BILL ANALYSIS �
Bill No: AB
2349
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
AB 2349 Author: Nestande
As Amended: June 19, 2012
Hearing Date: June 26, 2012
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages: tied-house restrictions: advertising
DESCRIPTION
AB 2349 makes several modifications to existing tied-house
restrictions of the Alcoholic Beverage Control (ABC) Act
that allow suppliers of wine, beer or spirits to respond to
consumer questions about where products are available at
on-sale retail establishments. Specifically, this measure:
1. Provides that the listing of names, addresses,
telephone numbers, or email addresses in
"other forms of electronic media" do not constitute a
thing of value.
2. Expands a manufacturer's ability to inform consumers
about all on-sale retail
locations, not just those operating as bona fide
eating places, by removing the
requirement that the unaffiliated on-sale retailer
operate and be licensed as a bona fide
public eating place.
3. Repeals a duplicative tied-house statutory provision
pertaining to the listing of on-sale
retailers as not a thing of value.
EXISTING LAW
AB 2349 (Nestande) continued
Page 2
Existing law establishes the Department of 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
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.
Existing law also provides that no licensee shall, directly
or indirectly, give any premium, gift, free goods, or other
thing of value in connection with the sale, distribution,
or sale and distribution of alcoholic beverages, and no
retailer shall, directly or indirectly, receive any
premium, gift, free goods or other thing of value from a
supplier of alcoholic beverages, except as authorized by
the Department of ABC. For purposes of these provisions,
the listing of the names, addresses, telephone numbers or
email addresses, or both, or Internet Web site addresses,
of 2 or more unaffiliated on-sale retailers selling beer,
wine, or distilled spirits, and operating and licensed as
bona fide public eating places selling the beer, wine, or
AB 2349 (Nestande) continued
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distilled spirits produced, distributed, or imported by a
nonretail industry member in response to a direct inquiry
from a consumer, as specified, does not constitute a thing
of value or prohibited inducement to the listed on-sale
retailer, if specified conditions are met.
Existing law 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
containers.
BACKGROUND
Purpose of AB 2349: The author's office notes that current
ABC law prohibits a supplier (manufacturer and distributor)
from giving or lending money or anything of value to anyone
who operates, owns or maintains any off-sale licensed
premise. However, these licensed entities may list or
publish, in response to a direct inquiry from a consumer,
the name, address, telephone numbers, or e-mail, web
address of two or more retailers who sell their products so
long as the retailer operates and is licensed as a bona
fide public eating place (restaurant).
The author's office states that this measure would revise
the direct inquiry provisions in current law to remove the
requirement that the unaffiliated on-sale retailer operates
and is licensed as a bona fide public eating place. This
change is intended to permit a supplier to list or publish
the address, telephone number, web address, etc. of all
on-sale retail locations in response to a direct inquiry
from a consumer.
The author's office contends that suppliers often list on a
Facebook fan page or website, the different restaurants
where a consumer may purchase their product. Thus, given
the development of new social media, a supplier should be
allowed to utilize the various social media mediums as a
marketing tool to educate consumers about additional retail
locations where a product can be purchased, not just at
restaurants.
Arguments in Support: Writing in support, the California
AB 2349 (Nestande) continued
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Beer and Beverage Distributors (CBBD) cites a recent
decision of the U.S. District Court for the Western
District of Texas, Austin Division, in which the court
ruled unconstitutional a tied-house provision of the Texas
Alcoholic Beverage Control Act prohibiting brewers and beer
distributors from listing retailers that sell their beers.
In light of the ruling, the Texas ABC announced that
manufacturers and distributors can list the retailers who
carry their products so long as there is no financial
remuneration, incentive, inducement, or compensation
between a member of one tier of the industry and a member
of another tier.
CBBD points out that existing California law permits
manufacturers and distributors to list two or more
unaffiliated off-sale and on-sale restaurant licensees that
carry their beers, but prohibits listing on-sale bars that
carry their beers - this measure would correct that
inequity, level the playing field for all retailers, and
bring California's law into compliance with the most
recent, relevant federal court decision on this issue.
CBBD emphasizes that California's current prohibitions
related to payments for advertising or any other financial
remuneration, incentive, inducement or other compensation
between suppliers and retailers remain unaffected by this
bill.
Also, writing in support, the Family Winemakers of
California notes that "by-the-glass wine programs have
dramatically expanded over the past few years due to the
growth in wine bars and economic conditions."
Additionally, Family Winemakers states "this bill will
allow a winegrower to inform consumers about additional
retail locations where his/her wine can be purchased, not
just at restaurants. Furthermore, the impact of AB 2349
will be broader brand awareness for small producers in a
highly competitive market that could improve economic
viability."
Staff Comment: The term "other electronic media" might be
a bit confusing as a type of contact information to be
listed. The author may wish to consider amending the term
as follows to add clarity: " contact information from other
electronic media"
PRIOR/RELATED LEGISLATION
AB 2349 (Nestande) continued
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SB 1423 (Chesbro) Chapter 205, Statutes of 2000.
Authorized wineries and brandy manufacturers to advertise
the name and location of restaurants that sell their
products.
SB 1233 (Chesbro) Chapter 666, Statutes of 1999. Allowed
for the limited dissemination of information regarding the
off-sale availability of alcoholic beverages.
SUPPORT: As of June 22, 2012:
California Beer and Beverage Distributors
Family Winemakers of California
Heimark Distributing LLC
OPPOSE: None on file as of June 22, 2012.
FISCAL COMMITTEE: Senate Appropriations Committee