BILL ANALYSIS �
-----------------------------------------------------------------------
|Hearing Date:May 2, 2011 |Bill No:SB |
| |823 |
-----------------------------------------------------------------------
SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 823Author:Corbett
As Amended:April 14, 2011Fiscal: Yes
SUBJECT: Consumer protections: Made in California Program.
SUMMARY: Creates the Made in California program within the Governor's
Office of Economic Development (GOED) for the purpose of encouraging
consumer product awareness and to foster the purchases of products
manufactured in California. Makes it an unfair method of competition
or business practice to use the designated "Made in California" label
without participating in the Made in California Program.
NOTE : This measure was heard in the Senate Committee on Judiciary on
April 26, 2011, and passed out of the Committee by a vote of 3-2.
Existing law:
1)Prohibits unfair methods of competition, acts or practices by any
person which either results in or is intended to result in the sale
or lease of goods or services to any consumer. Existing law
enumerates several methods of unfair competition, acts or practices.
(Civil Code � 1770)
2)Provides that any consumer who suffers damage as a result of a
practice declared to be unlawful under the Consumer Legal Remedies
Act (CLRA) may bring an action against that person to recover
damages, as specified. Allows for a class action suit to be filed
on behalf of a class of consumers adversely affected by an unfair
method of competition, act or practice. (Civil Code �� 1780 and
1781)
3)Provides for California to enter into marketing agreements and to
create the "Buy California Program." (Food & Agriculture Code �
SB 823
Page 2
58750.)
4)Establishes the Office of the Small Business Advocate within the
Governor's Office of Planning and Research for the purpose of
supporting small business development in the State. (Government Code
� 65054)
This bill:
1)Creates a "Made in California Program" within GOED as a public and
private collaboration. States that the purpose of the program is to
encourage consumer product awareness and to foster purchases of
high-quality products manufactured in this state. Allows GOED to
develop and adopt standards that permit a company to represent that
a product is made in California.
2)Authorizes GOED to issue and make effective marketing agreements,
including, but not limited to, issuance of a Made in California
label. Allows California companies to participate in the program on
a voluntary basis.
3)Specifies that representing that a product is made in California
when it does not comply with the standards adopted by GOED would be
an unfair or deceptive act or practice under the CLRA.
4)Outlines that the standards adopted by GOED may include:
a) A requirement that the company primarily designs and
manufactures a physical product, rather than a digital product or
a service.
b) A requirement that the company manufactures one or more
products in California.
c) A requirement that the company has a California-based
workforce and has the desire to grow that workforce over time.
5)Clarifies that provisions relating to the CLRA would only be
operative after GOED has adopted standards for the Made in
California program.
FISCAL EFFECT: Unknown. Legislative Counsel has keyed this bill
"fiscal."
COMMENTS:
SB 823
Page 3
1. Purpose. This bill is sponsored by the California Small Business
Association (CSBA). According to the Author, California's
unemployment rate has increased to 12.4 percent, one of the highest
rates in the nation. Nonfarm payroll jobs decrease by 33,500 each
month, according to the California Employment Development
Department. Unemployment is not only a reaction to the financial
crisis, but is also a symptom. The Author asserts that our economy
cannot be sustainable without products made in California, and our
consumer market will continue to be sluggish until we increase the
state's employment rate. The Author adds that our main source of
employment in the state continues to be local and small companies.
California is known worldwide for its products, so the "Made in
California" label can help add value to products made in the Golden
State. Because of the high cost of living in California, companies
that choose to manufacture products in California do so at a higher
cost than they might pay in another state or on foreign soil, and
have made a conscious decision to embrace local manufacturing as a
vital component of their business strategy. The Author believes
that this bill would help these businesses in their marketing
efforts.
2. Background. According to Small Business California, there are
approximately 3.4 million small businesses in California. This
number includes sole proprietors which account for approximately
2.3 million, leaving 1.4 million small businesses employing 100
employees or less in California. Small businesses in California
make up 50 percent of the employment in California as well as 50
percent of the California economy. On a national level two thirds
of new jobs come from small businesses.
In 2001, the "Buy California Program" was created within the
Department of Food and Agriculture for the purpose of "encouraging
consumer nutritional and food awareness and to foster purchases of
high-quality California agricultural products." The "California
Grown" label was created for this program, which gave farmers an
opportunity to participate in the marketing campaign promoting
California products. In 2010, a private California-based marketing
and management consulting firm, of the California Grown program
released a study. The study found that the specialty crops in the
California Grown program create $15.9 billion in economic output
annually. The study also found that more than 137,435 jobs are
created as a result of the program. Further, the study found that
nearly $567.7 million in indirect business taxes, not including
income taxes are generated from specialty agricultural products in
SB 823
Page 4
California. In addition to the vast agricultural products grown in
California, several other products are made and produced in this
state, many by small businesses.
In order to keep business competition fair and to protect consumers
from deceptive practices, the Consumer Legal Remedies Act (CLRA)
(Civil Code Section 1750 et seq.) was created in 1970 with "the
underlying purpose . . . as proclaimed in the statutory scheme
itself . . . 'to protect consumers against unfair and deceptive
business practices and to provide efficient and economical
procedures to secure such protection.'" (Kramer v. Intuit Inc.,
(2004) 121 Cal.App.4th 574, 579.) The CLRA also authorizes a
consumer to bring a civil action for damages resulting from
violations of the CLRA.
3. Economic Development in California. California has not had a
comprehensive, streamlined effort to coordinate and promote
economic development since the disbanding of the Technology, Trade
and Commerce Agency (TTCA) in 2003. This agency was created in
1992 and served as the primary economic development entity for
promoting the establishment, retention, and expansion of business,
employment, infrastructure, and international trade in California.
Instead of a centralized entity, currently all of California's
efforts and programs related to economic development are dispersed
in more than 10 advisory panels, boards, commissions, allocation
committees and financing authorities which are all housed under
various agencies or offices. The state has a fragmented approach
to economic development which some argue hinders the state's
ability to facilitate economic growth in the most effective manner.
4. Governor's Office of Economic Development (GOED). On February 25,
2010, the Little Hoover Commission (Little Hoover) released a
report titled, Making Up for Lost Ground: Creating a Governor's
Office of Economic Development , which catalyzed the recent creation
of GOED through Executive Order S-05-10 signed by Governor
Schwarzenegger on April 8, 2010. The report asserts that after the
dismantling of the Technology, Trade and Commerce Agency (TTCA) in
2003, many economic development programs were moved to either two
distinct agencies, Business, Transportation and Housing (BTH) and
Labor and Workforce Development (LWD), while the rest were housed
in less obvious locations.
The report asserted that the state has an urgent need to define a
strategy for the economic growth and then build the appropriate
government structure to meet that vision. The report stressed that
instead of a traditional, top-down bureaucracy, the state needs a
SB 823
Page 5
more agile entity placed within the Governor's Office that can
function as a convener and coordinator, rather than a provider of
economic development services. GOED would serve as the visible
national and international point of contact for existing businesses
as well as for local, state, and federal economic development
leaders. According to the report, the essential functions should
include:
Developing a vision for economic growth and a strategic
plan that leverages the state's economic development programs
with local, regional, federal and private efforts.
Designating a visible, point of contact and liaison for
information about business growth opportunities, economic
development assistance, and navigating permitting issues and
regulations.
Marketing the state's economic development programs and
business opportunities.
The report concluded that in the short term, the state must improve
its economic development operations to harness and match
California's existing strengths with a long-term economic
development strategy.
The following legislative attempts have been made to codify GOED:
a) AB 29 (John A. Perez, 2011), the Economic Revitalization Act,
establishes GOED in statute, under the control of a Director,
appointed by the Governor subject to confirmation by the Senate
Committee on Rules, to serve as the lead entity for economic
strategy and the marketing of California on issues relating to
business development, private sector investment, and economic
growth. The measure is set for hearing in the Assembly Committee
on Jobs, Economic Development and the Economy on May 3, 2011.
b) AB 2734 (John A. Perez, 2010) also established GOED in statute
but was vetoed by the Governor. In his veto message, Governor
Schwarzenegger indicated that requiring confirmation of the GOED
Director by the Senate Committee on Rules served as rationale for
the veto.
1. Small Business Regulatory Reform Act of 2000. California has
previously implemented programs to improve state services to small
businesses. One recent program was created by the Small Business
SB 823
Page 6
Regulatory Reform Act of 2000. It established a Small Business
Advocate in the Governor's Office of Planning and Research (OPR)
and required each state agency to designate at least one person to
serve as a small business liaison.
2. Related Legislation. AB 1233 (V. Manuel Perez) modernizes
California's economic development activities and promotes the
state's competitiveness by requiring an integrated economic and
workforce development strategy consistent with the needs of all
Californians. The bill is set for hearing in the Assembly
Committee on Jobs, Economic Development and the Economy on May 3,
2011.
SB 1259 (DeSaulnier, 2010) would have created the Economic
Development and Job Creation Agency and require the appointed
Secretary of the Agency to develop a reorganization plan, propose a
structure for the agency, and perform specified duties relating to
economic development and job creation. The bill was held under
submission by the Senate Committee on Appropriations.
AB 1558 (Perez, 2009/2010) would have reorganized the state's
economic development efforts by eliminating the duties of the
Secretary of Business, Transportation and Housing and transfer
modified duties to a Director and Executive Director of a renamed
Economic and Employment Development Department, which would succeed
to some of the duties of the existing Employment Development
Department. This bill was held under submission by the Senate
Committee on Appropriations.
3. Author's Amendments. The Author's intent is to allow companies who
may currently use the phrase "Made in California" to continue to be
able to use that phrase, even without participating in the program
as long as they do not use the label sanctioned by the office.
The Author accepted the following amendment in the Senate Committee
on Judiciary to achieve that goal and will it be made in this
Committee:
On Page 5, line 12 before the comma insert "by using the Made in
California label created pursuant to Section 13985 (d) of the
Government Code".
SUPPORT AND OPPOSITION:
Support:
SB 823
Page 7
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation AFL-CIO
California Official Court Reporters
California Small Business Association (Sponsor)
California State Council of the Service Employees International Union
California Teamsters Public Affairs Council
Council for Responsible Genetics
Engineer and Scientists of California
International Longshore and Warehouse Union
Professional and Technical Engineers, Local 21
Small Business California
Tesla Motors, Inc.
UNITE HERE!
Utility Workers Union of America, Local 132
Opposition:
None on file as of April 26, 2011.
Consultant:Sarah Mason