BILL ANALYSIS �
Bill No: AB
1928
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Lou Correa, Chair
2013-2014 Regular Session
Staff Analysis
AB 1928 Author: Bocanegra
As Amended: June 4, 2014
Hearing Date: June 10, 2014
Consultant: Art Terzakis
SUBJECT
Alcoholic Beverages: coupons: beer
DESCRIPTION
AB 1928 prohibits a beer manufacturer or a beer and wine
wholesaler from offering, promoting, or redeeming coupons,
as defined, and also prohibits an alcoholic beverage retail
licensee from accepting or redeeming any type of coupon
that is funded, produced or promoted by a beer manufacturer
or beer and wine wholesaler. Specifically, this measure:
1)Stipulates that a beer manufacturer or a beer and wine
wholesaler shall not offer, fund, produce, sponsor,
promote, furnish, or redeem any type of coupon.
2)Prohibits a licensee authorized to sell alcoholic
beverages at retail from accepting, redeeming,
possessing, or utilizing any type of coupon that is
funded, produced, sponsored, promoted, or furnished by a
beer manufacturer or beer and wine wholesaler.
3)Defines "beer manufacturer" to mean a holder of a beer
manufacturer's license, a holder of an out-of-state beer
manufacturer's certificate, a holder of a beer and wine
importer's general license when selling beer, malt
beverages, cider, or perry, or a winegrower that is a
wholly owned subsidiary of a beer manufacturer.
4)Defines "cider" and "perry" as set forth in the Code of
Federal Regulations.
5)Defines "coupon" to mean any method by which a consumer
AB 1928 (Bocanegra) continued
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receives an instant discount at the time of purchase that
is funded, produced, sponsored, promoted, or furnished,
either directly or indirectly, by a beer manufacturer or
beer and wine wholesaler, including, but not limited to,
a paper coupon, a digital coupon, an instant redeemable
coupon (IRC), or an electronic coupon commonly referred
to as a scan or scanback.
6)Provides that the above prohibition will not apply to:
a) A mail-in rebate by which the consumer purchases an
item and submits required information in order to
receive a rebate or discount from the beer
manufacturer.
b) A coupon that is offered and funded by a
winegrower, a wine rectifier, a wine blender, a beer
and wine wholesaler, a beer and wine importer, a beer
and wine importer general, or a wine broker that
offers a discount on the purchase of a wine product if
beer, malt beverages, cider, or perry are not
advertised in connection with the coupon.
c) A coupon that is offered and funded by a distilled
spirits producer, importer, or wholesaler that
offers a discount on the purchase of a distilled
spirits product if beer, malt beverages, cider, or
perry are not advertised in connection with the
coupon.
d) A discount that is offered and funded by a beer
manufacturer on the purchase of beer, malt beverages,
cider, or perry at the licensed premises of production
or other licensed premises owned and operated by the
beer manufacturer.
EXISTING LAW
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 for this purpose.
AB 1928 (Bocanegra) continued
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Existing law, known as the "tied-house" law, separates the
alcoholic beverage industry into three component parts of
manufacturer, wholesaler, and retailer. 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.
Existing law prohibits any licensee from giving any
premium, gift, or free goods in connection with the sale or
distribution of any alcoholic beverage, except as
specifically authorized. The ABC Act provides that a
violation of any of its provisions for which another
penalty or punishment is not specifically provided is a
misdemeanor.
With respect to beer, existing law provides that premiums,
gifts, or free goods, including advertising specialties
that have no significant utilitarian value other than
advertising, shall be deemed to have greater than
inconsequential value if they cost more than $0.25 per
unit, or cost more than $15 in the aggregate for all those
items given by a single supplier to a single retail
premises per calendar year. Additionally, existing law
prohibits the ABC from imposing a dollar limit of less than
$3 per unit original cost to the beer manufacturer who
purchased it.
With respect to distilled spirits and wines, a licensee may
furnish, give, rent, loan, or sell advertising specialties
to a retailer, provided those items bear conspicuous
advertising required of a sign and the total value of all
retailer advertising specialties furnished by a supplier,
directly or indirectly, to a retailer do not exceed $50
dollars per brand in any one calendar year per retail
premises.
Existing law prohibits the ABC from imposing a dollar limit
of less than $5 for consumer advertising specialties
furnished by a distilled spirits supplier to a retailer or
the general public. Existing law also provides that
consumer advertising specialties furnished by a wine
supplier to a retailer or to the general public shall not
AB 1928 (Bocanegra) continued
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exceed $1 per unit original cost to the supplier who
purchased it.
ABC Rule 106 prohibits the giving of any premium, gifts or
goods of any sort, whether by way of sweepstakes, drawings,
prizes, cross merchandizing promotions with a non-alcoholic
beverage or product, or any other method if the value of
the premium, gift or good exceeds $0.25 with respect to
beer, $1 with respect to wine, or $5 with respect to
distilled spirits. Rule 106 authorizes alcohol suppliers
to sponsor contests and other similar activities subject to
these monetary limits and other specified conditions.
The ABC Act permits an on-sale retail licensee of wine or
distilled spirits to conduct "instructional" consumer
tastings on the licensed retail premise provided the
following conditions are met: (1) no more than ounce of
distilled spirits is offered in one tasting; (2) no more
than one ounce of wine is offered in one tasting; and, (3)
no more than three tastings are offered to an individual in
one day.
Existing law authorizes beer manufacturers and wholesalers
to offer beer samples (not to exceed 8 ounces per person,
per day) to individuals of legal drinking age at on-sale
retail licensed premises under specified conditions.
Existing law permits a licensed winegrower, manufacturer,
importer, or wholesaler to provide samples of the alcoholic
beverages which are authorized to be sold by the licensee
in accordance with rules prescribed by the ABC. A retail
licensee, however, is not authorized to provide any free
samples of alcoholic beverages. Moreover, ABC regulations
provide that samples of alcoholic beverages may only be
given away to licensees or employees of licensees who are
in a position to purchase the product or who are in need of
additional information about the product, as specified.
Existing law authorizes distilled spirits manufacturers to
conduct tastings and provide distilled spirits without
charge for events sponsored by nonprofit organizations.
Only persons affiliated with the nonprofit organization,
including up to three guests, may attend. No distilled
spirits may be sold or solicited for sale at the tasting,
and the organization must obtain a permit from ABC prior to
the event.
AB 1928 (Bocanegra) continued
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BACKGROUND
Purpose of AB 1928: The author's office notes that the
beer market, as it relates to beer manufacturer coupons,
lacks transparency. Additionally, an inequity exists
between the major beer conglomerates and the craft
breweries in the marketplace. The author's office points
out that a problem has arisen within the industry because
instant redeemable coupons (IRCs), which are provided by
beer manufacturers and offer an instant reduction in the
price of a beer product purchased at a retail facility,
easily lend themselves to fraudulent practices such as
counterfeiting. As things stand, these beer manufacturers
are not only losing resources but they are also being
exposed to unnecessary liability due to fake coupons, which
are often hard to distinguish from those coupons that they
actually do produce.
The author's office emphasizes that there is a strong
desire for greater transparency within the beer market and
widespread support for the elimination of fraudulent
coupons. The author's office states that AB 1928
accomplishes both goals by increasing transparency and
stemming the flow of fake coupons. Furthermore, the
elimination of beer manufacturer coupons will serve to
level the playing field between the major brewing
conglomerates and the craft breweries that are quickly
becoming a sizable part of California's economy. Unlike
the major conglomerates, most craft breweries, which are
much smaller operations, cannot afford to offer their own
beer coupons. Thus, elimination of beer manufacturer
coupons would ensure greater fairness among all producers
in the beer market and provide greater equity among all
beer producers.
Arguments in Support: Writing in support, beer producers
emphasize that AB 1928 does not prohibit all consumer
discount offers. Mail-in rebates and retailer-sponsored
coupons are still permitted, as they are coupon types that
either have a system for checks and balances or are not
otherwise problematic. Proponents claim that AB 1928 is
narrowly tailored to only prohibit instant coupons that are
sponsored by beer manufacturers and distributors, but still
allows distilled spirits and wine companies to offer
coupons for spirits and wine.
AB 1928 (Bocanegra) continued
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Arguments in Opposition: The California Retailers
Association and the California Grocers Association have
expressed concern with AB 1928 and are opposed unless the
measure is amended to enable retailers to maintain the
ability to offer an instant electronic discount to the
consumer at the time of purchase that is funded in whole or
in part by the beer manufacturer as part of a retail
loyalty or card club program or scanback.
PRIOR/RELATED LEGISLATION
SB 778 (Padilla), Chapter 489, Statutes of 2012.
Authorized wine, beer and spirits producers to conduct
contests and sweepstakes and award prizes to consumers
subject to various restrictions. Furthermore, exempted
prize awards from provisions limiting premium awards in
connection with the sale or distribution of alcoholic
beverages.
AB 2184 (Hall), Chapter 480, Statutes of 2012. Created a
new tied-house exception in the ABC Act that authorized
wine, beer and spirits producers to participate in
promotional events held at an off-sale retail licensed
location for the purpose of providing autographs on bottles
or other items to consumers.
AB 1245 (Torrico), Chapter 629, Statutes of 2008. Modified
an existing provision of the ABC Act to allow beer
manufacturers to give adult consumers promotional
advertising items valued at $3 per unit original cost to
the beer manufacturer who purchased it.
AB 2518 (Bill Campbell), 2001-02 Session. Would have
allowed alcoholic beverage suppliers to conduct sweepstakes
or contests that offer adults the opportunity to win prizes
or things of value. (Failed passage in Assembly G.O.
Committee)
AB 642 (Strickland), 2001-02 Session. Would have provided
that no rule of the Department of ABC may permit a licensee
to offer any premium, gift, or free goods to a consumer in
such a way that would encourage the purchase or consumption
of alcoholic beverages by minors, and that is conditioned
on the purchase of an alcoholic beverage. (Held in
Assembly G.O. Committee)
AB 1928 (Bocanegra) continued
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AB 953 (Brown), 1997-98 Session. Would have allowed a
distilled spirits or beer supplier to sponsor a consumer
sweepstakes or contest, as defined, offering the chance to
win prizes or other things of value, if specified
conditions are met. (Withdrawn from Senate Third Reading
and re-referred to Senate Committee on Rules)
SB 1069 (Thompson), 1997-98 Session. Would have allowed a
winegrower or brandy manufacturer to sponsor a sweepstakes
or contest, as defined, offering the chance to win prizes
or other things of value, if specified conditions are met,
and to provide rebates or discounts on nonalcoholic
beverages or services in connection with the sale or
distribution of wine and brandy under certain conditions.
(Placed on Assembly Inactive File)
SB 993 (Burton), Chapter 544, Statutes of 1997. Among
other things, provided that no rule of the Department of
ABC may impose a dollar limit for consumer advertising
specialties furnished by a distilled spirits supplier to a
retailer or to the general public of less than $5 per unit
original cost to the supplier who purchased it. Also,
authorized a licensed distilled spirits manufacturer to
conduct tastings of distilled spirits on the licensed
premises under specified conditions.
SUPPORT: As of June 6, 2014:
Alcohol Justice (formerly Marin Institute)
Anheuser-Busch
California Beer & Beverage Distributors
California Chamber of Commerce
California Craft Brewers Association
MillerCoors
OPPOSE: As of June 6, 2014:
California Grocers Association
California Retailers Association
FISCAL COMMITTEE: Senate Appropriations Committee
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