BILL ANALYSIS
Bill No: SB
1480
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 1480 Author: Committee on Governmental Organization
As Introduced: March 8, 2010
Hearing Date: April 13, 2010
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages
DESCRIPTION
SB 1480 makes a minor clarifying change, as well as code
maintenance changes, to existing provisions of the
Alcoholic Beverage Control (ABC) Act in order to reduce
paperwork requirements of the Department of ABC.
EXISTING LAW
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.
Existing law, known as the "tied-house" law, separates the
alcoholic beverage industry into three component parts, or
tiers, of manufacturer (including breweries, wineries and
distilleries), wholesaler, and retailer (both on-sale and
off-sale).
Tied house refers to a practice in this country prior to
Prohibition and still occurring in England today where a
bar or public house, from whence comes the "house" of tied
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house, is tied to the products of a particular
manufacturer, either because the manufacturer owns the
house, or the house is contractually obligated to carry
only a particular manufacturer's products.
The original policy rationale for this body of law was to:
(a) promote the state's interest in an orderly market; (b)
prohibit the vertical integration and dominance by a single
producer in the marketplace; (c) prohibit commercial
bribery and protect the public from predatory marketing
practices; and, (d) discourage and/or prevent the
intemperate use of alcoholic beverages. Generally, other
than exceptions 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.
BACKGROUND
Current law (Business & Professions Code Section 25503.15)
provides as an exception to tied-house restrictions that a
winegrower who deals in wine only may hold an ownership
interest in any on-sale license, provided that the
winegrower has entered into an "undertaking" approved by
the Department of ABC not to sell or furnish his or her
wine to the holder of the license for as long as the
winegrower's ownership interest in the license continues,
or to enter into any collusive scheme to unfairly sell or
promote the wine of another winegrower in his or her retail
businesses in return for the same treatment in the retail
businesses of the other winegrower.
Current law also provides that a licensed winegrower may
hold an ownership interest in an on-sale license, if
certain conditions are met, including that the licensed
on-sale premises are operated as a bona fide eating place
or a bona fide bed and breakfast inn; any alcoholic
beverage sold and served at the on-sale licensed premises
is purchased only from a California wholesale licensee,
except as specified; the winegrower and any officer,
director, or agent of that person, whether individually or
in the aggregate, do not sell and serve wine products
produced or bottled under any brand or trade name owned by
that winegrower through more than 2 on-sale licensed
premises in which any of them holds an ownership interest;
and, in the case of a bona fide public eating place, wine
produced by the winegrower does not exceed a specified
percentage of the wine items offered for sale in the
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on-sale premises.
Purpose of SB 1480: This proposal would retain the
requirement that the winegrower meet the specified
conditions regarding the sale or furnishing of wine under
the circumstances described above, but would eliminate the
requirement that statements describing these conditions be
made pursuant to an "undertaking approved by the Department
of ABC." Additionally, this proposal would make other
minor technical changes to this section of law. In
summary, these changes are intended to streamline, simplify
and provide for a more conforming tied-house exception
without materially impacting its effect.
PRIOR/RELATED LEGISLATION
SB 359 (Rainey) Chapter 529, Statutes of 1997. Modified
an existing tied-house exception that permits a licensed
winegrower to hold an ownership interest in an on-sale
license, if certain conditions are met, to include a
winegrower who has a wholesale license to sell wine only.
SB 1376 (Thompson) Chapter 318, Statutes of 1994. Among
other things, created a tied-house exception applicable to
winegrowers owning restaurants or bed and breakfast inns,
provided certain conditions are met.
SUPPORT: None on file as of April 9, 2010
OPPOSE: None on file as of April 9, 2010
FISCAL COMMITTEE: Senate Appropriations Committee