BILL ANALYSIS �
AB 252
Page 1
Date of Hearing: April 13, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 252 (Calderon) - As Introduced: February 3, 2011
Policy Committee: Governmental
Organization Vote: 17 - 0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill expands the Alcoholic Beverage Control Act (Act) by
allowing a distilled spirits manufacturer's agent to provide
their product, food, and entertainment free of charge to
consumers during promotional events.
FISCAL EFFECT
There are currently 16 licensees who would be able to take
advantage of this expansion. Costs associated with including
them in this tied-house exception would likely be minor and
absorbable within existing resources.
COMMENTS
1)Rationale . The intent of this legislation is to expand an
existing tied-house exception which allows alcoholic beverage
manufacturers to hold private promotional events where they
provide food, entertainment and free alcohol to the guests.
This bill would add distilled spirits manufacturer's agents to
the list of licensees who are able to take advantage of these
promotional events.
2)Background . Current law permits a manufacturer, winegrower,
rectifier, or distiller, or any authorized agent of that
person to provide, free of charge, entertainment, food, and
distilled spirits, wine, or nonalcoholic beverages to
consumers over 21 years of age at an invitation-only event in
order to market and promote their products. That tied house
exception is scheduled to sunset January 1, 2014.
AB 252
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3)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. The policy
established under the De Leon legislation represented a
significant departure from other existing tied-house
exceptions. In fact, that exception is the only one 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 at no charge 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.
4)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.
5)ABC Staffing . There are approximately 82,000 permanently
licensed establishments in California, with an average of
12,000 applications for license transfers and new businesses
made each year. On average, an additional 33,000 temporary
"special event" licenses are issued to non-profit and
charitable organizations for their events annually. Although
the majority of these businesses/venues are run in an orderly
AB 252
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fashion, some present significant public safety problems.
As of March 2011, ABC is authorized 142 sworn investigators to
conduct its enforcement operations to police the activities at
these 115,000 licensed venues. Currently, there are 45 vacant
investigator positions which have not been filled due to
several factors, including hiring freeze restrictions in place
since July 2010. If ABC were able to maintain a zero percent
vacancy rate, each investigator would be responsible for
approximately 810 licensed venues.
6)Related Legislation . AB 1323 (Walters) in 2010, was similar to
this bill but would have allowed the tied-house exception for
a larger number of licensees. That bill included: (a) a
distilled spirits manufacturer's agent; (b) a holder of a
distilled spirits importer's general license who does not also
hold a distilled spirits wholesaler's license; (c) a holder of
a distilled spirits rectifier's general license; and, (d) a
holder of an out-of-state distilled spirits shipper's
certificate. That bill was held on this committee's suspense
file.
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, 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.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081