BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 816|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 816
Author: Hall (D)
Amended: 6/12/14 in Senate
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 11-0, 6/11/13
AYES: Wright, Nielsen, Berryhill, Calderon, Cannella, Correa,
De Le�n, Galgiani, Hernandez, Lieu, Padilla
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-0, 5/9/13 (Consent) - See last page for vote
SUBJECT : Alcoholic beverages
SOURCE : Author
DIGEST : This bill merges two similar tied-house exceptions
(one pertaining to on-sale retailers the other to off-sale
retailers) within the Alcoholic Beverage Control Act (ABC Act)
which authorizes the dissemination of information regarding the
retail availability of products by alcoholic beverage producers,
distributors or importers in response to direct requests from
consumers; and includes "cider or perry," as specified, within
the definition of beverage "product."
Senate Floor Amendments of 6/12/14 strike the language that
modified the definition of "product" relative to brand transfer
and distribution rights for beer brands by including "cider and
perry" and instead, clarify that these brewer designated
CONTINUED
AB 816
Page
2
products apply to cider and perry brands that a beer
manufacturer has designated a beer wholesaler to distribute in a
specific territory.
Senate Floor Amendments of 3/6/14 add clarity to an existing
body of law within the ABC Act pertaining to brand transfer and
distribution rights by including "cider and perry" within the
definition of "product," and make other technical and code
maintenance changes to this body of law.
ANALYSIS :
Existing law:
1.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.
2.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). This is known as the "tied-house" law.
3.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.
4.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.
CONTINUED
AB 816
Page
3
5.Requires each manufacturer, importer, and wholesaler of beer
to file, and thereafter maintain on file with ABC, a schedule
of selling prices charged for beer sold and distributed to
customers in California, as specified. These provisions are
also applicable to certain sales of beer made under contract
and existing law defines "contract beer manufacturer" and
"beer manufacturer" for these purposes.
6.Establishes, within the ABC Act, a framework to determine fair
market value to be paid to an existing beer wholesaler by a
successor beer wholesaler when distribution rights to a brand
are cancelled and that right is granted to a successor beer
wholesaler.
7.Grants beer manufacturers producing more than 60,000 barrels
of beer per year the privilege of also manufacturing "cider or
perry" at their licensed premises and to sell the product to
any licensee authorized to sell wine.
This bill:
1.Merges two similar tied-house exceptions (one pertaining to
"on-sale" retailers the other to "off-sale" retailers) within
the ABC Act which authorizes the dissemination of information
regarding the retail availability of products by alcoholic
beverage producers, distributors or importers in response to
direct requests from consumers.
2.Includes any brand(s) of "cider or perry" that a beer
manufacturer has designated a beer wholesaler to distribute in
a specific territory, within the definition of beverage
"product" covered under brand transfer and distribution rights
provisions of the ABC Act.
Background
The original policy rationale for tied-house law was to (1)
promote the state's interest in an orderly market; (2) prohibit
the vertical integration and dominance by a single producer in
the marketplace; (3) prohibit commercial bribery and protect the
public from predatory marketing practices; and (4) 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
CONTINUED
AB 816
Page
4
another type of licensee within the "three-tier" system.
Cider and perry . In California, cider and perry are considered
wine because they are fermented from fruit (apples or pears) and
thus can only be manufactured by a holder of a Type 02 ABC
license (Winegrower), except as specified.
According to industry studies, the volume sales of cider in the
U.S. have grown tremendously over the past 3-4 years and have
also resulted in greater cider product offerings by various beer
manufacturers such as Anheuser-Busch, MillerCoors, Heineken and
Boston Beer.
Related Legislation
AB 779 (Bocanegra, Chapter 379, Statutes of 2013) essentially
simplified the licensure process for certain alcoholic beverage
manufacturers by allowing the holder of a beer manufacturers
license (Type 01) to also produce cider and perry.
Specifically, AB 779 authorized licensed beer manufacturers that
produce more than 60,000 barrels of beer a year to also
manufacture cider or perry at their licensed premises of
production and to sell that product to any licensee authorized
to sell wine.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 6/12/14)
California Beer and Beverage Distributors
OPPOSITION : (Verified 6/12/14)
Wine Institute
ARGUMENTS IN SUPPORT : According to the author's office,
suppliers often list on a Facebook fan page or Web site, the
different restaurants where a consumer may purchase their
products. Thus, given the development of new social media,
distributors are utilizing the various social media mediums as a
marketing tool to inform consumers about additional retail
locations where a product can be purchased. This bill is simply
CONTINUED
AB 816
Page
5
intended to clean-up existing ABC statutes by consolidating into
a single statute the "on-sale" and "off-sale" provisions of law
which authorize manufacturers and distributors, in response to a
direct inquiry from a consumer, to provide information relative
to where their product is available for purchase.
The California Beer and Beverage Distributors note that beer
distributors are currently being asked to invest, promote and
build brands in the cider category of "products" through their
distribution agreements with beer producers. Thus, proponents
believe that brewer designated cider products should be treated
the same as beer for purposes of California's brand transfer law
to encourage growth, investment and fairness in the category.
Proponents emphasize that "the proposed amendment simply extends
the same efficient brand transfer process and market-based
compensation principles of the state's brand transfer law to the
fast-growing lines of cider and perry that are widely recognized
by consumers and the industry as part of the beer category."
ARGUMENTS IN OPPOSITION : The Wine Institute argues that the
change in definition expands the beer wholesalers' monopoly
protection law to include wine products made from apples and
pears - both California law and federal law define cider and
perry as "wine" in light of the fact that both products are
fermented from fruit. They believe this bill is an unwelcome
encroachment into the wine sector and state, "there is nothing
prohibiting wineries or cideries from freely contracting with
beer wholesalers to guarantee beer wholesalers the monopoly
protection they seek to impose statutorily."
ASSEMBLY FLOOR : 75-0, 5/9/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Ch�vez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,
Grove, Hagman, Hall, Harkey, Roger Hern�ndez, Jones,
Jones-Sawyer, Levine, Linder, Lowenthal, Maienschein, Mansoor,
Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel
P�rez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone,
Ting, Torres, Wagner, Weber, Wieckowski, Wilk, Williams,
Yamada, John A. P�rez
CONTINUED
AB 816
Page
6
NO VOTE RECORDED: Donnelly, Holden, Logue, Waldron, Vacancy
MW:nl 6/13/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED