail licensed premises retail
(grocery store, large warehouse stores, and liquor stores) in
a segregated area. It limited tastings to one-quarter ounce of
distilled spirits and one ounce of wine, and limited tastings
to three per person each day. That bill passed the Assembly
Governmental Organization Committee, but the author decided
not to pursue the legislation.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081