BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1401 (Block) - Department of Alcoholic Beverage Control
Amended: March 26, 2014 Policy Vote: GO 9-0
Urgency: No Mandate: No
Hearing Date: May 23, 2014 Consultant: Maureen Ortiz
SUSPENSE FILE.
Bill Summary: SB 1401 grants the Department of Alcoholic
Beverage Control (ABC) the authority to investigate violations
relating to beer price posting, and directs and further
authorizes the ABC to hire six full-time equivalent personnel to
investigate and prosecute violations of the tied-house laws.
Fiscal Impact:
Annual costs of up to $800,000 for six investigative agents
(Special Fund)
Background: The Department of Alcoholic Beverage Control has 24
offices throughout the state, with 133 authorized agents to
enforce about 86,000 permanent licenses as well as an additional
37,000 special one-day licenses. Enforcement actions conducted
are predominantly related to public safety crimes such as
fights, gang activity, illegal drug sales, prostitution,
gambling, sales of alcohol to minors, and to obviously
intoxicated persons cases occurring in and around the licensed
businesses.
Tied house investigations are primarily conducted by the Trade
Enforcement Unit (TEU). TEU staff also provides technical
assistance to department personnel regarding non-retail
licensing issues, and advises industry members and stakeholders
concerning the types of non-retail licenses issued by the
department, including their privileges and restrictions, and the
overall licensing process.
Proposed Law: SB 1401 authorizes the Department of Alcoholic
Beverage Control to hire six additional full-time staff to its
trade enforcement unit and makes it explicit that the ABC has
the authority to investigate violations relating to beer price
SB 1401 (Block)
Page 1
posting, marketing regulations, and provisions relating to
labeling and containers. Specifically, this measure:
1)Makes various Legislative Findings and Declarations relative
to the importance and necessity of maintaining a regulated
process for investigation and enforcement of violations of the
state's "tied-house" laws for the stated purpose of preserving
a fair and orderly market in the manufacture, distribution,
and retail sales of alcoholic beverages.
2)Encourages the Department of ABC to devote the necessary
resources to adequately and aggressively enforce the state's
tied-house laws.
3)Stipulates that the Department of ABC has the authority to
investigate violations relating to beer price posting and
marketing regulations and provisions relating to labeling and
containers.
4)Directs and authorizes the Department of ABC to hire six,
full-time equivalent personnel, additional to ABC's current
staff, to investigate and prosecute violations of the state's
tied-house laws.
5)Makes minor code maintenance changes and deletes obsolete
cross-references to certain provisions of the ABC Act relating
to alcoholic beverages fair trade contracts and price posting,
and wine fair trade contracts and price posting.
Staff Comments: As of January 1, 2014, the department's Trade
Enforcement Unit investigative staff consisted of two full time
agents and one supervising agent, who are actively working
approximately 72 of the 287 pending trade practice
investigations. Generally, these types of violations have a one
year statute of limitations for the department to complete the
investigation and file an enforcement action against the
licensee.
Most trade practices investigations result from complaints
generated from the alcoholic beverage industry. These
complaints are mainly from ABC licensees that are adhering to
laws and regulations and who want to compete on a level playing
field when it comes to marketing and selling their products.
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The department is charged with safeguarding the public against
the threat of corrupt and unfair business practices.
In addition, the craft beer industry has experienced tremendous
growth over the years. There are currently 430 craft breweries
in California. Their continued growth and success rely upon a
marketplace that is carefully regulated and consistently
enforced for all licensees and consumers statewide.
The department has been unable in recent years to adequately
enforce the tied-house safeguards due to a challenging agent to
licensee staffing ratio.
The ABC Fund had a surplus of $28.5 million in the 2013-14
fiscal year and an estimated surplus of $26.2 million through
the 2014-15 fiscal year. The six new investigators that are
being authorized by this measure will be paid out of the
existing ABC Fund.