Existing law generally restricts certain alcoholic beverage licensees, including manufacturers and winegrowers, from paying, crediting, or compensating a retailer for advertising in connection with the advertising and sale of alcoholic beverages. Existing law expressly authorizes a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a live entertainment company that has its principal place of business in the County of Los Angeles, as provided.

This bill would expressly authorize an authorized licensee, as defined, to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company in connection with events organized and conducted by the live entertainment marketing company at the San Diego County Fairgrounds, under specified conditions. The bill would also make an authorized licensee who, through coercion or other illegal means, induces the holder of a wholesalers license to fulfill those contractual obligations entered into pursuant to these provisions guilty of a misdemeanor. The bill would additionally make an on-sale retail licensee, as described, who solicits or coerces a holder of a wholesalers license to solicit an authorized licensee to purchase advertising time or space pursuant to these provisions guilty of a misdemeanor. The bill would make a related statement of findings.

By creating new crimes, this bill would impose a state-mandated local program.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of San Diego.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing law generally restricts certain alcoholic beverage licensees, including manufacturers and winegrowers, from paying, crediting, or compensating a retailer for advertising in connection with the advertising and sale of alcoholic beverages. Existing law expressly authorizes a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a live entertainment company that has its principal place of business in the County of Los Angeles, as provided.

This bill would expressly authorize an authorized licensee, as defined, to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company in connection with events organized and conducted by the live entertainment marketing company at the San Diego County Fairgrounds, under specified conditions. The bill would also make an authorized licensee who, through coercion or other illegal means, induces the holder of a wholesalers license to fulfill those contractual obligations entered into pursuant to these provisions guilty of a misdemeanor. The bill would additionally make an on-sale retail licensee, as described, who solicits or coerces a holder of a wholesalers license to solicit an authorized licensee to purchase advertising time or space pursuant to these provisions guilty of a misdemeanor. The bill would make a related statement of findings.

By creating new crimes, this bill would impose a state-mandated local program.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of San Diego.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing law generally restricts certain alcoholic beverage licensees, including manufacturers and winegrowers, from paying, crediting, or compensating a retailer for advertising in connection with the advertising and sale of alcoholic beverages. Existing law expressly authorizes a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a live entertainment company that has its principal place of business in the County of Los Angeles, as provided.

This bill would expressly authorize a holder of a beer manufacturer license, holder of an out-of-state beer manufacturers certificate, holder of a winegrowers license, winegrowers agent, holder of a rectifier license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, distilled spirits manufacturers agent, or holder of a beer and wine importers general license or distilled spirits importers general license, as described, an authorized licensee, as defined, to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that conducts entertainment events solely at in connection with events organized and conducted by the live entertainment marketing company at the San Diego County Fairgrounds, under specified conditions. The bill would also make a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent an authorized licensee who, through coercion or other illegal means, induces the holder of a wholesalers license to fulfill those contractual obligations entered into pursuant to these provisions guilty of a misdemeanor. The bill would additionally make an on-sale retail licensee, as described, who solicits or coerces a holder of a wholesalers license to solicit a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent an authorized licensee to purchase advertising time or space pursuant to these provisions guilty of a misdemeanor. The bill would make a related statement of findings.

By creating new crimes, this bill would impose a state-mandated local program.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of San Diego.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing law generally restricts certain alcoholic beverage licensees, including manufacturers and winegrowers, from paying, crediting, or compensating a retailer for advertising in connection with the advertising and sale of alcoholic beverages. Existing law expressly authorizes a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a live entertainment company that has its principal place of business in the County of Los Angeles, as provided.

This bill would expressly authorize a holder of a beer manufacturer license, holder of an out-of-state beer manufacturers certificate, holder of a winegrowers license, winegrowers agent, holder of an importers general license, as described, a rectifier license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent agent, or holder of a beer and wine importers general license or distilled spirits importers general license, as described, to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that conducts entertainment events solely at the San Diego County Fairgrounds, under specified conditions. The bill would also make a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent who, through coercion or other illegal means, induces the holder of a wholesalers license to fulfill those contractual obligations entered into pursuant to these provisions guilty of a misdemeanor. The bill would additionally make an on-sale retail licensee, as described, who solicits or coerces a holder of a wholesalers license to solicit a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to purchase advertising time or space pursuant to these provisions guilty of a misdemeanor. The bill would make a related statement of findings.

By creating new crimes this bill would impose a state-mandated local program.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of San Diego.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law generally restricts certain alcoholic beverage licensees, including manufacturers and winegrowers, from paying, crediting, or compensating a retailer for advertising in connection with the advertising and sale of alcoholic beverages. Existing law expressly authorizes a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a live entertainment company that has its principal place of business in the County of Los Angeles, as provided.

This bill would expressly authorize a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, as described, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that conducts entertainment events solely at the San Diego County Fairgrounds, under specified conditions. The bill would also make a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent who, through coercion or other illegal means, induces the holder of a wholesalers license to fulfill those contractual obligations entered into pursuant to these provisions guilty of a misdemeanor. The bill would additionally make an on-sale retail licensee, as described, who solicits or coerces a holder of a wholesalers license to solicit a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to purchase advertising time or space pursuant to these provisions guilty of a misdemeanor. The bill would make a related statement of findings.

By creating new crimes this bill would impose a state-mandated local program.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of San Diego.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law prohibits specified holders of alcoholic beverage licenses from having specified relationships with an on-sale alcoholic beverage licensee, with limited exceptions. Existing law permits a manufacturer, winegrower, rectifier, distiller, distilled spirits wholesaler, or any agent of those licenses, to conduct market research and, in connection with that research, to purchase from licensed off-sale retailers data, regarding purchases and sales of alcoholic beverage products, at the customary rates that those retailers sell similar data for nonalcoholic beverage products, provided that no licensed retailer shall be obligated to purchase or sell the alcoholic beverages of the manufacturer, winegrower, rectifier, or distiller. generally restricts certain alcoholic beverage licensees, including manufacturers and winegrowers, from paying, crediting, or compensating a retailer for advertising in connection with the advertising and sale of alcoholic beverages. Existing law expressly authorizes a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to sponsor events promoted by or purchase advertising space and time from, or on behalf of, specified entities, including certain parks, entertainment complexes, and outdoor stadiums, as provided.

This bill would make a nonsubstantive change to this provision. expressly authorize a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to sponsor events promoted by or own, sponsor, conduct, or purchase advertising space and time from, or on behalf of, an on-sale retail licensee that is the owner, manager, agent of the owner, assignee of the owners advertising rights, or major tenant of a state- or county-owned fairground, under specified conditions. The bill would also make a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent who, through coercion or other illegal means, induces the holder of a wholesalers license to fulfill those contractual obligations entered into pursuant to these provisions guilty of a misdemeanor. The bill would additionally make an on-sale retail licensee, as described, who solicits or coerces a holder of a wholesalers license to solicit a beer manufacturer, holder of a winegrowers license, winegrowers agent, holder of an importers general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturers agent to purchase advertising time or space pursuant to these provisions guilty of a misdemeanor.

Existing law prohibits specified holders of alcoholic beverage licenses from having specified relationships with an on-sale alcoholic beverage licensee, with limited exceptions. Existing law permits a manufacturer, winegrower, rectifier, distiller, distilled spirits wholesaler, or any agent of those licenses, to conduct market research and, in connection with that research, to purchase from licensed off-sale retailers data, regarding purchases and sales of alcoholic beverage products, at the customary rates that those retailers sell similar data for nonalcoholic beverage products, provided that no licensed retailer shall be obligated to purchase or sell the alcoholic beverages of the manufacturer, winegrower, rectifier, or distiller.

This bill would make a nonsubstantive change to this provision.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1320

Author:(Maienschein)

As Amended Ver:September 4, 2015

2/3 vote. Urgency

Original Committee Reference: G.O.

SUMMARY: Creates a new tied-house exception in the Alcoholic Beverage Control Act (Act) that authorizes certain alcoholic beverage licensees to sponsor a limited number of events promoted by or to purchase advertising space and time from, or on behalf of, a live entertainment marketing company that conducts live artistic, musical, sports, or cultural entertainment events solely at the San Diego County Fairgrounds in the City of Del Mar, under specified conditions. Specifically, this bill:

1. Provides an authorized licensee may sponsor events promoted by, and may purchase advertising space and time from, or on behalf of, a live entertainment marketing company in connection with events organized and conducted by the live entertainment marketing company on the premises of a permanent retail licensee located at the San Diego County Fairgrounds, located in the City of Del Mar in the County of San Diego, subject to all of the following conditions:

   1. The live entertainment marketing company operates and promotes live artistic, musical, sports, or cultural entertainment events only.

   2. The events will take place over a period of no more than four consecutive days during which approximately 100 acts will perform before approximately 20,000 or more patrons.

   3. The live entertainment marketing company is a Delaware limited liability company that is under common ownership, management, or control by a private equity firm that may also have common ownership, management, or control of a licensed California winery, provided the winery represents not more than 25% of the assets under common ownership, management, or control by the private equity firm or its subsidiaries, and the live entertainment marketing company exercises no control over the operations of the winery.

   4. Any authorized licensee sponsoring an event or purchasing advertising space or time, pursuant to this section, shall obtain written verification of compliance with this subdivision prior to such sponsorship or the purchase of advertising space or time.

   5. Any on-sale licensee operating at the San Diego County Fairgrounds shall serve other brands of beer, distilled spirits, and wine distributed by a competing wholesaler or manufacturer in addition to any brand manufactured, distributed, or owned by the authorized licensee sponsoring an event or purchasing advertising space or time, as defined.

   6. An agreement shall not be conditioned directly or indirectly, on the purchase, sale, or distribution of any alcoholic beverage manufactured or distributed by any authorized licensee sponsoring or purchasing advertising space or time, as defined.

2. Provides any sponsorship of events or purchase of advertising space or time shall be conducted pursuant to a written contract entered into by the authorized licensee and the live entertainment marketing company.

3. Defines "authorized licensee" to mean the following licensees: beer manufacturer, out-of-state beer manufacturer's certificate, winegrower, winegrower’s agent, importer, rectifier, distilled spirits manufacturer, distilled spirits rectifier general, distilled spirits manufacturer’s agent.

4. States that except for a licensee that holds only a beer and wine importer general license or a distilled spirits importer general license, "importer" does not include the holder of any importer license that does not also hold at least one other license specified as an authorized licensee.

5. States that an authorized licensee who, through coercion or other illegal means, induces the holder of a wholesaler's license to fulfill contractual obligations entered into pursuant to this bill guilty of a misdemeanor.

The Senate amendments:

1. Clarify where a live entertainment marketing company can hold an event in San Diego County while taking place over a period of no more than four consecutive days.

2. State that any authorized licensee sponsoring an event or purchasing advertising space or time, shall obtain written verification of compliance with this subdivision prior to such sponsorship or the purchase of advertising space or time.

3. Add definitions pertaining to the implementation of the bill.

4. Add clarifying and technical amendments.

5. Add an urgency clause, to take effect immediately.

EXISTING LAW:

1. Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the 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.

2. Separates the alcoholic beverage industry into three component parts, or tiers (referred to as the "tied-house" law or "three-tier" system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). 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 market place; c) prohibit commercial bribery and to 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.

3. Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising.

4. Prohibits paid advertising by winegrowers, beer manufacturers and distilled spirits producers in cases where a retail licensee also owns a sports or entertainment venue. Over the years numerous exceptions to this prohibition have been added to the ABC Act [e.g., Sleep Train Arena (formerly known as ARCO Arena) in Sacramento, Oakland Coliseum in Oakland, Arrowhead Pond Arena in Anaheim, Kern County Arena in Bakersfield, the National Orange Show Event Center in San Bernardino, California Speedway in Fontana, Grizzly Stadium in downtown Fresno, Raley Field in West Sacramento, HP Pavilion in San Jose, the Home Depot Center in the City of Carson, Levi's Stadium in the City of Santa Clara, and other venues].

5. Provides a narrow tied-house exception that expressly authorizes, under specified conditions, a beer manufacturer, holder of a winegrower's license, California winegrower’s agent, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturer's agent to purchase advertising space or time from a fully enclosed venue (ClubNokia) with box office sales and attendance by the public on a ticket basis only, with a patronage capacity in excess of 2,000, but not more than 3,000, located in Los Angeles County within the area subject to the Los Angeles Sports and Entertainment District Specific Plan adopted by the City on September 6, 2001, where the owner of the venue is not the on-sale retail licensee. (Business and Professions Code Section 25503.42)

AS PASSED BY THE ASSEMBLY, this bill created a specific tied-house exception to allow specific alcohol licensees to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company for live artistic, musical, sports, or cultural entertainment events conducted at the San Diego County Fairgrounds in Del Mar.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS: This bill as amended in the Senate is consistent with Assembly actions.

Purpose of the bill: As noted above, existing tied-house laws prohibit an alcoholic beverage supplier, or any officer, director or agent of an alcoholic beverage supplier, from providing anything of value to an on-sale retailer licensee, be it free goods, money, services or advertising. Over the years, numerous exceptions to this prohibition have been added to the ABC Act encompassing various venues throughout the state.

This bill creates a stand-alone tied-house exception applicable to Horsepower Entertainment Company, which is holding the KAABOO festival – a three-day event to be held in September 2015 at the San Diego Fairgrounds in Del Mar that will combine a diverse mix of music, culinary offerings, libations, art exhibitions, comedy, dancing and other amenities. Due to the fact that Horsepower Entertainment’s ownership includes an interest in a Napa winery (Jamieson Ranch Vineyards) it cannot sponsor the festival on the grounds of the San Diego County Fair which has an on-sale licensee (caterer) on its premises.

This bill will enable Horsepower Entertainment to enter into a contractual agreement with an alcoholic beverage supplier interested in purchasing advertising at the festival. This bill subjects Horsepower Entertainment to certain requirements, as specified, and also requires the on-sale licensee operating at the venue where the live events are performed to serve other brands of beer, wine, or distilled spirits distributed by a competing wholesaler in addition to any brand manufactured or distributed by the owning, sponsoring, or advertising alcoholic beverage supplier.

According to the author's office, "the KAABOO festival is an entertainment experience with world-class music, dancing, incredible cuisine, craft libations, inspiring contemporary art, and more. In contrast to typical festivals, KAABOO will offer local and regional delicacies, a contemporary art fair, salon and golf simulator in addition to the more than 100 music acts. KAABOO has committed to donate $1 for every ticket sold to San Diego area charitable partners."

Additionally, the author's office indicates that the festival is expected to have a significant economic impact on the Del Mar region – local restaurants, lodging and other businesses are expected to benefit from the increased tourism that will be generated.

Related/Prior Legislation: SB 462 (Wolk) of the current legislative session extends an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a specified entertainment complex, known as the Green Music Center, located on the campus of Sonoma State University. Additionally, this bill adds a new section of law to the ABC Act that allows alcoholic beverage licensees, as specified, to make monetary or alcoholic beverage contributions to the Green Music Center under certain conditions.

AB 527 (Dodd) of the current legislative session, creates a new tied-house exception that authorizes alcoholic beverage suppliers to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a non-publicly traded live entertainment company that has its principal place of business in Napa County, subject to specified restrictions. (Pending on the Senate Floor)

AB 600 (Bonta), Chapter 139, Statutes of 2014, extended an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor stadium with a fixed seating capacity of at least 68,000 seats located in the City of Santa Clara (Levi's Stadium – new home of the San Francisco 49ers).

SB 324 (Wright), Chapter 164, Statutes of 2013, extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a fully enclosed arena with a fixed seating capacity in excess of 13,000 seats (the Forum) in the City of Inglewood.

AB 813 (John A. Pérez), Chapter 647, Statutes of 2009, created a new tied-house exception that authorized the owner of a venue (Club Nokia) in Los Angeles to engage in a sponsorship agreement with an alcoholic beverage supplier for the privilege of placing advertising in the on-sale licensee’s premises, subject to specified conditions.

AB 776 (Aghazarian), Chapter 221, Statutes of 2007, created a new tied-house exception by authorizing a beer manufacturer to sponsor or purchase advertising space and time from, or on behalf of, an off-sale retail licensee that is an owner or co-owner of a professional sports team (California Cougars indoor soccer team) that plays its home games, in an arena with a fixed seating capacity of 10,000 seats (Stockton Arena) located in San Joaquin County.

AB 663 (Galgiani), Chapter 745, Statutes of 2007, extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor professional sports facility with a fixed seating capacity of at least 4,200 (Banner Island Ballpark – home of the Stockton Ports Class A baseball team) located in San Joaquin County.

AB 3046 (Chávez), Chapter 587, Statutes of 2006, extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to the HP Pavilion in Santa Clara County.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0002307

 THIRD READING  

Bill No: AB 1320

Author: Maienschein (R)

Amended: 9/4/15 in Senate

Vote: 27 - Urgency

SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 6/29/15

AYES: Hall, Berryhill, Block, Gaines, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Runner, Vidak

NO VOTE RECORDED: Galgiani

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 76-0, 5/26/15 (Consent) - See last page for vote

SUBJECT: Alcoholic beverages: tied-house restrictions: advertising

SOURCE: KAABOO Entertainment

DIGEST: This bill creates a new tied-house exception in the Alcoholic Beverage Control (ABC) Act that authorizes certain alcoholic beverage licensees to sponsor events promoted by or to purchase advertising space and time from, or on behalf of, a live entertainment marketing company that conducts live artistic, musical, sports, or cultural entertainment events on the premises of a permanent retail licensee located at the San Diego County Fairgrounds in the City of Del Mar, under specified conditions.

Senate Floor Amendments of 9/4/15 are largely a technical redraft to address concerns raised by the Department of ABC relative to implementation and enforcement of this bill.

Senate Floor Amendments of 8/18/15 include “rectifier” to the list of licensees that can purchase advertising; modify certain license terms so that they conform to existing ABC Act language; and, add an urgency clause.

ANALYSIS:

Existing law:

1. 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.
   
   

2. Separates the alcoholic beverage industry into three component parts, or tiers (referred to as the “tied-house” law or “three-tier” system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). 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 market place; (c) prohibit commercial bribery and to 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.

3. Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising.
   
   

4. Prohibits paid advertising by winegrowers, beer manufacturers and distilled spirits producers in cases where a retail licensee also owns a sports or entertainment venue. Over the years numerous exceptions to this prohibition have been added to the ABC Act [e.g., Sleep Train Arena (formerly known as ARCO Arena) in Sacramento, Oakland Coliseum in Oakland, Arrowhead Pond Arena in Anaheim, Kern County Arena in Bakersfield, the National Orange Show Event Center in San Bernardino, California Speedway in Fontana, Grizzly Stadium in downtown Fresno, Raley Field in West Sacramento, HP Pavilion in San Jose, the Home Depot Center in the City of Carson, Levi’s Stadium in the City of Santa Clara, and other venues].
   
   

5. Provides a narrow tied-house exception that expressly authorizes, under specified conditions, a beer manufacturer, holder of a winegrower’s license, California winegrower’s agent, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturer’s agent to purchase advertising space or time from a fully enclosed venue (ClubNokia) with box office sales and attendance by the public on a ticket basis only, with a patronage capacity in excess of 2,000, but not more than 3,000, located in Los Angeles County within the area subject to the Los Angeles Sports and Entertainment District Specific Plan adopted by the City on September 6, 2001, where the owner of the venue is not the on-sale retail licensee. (Business & Professions Code Section 25503.42)
   
   

This bill:

1. Provides that an authorized licensee, as defined, may sponsor events promoted by, and may purchase advertising space and time from, or on behalf of, a live entertainment marketing company in connection with events organized and conducted by the live entertainment company on the premises of a permanent retail licensee located at the San Diego County Fairgrounds, in the City of Del Mar, subject to the following conditions:
   
   

   1. The live entertainment marketing company operates and promotes live artistic, musical, sports, or cultural entertainment events only.
      
      

   2. The events will take place over a period of no more than four consecutive days during which approximately 100 acts will perform before approximately 20,000 or more patrons.
      
      

   3. The live entertainment marketing company is a Delaware limited liability company that is under common ownership, management, or control by a private equity firm that may also have common ownership, management, or control of a licensed California winery, provided the winery represents not more than 25% of the assets under common ownership, management, or control by the private equity firm or its subsidiaries, and the live entertainment marketing company exercises no control over the operations of the winery.
      
      

   4. Any authorized licensee sponsoring an event or purchasing advertising space or time, pursuant to this section, must obtain written verification of compliance with this subdivision prior to such sponsorship or the purchase of advertising space or time.
      
      

   5. Any on-sale licensee operating at the San Diego County Fairgrounds must serve other brands of beer, wine, or distilled spirits distributed by a competing wholesaler in addition to any brand manufactured, distributed, or owned by the authorized licensee sponsoring an event or purchasing advertising space or time pursuant to this section.
      
      

   6. An agreement pursuant to this section shall not be conditioned directly or indirectly on the purchase, sale, or distribution of any alcoholic beverage manufactured or distributed by any authorized licensee sponsoring or purchasing advertising space or time pursuant to this section.
      
      

2. Provides that any sponsorship of events or purchase of advertising space or time must be conducted pursuant to a written contract entered into by the authorized licensee and the live entertainment marketing company.
   
   

3. Makes it a misdemeanor for any authorized licensee to coerce or induce, directly or indirectly, a licensed wholesaler to fulfill the contractual obligations entered into pursuant to the above provisions. Also, subjects the authorized licensee to license suspension or revocation.
   
   

4. Makes it a misdemeanor for any on-sale retail licensee to solicit or coerce, directly or indirectly, a licensed wholesaler to solicit an authorized licensee to purchase advertising time or space and subjects the on-sale retail licensee to license suspension or revocation.
   
   

5. Contains boiler plate language (legislative findings and declarations) relative to the necessity of requiring a separation between manufacturing interests, wholesale interests, and retail interests in the production and distribution of alcoholic beverages.
   
   

6. Defines “authorized licensee” to mean the following licensees: beer manufacturer, out-of-state beer manufacturer’s certificate, winegrower, winegrower’s agent, importer, rectifier, distilled spirits manufacturer, distilled spirits rectifier general, distilled spirits manufacturer’s agent. Also, specifies, except for a licensee that holds only a beer and wine importer general license or a distilled spirits importer general license, “importer” does not include the holder of any importer license that does not also hold at least one other license specified as an authorized licensee.
   
   

7. Contains an urgency clause, to take effect immediately.

Background

Purpose of AB 1320. As noted above, existing tied-house laws prohibit an alcoholic beverage supplier, or any officer, director or agent of an alcoholic beverage supplier, from providing anything of value to an on-sale retailer licensee, be it free goods, money, services or advertising. Over the years, numerous exceptions to this prohibition have been added to the ABC Act encompassing various venues throughout the state.

This bill creates a stand-alone tied-house exception applicable to Horsepower Entertainment Company, which is holding the KAABOO festival – a three-day event to be held in September 2015 at the San Diego County Fairgrounds in Del Mar that will combine a diverse mix of music, culinary offerings, libations, art exhibitions, comedy, dancing and other amenities. Due to the fact that Horsepower Entertainment’s ownership includes an interest in a Napa winery (Jamieson Ranch Vineyards) it cannot sponsor the festival on the grounds of the San Diego County Fair which has an on-sale alcoholic beverage licensee on its premises. This bill will enable Horsepower Entertainment to enter into a contractual agreement with any authorized alcoholic beverage licensee interested in purchasing advertising time or space at the festival. This bill subjects Horsepower Entertainment to certain requirements, as specified, and also requires the on-sale licensee operating at the San Diego County Fairgrounds to serve other brands of beer, wine, or distilled spirits distributed by a competing wholesaler in addition to any brand manufactured, distributed, or owned by the authorized licensee sponsoring an event or purchasing advertising space or time.

According to the author’s office, “the KAABOO festival is an entertainment experience with world-class music, dancing, incredible cuisine, craft libations, inspiring contemporary art, and more. In contrast to typical festivals, KAABOO will offer local and regional delicacies, a contemporary art fair, salon and golf simulator in addition to the more than 100 music acts. KAABOO has committed to donate $1 for every ticket sold to San Diego area charitable partners.”

Additionally, the author’s office indicates that the festival is expected to have a significant economic impact on the Del Mar region – local restaurants, lodging and other businesses are expected to benefit from the increased tourism that will be generated.

Related Legislation

SB 462 (Wolk, 2015) extends an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a specified entertainment complex, known as the Green Music Center, located on the campus of Sonoma State University. Additionally, this bill adds a new section of law to the ABC Act that allows alcoholic beverage licensees, as specified, to make monetary or alcoholic beverage contributions to the Green Music Center under certain conditions. (Enrolled and presented to the Governor on 9/3/15)

AB 527 (Dodd, 2015) creates a new tied-house exception that authorizes alcoholic beverage suppliers to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a non-publicly traded live entertainment company that has its principal place of business in Napa County, subject to specified restrictions. (Pending on the Senate Floor)

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 9/8/15)

KAABOO Entertainment (source)

Family Winemakers of California

OPPOSITION: (Verified 9/8/15)

None received

ASSEMBLY FLOOR: 76-0, 5/26/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Bloom, Chávez, Harper, Mathis

Prepared by: Arthur Terzakis / G.O. / (916) 651-1530

9/8/15 15:00:06

**** END ****

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1320

Author:(Maienschein)

As Amended Ver:August 18, 2015

2/3 vote. Urgency

Original Committee Reference: G.O.

SUMMARY: Creates a new tied-house exception in the Alcoholic Beverage Control Act (ABC Act) that authorizes certain alcoholic beverage licensees to sponsor a limited number of events promoted by or to purchase advertising space and time from, or on behalf of, a live entertainment marketing company that conducts live artistic, musical, sports, or cultural entertainment events solely at the San Diego County Fairgrounds in Del Mar, under specified conditions.

The Senate amendments:

1. Include "rectifier" to the list of licensees that can purchase advertising; modify certain license terms so that they conform to existing Act language.

2. Add an urgency clause, to take effect immediately.

EXISTING LAW:

1. Establishes the Department of Alcoholic Beverage Control and grants it exclusive authority to administer the provisions of the 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.

2. Separates the alcoholic beverage industry into three component parts, or tiers (referred to as the "tied-house" law or "three-tier" system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). 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 market place; c) prohibit commercial bribery and to 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.

3. Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising.

4. Prohibits paid advertising by winegrowers, beer manufacturers and distilled spirits producers in cases where a retail licensee also owns a sports or entertainment venue. Over the years numerous exceptions to this prohibition have been added to the ABC Act [e.g., Sleep Train Arena (formerly known as ARCO Arena) in Sacramento, Oakland Coliseum in Oakland, Arrowhead Pond Arena in Anaheim, Kern County Arena in Bakersfield, the National Orange Show Event Center in San Bernardino, California Speedway in Fontana, Grizzly Stadium in downtown Fresno, Raley Field in West Sacramento, HP Pavilion in San Jose, the Home Depot Center in the City of Carson, Levi’s Stadium in the City of Santa Clara, and other venues].

5. Provides a narrow tied-house exception that expressly authorizes, under specified conditions, a beer manufacturer, holder of a winegrower's license, California winegrower's agent, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturer's agent to purchase advertising space or time from a fully enclosed venue (ClubNokia) with box office sales and attendance by the public on a ticket basis only, with a patronage capacity in excess of 2,000, but not more than 3,000, located in Los Angeles County within the area subject to the Los Angeles Sports and Entertainment District Specific Plan adopted by the City on September 6, 2001, where the owner of the venue is not the on-sale retail licensee. (Business and Professions Code Section 25503.42)

AS PASSED BY THE ASSEMBLY, this bill created a specific tied-house exception to allow specific alcohol licensees to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company for live artistic, musical, sports, or cultural entertainment events conducted at the San Diego County Fairgrounds in Del Mar.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS: This bill as amended in the Senate is consistent with Assembly actions.

Background

Purpose of this bill: As noted above, existing tied-house laws prohibit an alcoholic beverage supplier, or any officer, director or agent of an alcoholic beverage supplier, from providing anything of value to an on-sale retailer licensee, be it free goods, money, services or advertising. Over the years, numerous exceptions to this prohibition have been added to the ABC Act encompassing various venues throughout the state.

This bill creates a stand-alone tied-house exception applicable to Horsepower Entertainment Company, which is holding the KAABOO festival – a three-day event to be held in September 2015 at the San Diego Fairgrounds in Del Mar that will combine a diverse mix of music, culinary offerings, libations, art exhibitions, comedy, dancing and other amenities. Due to the fact that Horsepower Entertainment's ownership includes an interest in a Napa winery (Jamieson Ranch Vineyards) it cannot sponsor the festival on the grounds of the San Diego County Fair which has an on-sale licensee (caterer) on its premises.

This bill will enable Horsepower Entertainment to enter into a contractual agreement with an alcoholic beverage supplier interested in purchasing advertising at the festival. This bill subjects Horsepower Entertainment to certain requirements, as specified, and also requires the on-sale licensee operating at the venue where the live events are performed to serve other brands of beer, wine, or distilled spirits distributed by a competing wholesaler in addition to any brand manufactured or distributed by the owning, sponsoring, or advertising alcoholic beverage supplier.

According to the author's office, "the KAABOO festival is an entertainment experience with world-class music, dancing, incredible cuisine, craft libations, inspiring contemporary art, and more. In contrast to typical festivals, KAABOO will offer local and regional delicacies, a contemporary art fair, salon and golf simulator in addition to the more than 100 music acts. KAABOO has committed to donate $1 for every ticket sold to San Diego area charitable partners."

Additionally, the author's office indicates that the festival is expected to have a significant economic impact on the Del Mar region – local restaurants, lodging and other businesses are expected to benefit from the increased tourism that will be generated.

Related/Prior Legislation: SB 462 (Wolk) of the current legislative session, extends an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a specified entertainment complex, known as the Green Music Center, located on the campus of Sonoma State University. Additionally, this bill adds a new section of law to the ABC Act that allows alcoholic beverage licensees, as specified, to make monetary or alcoholic beverage contributions to the Green Music Center under certain conditions. (Pending on the Assembly Floor)

AB 527 (Dodd) of the current legislative session, creates a new tied-house exception that authorizes alcoholic beverage suppliers to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a non-publicly traded live entertainment company that has its principal place of business in Napa County, subject to specified restrictions. (Pending on the Senate Floor)

AB 600 (Bonta), Chapter 139, Statutes of 2014, extended an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor stadium with a fixed seating capacity of at least 68,000 seats located in the City of Santa Clara (Levi's Stadium – new home of the San Francisco 49ers).

SB 324 (Wright), Chapter 164, Statutes of 2013, extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a fully enclosed arena with a fixed seating capacity in excess of 13,000 seats (the Forum) in the City of Inglewood.

AB 813 (John A. Pérez), Chapter 647, Statutes of 2009, created a new tied-house exception that authorized the owner of a venue (Club Nokia) in Los Angeles to engage in a sponsorship agreement with an alcoholic beverage supplier for the privilege of placing advertising in the on-sale licensee’s premises, subject to specified conditions.

AB 776 (Aghazarian), Chapter 221, Statutes of 2007, created a new tied-house exception by authorizing a beer manufacturer to sponsor or purchase advertising space and time from, or on behalf of, an off-sale retail licensee that is an owner or co-owner of a professional sports team (California Cougars indoor soccer team) that plays its home games, in an arena with a fixed seating capacity of 10,000 seats (Stockton Arena) located in San Joaquin County.

AB 663 (Galgiani), Chapter 745, Statutes of 2007, extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor professional sports facility with a fixed seating capacity of at least 4,200 (Banner Island Ballpark – home of the Stockton Ports Class A baseball team) located in San Joaquin County.

AB 3046 (Chávez), Chapter 587, Statutes of 2006, extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to the HP Pavilion in Santa Clara County.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0001532

 THIRD READING  

Bill No: AB 1320

Author: Maienschein (R)

Amended: 8/18/15 in Senate

Vote: 27 - Urgency

SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 6/29/15

AYES: Hall, Berryhill, Block, Gaines, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Runner, Vidak

NO VOTE RECORDED: Galgiani

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 76-0, 5/26/15 (Consent) - See last page for vote

SUBJECT: Alcoholic beverages: tied-house restrictions: advertising

SOURCE: KAABOO Entertainment

DIGEST: This bill creates a new tied-house exception in the Alcoholic Beverage Control (ABC) Act that authorizes certain alcoholic beverage licensees to sponsor a limited number of events promoted by or to purchase advertising space and time from, or on behalf of, a live entertainment marketing company that conducts live artistic, musical, sports, or cultural entertainment events solely at the San Diego County Fairgrounds in Del Mar, under specified conditions.

Senate Floor Amendments of 8/18/15 include “rectifier” to the list of licensees that can purchase advertising; modify certain license terms so that they conform to existing ABC Act language; and, add an urgency clause.

ANALYSIS:

Existing law:

1. 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.
   
   

2. Separates the alcoholic beverage industry into three component parts, or tiers (referred to as the “tied-house” law or “three-tier” system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). 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 market place; (c) prohibit commercial bribery and to 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.

3. Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising.
   
   

4. Prohibits paid advertising by winegrowers, beer manufacturers and distilled spirits producers in cases where a retail licensee also owns a sports or entertainment venue. Over the years numerous exceptions to this prohibition have been added to the ABC Act [e.g., Sleep Train Arena (formerly known as ARCO Arena) in Sacramento, Oakland Coliseum in Oakland, Arrowhead Pond Arena in Anaheim, Kern County Arena in Bakersfield, the National Orange Show Event Center in San Bernardino, California Speedway in Fontana, Grizzly Stadium in downtown Fresno, Raley Field in West Sacramento, HP Pavilion in San Jose, the Home Depot Center in the City of Carson, Levi’s Stadium in the City of Santa Clara, and other venues].
   
   

5. Provides a narrow tied-house exception that expressly authorizes, under specified conditions, a beer manufacturer, holder of a winegrower’s license, California winegrower’s agent, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturer’s agent to purchase advertising space or time from a fully enclosed venue (ClubNokia) with box office sales and attendance by the public on a ticket basis only, with a patronage capacity in excess of 2,000, but not more than 3,000, located in Los Angeles County within the area subject to the Los Angeles Sports and Entertainment District Specific Plan adopted by the City on September 6, 2001, where the owner of the venue is not the on-sale retail licensee. (Business & Professions Code Section 25503.42)
   
   

This bill:

1. Authorizes a holder of a beer manufacturer license, holder of an out-of-state beer manufacturer’s certificate, holder of a winegrower’s license, winegrower’s agent, holder of a rectifier license, holder of a distilled spirits rectifier’s general license, distilled spirits manufacturer, distilled spirits manufacturer’s agent or holder of a beer and wine importer’s general license or distilled spirits importer’s general license that, unless it holds one of the other authorized licenses specified in this section, does not also hold a wholesale or retail license as an additional license (these entities will hereafter be referred to as “alcoholic beverage suppliers”) to sponsor events promoted by or to purchase advertising space and time from, or on behalf of, a live entertainment marketing company subject to the following conditions:
   
   

   1. The live entertainment marketing company operates and promotes live artistic, musical, sports, or cultural entertainment events only.
      
      

   2. All of the live events are conducted at the San Diego County Fairgrounds, in the City of Del Mar, and the events will typically occur over a period of no more than four consecutive days during which approximately 100 acts will perform before approximately 20,000 or more patrons.
      
      

   3. The live entertainment marketing company shall not conduct more than three of these types of events within a calendar year.
      
      

   4. The live entertainment marketing company is a Delaware limited liability company that is under common ownership, management, or control by a private equity firm that may also have common ownership, management, or control of a licensed California winery, provided the winery represents not more than 25% of the assets under common ownership, management, or control by the private equity firm or its subsidiaries, and the live entertainment marketing company exercises no control over the operations of the winery.
      
      

   5. Any on-sale licensee operating at a venue where live events are performed pursuant to a sponsorship or where advertising is purchased must serve other brands of beer, wine, or distilled spirits distributed by a competing wholesaler in addition to any brand manufactured or distributed by the owning, sponsoring, or advertising alcoholic beverage supplier.
      
      

   6. An agreement for the sponsorship of or for the purchase of advertising space and time during a live event shall not be conditioned directly, or indirectly, in any way, on the purchase, sale, or distribution of any alcoholic beverage manufactured or distributed by the owning, advertising, or sponsoring alcoholic beverage supplier by the live entertainment marketing company.
      
      

2. Provides that any sponsorship of events or purchase of advertising space or time must be conducted pursuant to a written contract entered into by the alcoholic beverage supplier and the live entertainment marketing company.
   
   

3. Makes it a misdemeanor for an alcoholic beverage supplier to coerce or induce, directly or indirectly, a licensed wholesaler to fulfill the contractual obligations entered into pursuant to the above provisions. Also, subjects the alcoholic beverage supplier (licensee) to license suspension or revocation.
   
   

4. Makes it a misdemeanor for the on-sale retail licensee to solicit or coerce, directly or indirectly, an alcoholic beverage supplier to purchase advertising time or space and subjects the on-sale retail licensee to license suspension or revocation.
   
   

5. Contains boiler plate language (legislative findings and declarations) relative to the necessity of requiring a separation between manufacturing interests, wholesale interests, and retail interests in the production and distribution of alcoholic beverages.
   
   

6. Contains an urgency clause, to take effect immediately.

Background

Purpose of AB 1320. As noted above, existing tied-house laws prohibit an alcoholic beverage supplier, or any officer, director or agent of an alcoholic beverage supplier, from providing anything of value to an on-sale retailer licensee, be it free goods, money, services or advertising. Over the years, numerous exceptions to this prohibition have been added to the ABC Act encompassing various venues throughout the state.

This bill creates a stand-alone tied-house exception applicable to Horsepower Entertainment Company, which is holding the KAABOO festival – a three-day event to be held in September 2015 at the San Diego Fairgrounds in Del Mar that will combine a diverse mix of music, culinary offerings, libations, art exhibitions, comedy, dancing and other amenities. Due to the fact that Horsepower Entertainment’s ownership includes an interest in a Napa winery (Jamieson Ranch Vineyards) it cannot sponsor the festival on the grounds of the San Diego County Fair which has an on-sale licensee (caterer) on its premises. This bill will enable Horsepower Entertainment to enter into a contractual agreement with an alcoholic beverage supplier interested in purchasing advertising at the festival. This bill subjects Horsepower Entertainment to certain requirements, as specified, and also requires the on-sale licensee operating at the venue where the live events are performed to serve other brands of beer, wine, or distilled spirits distributed by a competing wholesaler in addition to any brand manufactured or distributed by the owning, sponsoring, or advertising alcoholic beverage supplier.

According to the author’s office, “the KAABOO festival is an entertainment experience with world-class music, dancing, incredible cuisine, craft libations, inspiring contemporary art, and more. In contrast to typical festivals, KAABOO will offer local and regional delicacies, a contemporary art fair, salon and golf simulator in addition to the more than 100 music acts. KAABOO has committed to donate $1 for every ticket sold to San Diego area charitable partners.”

Additionally, the author’s office indicates that the festival is expected to have a significant economic impact on the Del Mar region – local restaurants, lodging and other businesses are expected to benefit from the increased tourism that will be generated.

Related/Prior Legislation

SB 462 (Wolk, 2015) extends an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a specified entertainment complex, known as the Green Music Center, located on the campus of Sonoma State University. Additionally, this bill adds a new section of law to the ABC Act that allows alcoholic beverage licensees, as specified, to make monetary or alcoholic beverage contributions to the Green Music Center under certain conditions. (Pending on the Assembly Floor)

AB 527 (Dodd, 2015) creates a new tied-house exception that authorizes alcoholic beverage suppliers to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a non-publicly traded live entertainment company that has its principal place of business in Napa County, subject to specified restrictions. (Pending on the Senate Floor)

AB 600 (Bonta, Chapter 139, Statutes of 2014) extended an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor stadium with a fixed seating capacity of at least 68,000 seats located in the City of Santa Clara (Levi’s Stadium – new home of the San Francisco 49ers).

SB 324 (Wright, Chapter 164, Statutes of 2013) extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a fully enclosed arena with a fixed seating capacity in excess of 13,000 seats (the Forum) in the City of Inglewood.

AB 813 (John A. Perez, Chapter 647, Statutes of 2009) created a new tied-house exception that authorized the owner of a venue (Club Nokia) in Los Angeles to engage in a sponsorship agreement with an alcoholic beverage supplier for the privilege of placing advertising in the on-sale licensee’s premises, subject to specified conditions.

AB 776 (Aghazarian, Chapter 221, Statutes of 2007) created a new tied-house exception by authorizing a beer manufacturer to sponsor or purchase advertising space and time from, or on behalf of, an off-sale retail licensee that is an owner or co-owner of a professional sports team (California Cougars indoor soccer team) that plays its home games, in an arena with a fixed seating capacity of 10,000 seats (Stockton Arena) located in San Joaquin County.

AB 663 (Galgiani, Chapter 745, Statutes of 2007) extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor professional sports facility with a fixed seating capacity of at least 4,200 (Banner Island Ballpark – home of the Stockton Ports Class A baseball team) located in San Joaquin County.

AB 3046 (Chavez, Chapter 587, Statutes of 2006) extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to the HP Pavilion in Santa Clara County.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT:

(Verified 8/19/15)

KAABOO Entertainment (source)

OPPOSITION: (Verified 8/19/15)

None received

ASSEMBLY FLOOR: 76-0, 5/26/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Bloom, Chávez, Harper, Mathis

Prepared by: Arthur Terzakis / G.O. / (916) 651-1530

8/19/15 20:34:35

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Isadore Hall, III

Chair

2015 - 2016 Regular

Bill No: AB 1320 Hearing Date: 6/29/2015

SUBJECT: Alcoholic beverages: tied-house restrictions: advertising

DIGEST: This bill creates a new tied-house exception in the Alcoholic Beverage Control (ABC) Act that authorizes certain alcoholic beverage licensees to sponsor a limited number of events promoted by or to purchase advertising space and time from, or on behalf of, a live entertainment marketing company that conducts live artistic, musical, sports, or cultural entertainment events solely at the San Diego County Fairgrounds in Del Mar, under specified conditions.

ANALYSIS:

Existing law:

1. 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.
   
   

2. Separates the alcoholic beverage industry into three component parts, or tiers (referred to as the “tied-house” law or “three-tier” system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). 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 market place; (c) prohibit commercial bribery and to 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.

3. Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising.
   
   

4. Prohibits paid advertising by winegrowers, beer manufacturers and distilled spirits producers in cases where a retail licensee also owns a sports or entertainment venue. Over the years numerous exceptions to this prohibition have been added to the ABC Act [e.g., Sleep Train Arena (formerly known as ARCO Arena) in Sacramento, Oakland Coliseum in Oakland, Arrowhead Pond Arena in Anaheim, Kern County Arena in Bakersfield, the National Orange Show Event Center in San Bernardino, California Speedway in Fontana, Grizzly Stadium in downtown Fresno, Raley Field in West Sacramento, HP Pavilion in San Jose, the Home Depot Center in the City of Carson, Levi’s Stadium in the City of Santa Clara, and other venues].
   
   

5. Provides a narrow tied-house exception that expressly authorizes, under specified conditions, a beer manufacturer, holder of a winegrower’s license, California winegrower’s agent, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturer’s agent to purchase advertising space or time from a fully enclosed venue (ClubNokia) with box office sales and attendance by the public on a ticket basis only, with a patronage capacity in excess of 2,000, but not more than 3,000, located in Los Angeles County within the area subject to the Los Angeles Sports and Entertainment District Specific Plan adopted by the City on September 6, 2001, where the owner of the venue is not the on-sale retail licensee. (Business & Professions Code Section 25503.42)
   
   

This bill:

1. Authorizes a beer manufacturer, holder of a winegrower’s license, winegrower’s agent, holder of an importer’s general license that does not also hold a wholesale or retail license as an additional license, holder of a distilled spirits rectifiers general license, distilled spirits manufacturer, or a distilled spirits manufacturer’s agent (these entities will hereafter be referred to as “alcoholic beverage suppliers”) to sponsor events promoted by or to purchase advertising space and time from, or on behalf of, a live entertainment marketing company subject to the following conditions:
   
   

   1. The live entertainment marketing company operates and promotes live artistic, musical, sports, or cultural entertainment events only.
      
      

   2. All of the live events are conducted at the San Diego County Fairgrounds, in the City of Del Mar, and the events will typically occur over a period of no more than four consecutive days during which approximately 100 acts will perform before approximately 20,000 or more patrons.
      
      

   3. The live entertainment marketing company shall not conduct more than three of these types of events within a calendar year.
      
      

   4. The live entertainment marketing company is a Delaware limited liability company that is under common ownership, management, or control by a private equity firm that may also have common ownership, management, or control of a licensed California winery, provided the winery represents not more than 25% of the assets under common ownership, management, or control by the private equity firm or its subsidiaries, and the live entertainment marketing company exercises no control over the operations of the winery.
      
      

   5. Any on-sale licensee operating at a venue where live events are performed pursuant to a sponsorship or where advertising is purchased must serve other brands of beer, wine, or distilled spirits distributed by a competing wholesaler in addition to any brand manufactured or distributed by the owning, sponsoring, or advertising alcoholic beverage supplier.
      
      

   6. An agreement for the sponsorship of or for the purchase of advertising space and time during a live event shall not be conditioned directly, or indirectly, in any way, on the purchase, sale, or distribution of any alcoholic beverage manufactured or distributed by the owning, advertising, or sponsoring alcoholic beverage supplier by the live entertainment marketing company.
      
      

2. Provides that any sponsorship of events or purchase of advertising space or time must be conducted pursuant to a written contract entered into by the alcoholic beverage supplier and the live entertainment marketing company.
   
   

3. Makes it a misdemeanor for an alcoholic beverage supplier to coerce or induce, directly or indirectly, a licensed wholesaler to fulfill the contractual obligations entered into pursuant to the above provisions. Also, subjects the alcoholic beverage supplier (licensee) to license suspension or revocation.
   
   

4. Makes it a misdemeanor for the on-sale retail licensee to solicit or coerce, directly or indirectly, an alcoholic beverage supplier to purchase advertising time or space and subjects the on-sale retail licensee to license suspension or revocation.
   
   

5. Contains boiler plate language (legislative findings and declarations) relative to the necessity of requiring a separation between manufacturing interests, wholesale interests, and retail interests in the production and distribution of alcoholic beverages.

Background

Purpose of AB 1320. As noted above, existing tied-house laws prohibit an alcoholic beverage supplier, or any officer, director or agent of an alcoholic beverage supplier, from providing anything of value to an on-sale retailer licensee, be it free goods, money, services or advertising. Over the years, numerous exceptions to this prohibition have been added to the ABC Act encompassing various venues throughout the state.

This bill creates a stand-alone tied-house exception applicable to Horsepower Entertainment Company, which is holding the KAABOO festival – a three-day event to be held in September 2015 at the San Diego Fairgrounds in Del Mar that will combine a diverse mix of music, culinary offerings, libations, art exhibitions, comedy, dancing and other amenities. Due to the fact that Horsepower Entertainment’s ownership includes an interest in a Napa winery (Jamieson Ranch Vineyards) it cannot sponsor the festival on the grounds of the San Diego County Fair which has an on-sale licensee (caterer) on its premises. This bill will enable Horsepower Entertainment to enter into a contractual agreement with an alcoholic beverage supplier interested in purchasing advertising at the festival. This bill subjects Horsepower Entertainment to certain requirements, as specified, and also requires the on-sale licensee operating at the venue where the live events are performed to serve other brands of beer, wine, or distilled spirits distributed by a competing wholesaler in addition to any brand manufactured or distributed by the owning, sponsoring, or advertising alcoholic beverage supplier.

According to the author’s office, “the KAABOO festival is an entertainment experience with world-class music, dancing, incredible cuisine, craft libations, inspiring contemporary art, and more. In contrast to typical festivals, KAABOO will offer local and regional delicacies, a contemporary art fair, salon and golf simulator in addition to the more than 100 music acts. KAABOO has committed to donate $1 for every ticket sold to San Diego area charitable partners.”

Additionally, the author’s office indicates that the festival is expected to have a significant economic impact on the Del Mar region – local restaurants, lodging and other businesses are expected to benefit from the increased tourism that will be generated.

Prior/Related Legislation

SB 462 (Wolk, 2015) extends an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a specified entertainment complex, known as the Green Music Center, located on the campus of Sonoma State University. Additionally, this bill adds a new section of law to the ABC Act that allows alcoholic beverage licensees, as specified, to make monetary or alcoholic beverage contributions to the Green Music Center under certain conditions. (Pending in Assembly policy committee)

AB 527 (Dodd, 2015) creates a new tied-house exception that authorizes alcoholic beverage suppliers to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a non-publicly traded live entertainment company that has its principal place of business in Napa County, subject to specified restrictions. (Pending in this Committee)

AB 600 (Bonta, Chapter 139, Statutes of 2014) extended an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor stadium with a fixed seating capacity of at least 68,000 seats located in the City of Santa Clara (Levi’s Stadium – new home of the San Francisco 49ers).

SB 324 (Wright, Chapter 164, Statutes of 2013) extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a fully enclosed arena with a fixed seating capacity in excess of 13,000 seats (the Forum) in the City of Inglewood.

AB 813 (John A. Perez, Chapter 647, Statutes of 2009) created a new tied-house exception that authorized the owner of a venue (Club Nokia) in Los Angeles to engage in a sponsorship agreement with an alcoholic beverage supplier for the privilege of placing advertising in the on-sale licensee’s premises, subject to specified conditions.

AB 776 (Aghazarian, Chapter 221, Statutes of 2007) created a new tied-house exception by authorizing a beer manufacturer to sponsor or purchase advertising space and time from, or on behalf of, an off-sale retail licensee that is an owner or co-owner of a professional sports team (California Cougars indoor soccer team) that plays its home games, in an arena with a fixed seating capacity of 10,000 seats (Stockton Arena) located in San Joaquin County.

AB 663 (Galgiani, Chapter 745, Statutes of 2007) extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor professional sports facility with a fixed seating capacity of at least 4,200 (Banner Island Ballpark – home of the Stockton Ports Class A baseball team) located in San Joaquin County.

AB 3046 (Chavez, Chapter 587, Statutes of 2006) extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to the HP Pavilion in Santa Clara County.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT:

KAABOO Entertainment (sponsor)

Family Winemakers of California

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: Writing in support, Family Winemakers of California (FWC) notes that AB 1320 extends existing tied-house exceptions relative to the general prohibition against advertising arrangements between retail, wholesale, and manufacturer licensees to Horsepower Entertainment which is holding the KAABOO Festival 2015. FWC states, “Traditionally, entertainment venues sell a variety of advertising signage that typically promotes products for sale at the facility or site, including alcoholic beverages. Advertising restrictions would preclude any signage, paid for by the manufacturer, unless such an exception is created. Horsepower Entertainment’s ownership includes a wine producer necessitating the exception.”

Date of Hearing: May 20, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 1320

Author:(Maienschein) – As Amended Ver:April 28, 2015

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill creates a specific tied-house exception to allow specific alcohol licensees to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company for live artistic, musical, sports, or cultural entertainment events conducted at the San Diego County Fairgrounds in Del Mar.

FISCAL EFFECT:

Minor, likely absorbable enforcement costs to the Department of Alcoholic Beverage Control as the bill is effectively unenforceable.

COMMENTS:

1) Purpose. According to the author, this bill creates a narrow exemption to the tied-house advertising rules to allow the event KAABOO to be conducted at the San Diego Fairgrounds in Del Mar. The author claims this exception is needed because KAABOO Entertainment's owners also own an interest in a winery, which would otherwise prohibit KAABOO from receiving advertising and sponsorships from alcoholic beverage manufacturers. The author asserts such limitations on alcoholic beverage sales would effectively preclude the festival from operation.

The author believes the KAABOO festival will have a significant economic impact on the Del Mar region, generating additional tourism at hotels, restaurants, and retailers, and contributing as much as $1.5 million in additional sales tax.

2) Other Tied-House Exemptions. California law contains numerous tied-house exceptions to permit advertising and sponsorships at certain events and venues. Some of the best known are exceptions for Levi's Stadium in Santa Clara, the Los Angeles Forum, the Stockton Arena, the Los Angeles County Fair, the Oakland Coliseum, and the California Speedway in Fontana.

Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081

Date of Hearing: April 30, 2015

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 1320

Author:(Maienschein) – As Amended Ver:April 28, 2015

SUBJECT: Alcoholic beverages: tied-house restrictions: advertising

SUMMARY: Provides a Tied-house exception allowing specific alcohol licensees to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company for live artistic, musical, sports, or cultural entertainment events which are conducted at the San Diego County Fairgrounds, located in the City of Del Mar in the County of San Diego, under specified conditions. Specifically, this bill:

1) Provides a beer manufacturer, holder of a winegrower’s license, winegrower’s agent, holder of an importer’s general license that does not also hold a wholesale or retail license as an additional license, distilled spirits manufacturer, holder of a distilled spirits rectifier’s general license, or a distilled spirits manufacturer’s agent may sponsor events promoted by, and may purchase advertising space and time from, or on behalf of, a live entertainment marketing company.

2) Provides that the live entertainment marketing company operate and promotes live artistic, musical, sports, or cultural entertainment events only.

3) Provides all of the live artistic, musical, sports, or cultural entertainment events are conducted at the San Diego County Fairgrounds, located in the City of Del Mar in the County of San Diego, and the events will typically occur over a period of three or more consecutive days during which approximately 100 acts will perform before approximately 20,000 or more patrons. The live entertainment marketing company shall not conduct more than three of these types of events within a calendar year.

4) States the live entertainment marketing company is a Delaware limited liability company that is under common ownership, management, or control by a private equity firm that may also have common ownership, management, or control of a licensed California winery, provided the winery represents not more than 25 percent of the assets under common ownership, management, or control by the private equity firm or its subsidiaries, and the live entertainment marketing company exercises no control over the operations of the winery.

5) Provides that any on-sale licensee operating at a venue where live artistic, musical, sports, or cultural entertainment events are performed pursuant to a sponsorship described in this section or where advertising is purchased, as described, shall serve other brands of beer, distilled spirits, and wine distributed by a competing wholesaler in addition to any brand manufactured or distributed by the owning, sponsoring, or advertising beer manufacturer, holder of a winegrower’s license, winegrower’s agent, holder of an importer’s general license, distilled spirits manufacturer, holder of a distilled spirits rectifier’s general license, or a distilled spirits manufacturer’s agent.

6) Provides that any sponsorship of events or purchase of advertising space or time conducted, as defined, shall be conducted pursuant to a written contract entered into by the beer manufacturer, holder of a winegrower’s license, winegrower’s agent, holder of an importer’s general license, distilled spirits manufacturer, holder of a distilled spirits rectifier’s general license, or a distilled spirits manufacturer’s agent and the live entertainment marketing company.

7) Contains language to address coercion or other illegal means, relating to the purchase of advertising time or space pursuant to this bill.

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) Existing law, known as the “tied-house” law or “three-tier” system, separates the alcoholic beverage industry into three component parts of manufacturer (the first tier), wholesaler (the second tier), and retailer (the third tier). 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.

3) Tied-house laws generally prohibit suppliers and retailers from sharing common owners and legally restrict alcohol beverage suppliers’ ability to gain control over retailers through indirect means. 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.

4) The Act prohibits an alcoholic beverage supplier from paying money, or giving or furnishing anything of value, for the privilege of placing or painting a sign or advertisement, or window display, on or in premises selling alcoholic beverages at retail.

5) Prohibits paid advertising by winegrowers, beer manufacturers and distilled spirits producers in cases where a retail licensee also owns a sports or entertainment venue. Over the years numerous exceptions to this prohibition have been added to the ABC Act (e.g., Sleep Train Arena in Sacramento, Oakland Coliseum in Oakland, Arrowhead Pond Arena in Anaheim, Kern County Arena in Bakersfield, the National Orange Show Event Center in San Bernardino, California Speedway in Fontana, Grizzly Stadium in downtown Fresno, Raley Field in West Sacramento, HP Pavilion in San Jose, the Home Depot Center in the City of Carson and other venues).

6) Provides a Tied-house exception allowing certain alcohol manufacturers and distributors to sponsor events or purchase advertising space from a live entertainment company that has its principal place of business in the County of Los Angeles, as defined.

7) 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).

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the bill: According to the author’s office, this bill creates a narrow exemption to the tied-house rules to enable an event by KAABOO to be successfully conducted at the San Diego Fairgrounds in Del Mar.

Stadiums, speedways and other concert venues have also had to have tied-house exceptions made in order to both sell alcoholic beverages and accept money for advertising. An additional exemption is needed in order for KAABOO music festival to do the same, as KAABOO Entertainment’s owners happen to have an ownership interest in a winery. Without this exemption, KAABOO music festival will be unable to secure important sponsorships from beverage manufacturers and this along with limitations on retail sales would mean the festival could not operate.

The KAABOO festival is expected to have a significant beneficial economic impact on the Del Mar region. Local restaurants, lodging and parking will all benefit from the increased tourism in the Del Mar area. The festival is expected to generate approximately $1.5 million in sales tax.

Related legislation: AB 527 (Dodd) of 2015. Would allow alcohol manufacturers and distributors to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a live entertainment company that has its principal place of business in the County of Napa, under specified conditions. (Pending in Assembly Appropriations Committee)

Prior legislation: SB 600 (Bonta), Chapter 139, Statutes of 2014. Extends an existing “Tied-house” exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor stadium with a fixed seating capacity of at least 68,000 seats located in the City of Santa Clara (Levi’s Stadium – San Francisco 49ers new stadium).

SB 324 (Wright), Chapter 164, Statutes of 2013. Provided a "Tied-house" exception to the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees and the Los Angeles Forum in the City of Inglewood.

AB 776 (Aghazarian) Chapter 221, Statutes of 2007. Created a new "Tied-house" exception by authorizing a beer manufacturer to sponsor or purchase advertising space and time from, or on behalf of, an off-sale retail licensee that is an owner or co-owner of a professional sports team (California Cougars indoor soccer team) that plays its home games, in an arena with a fixed seating capacity of 10,000 seats (Stockton Arena) located in San Joaquin County.

AB 663 (Galgiani) Chapter 745, Statutes of 2007. Extended an existing “Tied-house” exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor professional sports facility with a fixed seating capacity of at least 4,200 (Banner Island Ballpark) located in San Joaquin County.

AB 1442 (Horton) Chapter 617, Statutes of 2005. Extended an existing “Tied-house” exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to the Home Depot Center, a sports and athletic complex within the City of Carson in Los Angeles and the Nokia Theater, located within the Los Angeles Sports and Entertainment District, adjacent to Staples Center.

AB 3085 (Governmental Organization Committee), Chapter 437, Statutes of 2004. Provided the Los Angeles County Fair with an exemption from tied-house laws so that so that alcohol manufacturers may purchase advertising from, or on behalf of, the on-sale licensees at this venue.

SB 1647 (Perata) Chapter 275, Statutes of 2004. Extended an existing "Tied-house" exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licenses to the Oakland Coliseum in Alameda County.

SB 1189 (Costa) Chapter 47, Statutes of 2002. Extended an existing "Tied-house" exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licenses to the Visalia Oaks Stadium in Visalia and the California Speedway in Fontana.

REGISTERED SUPPORT / OPPOSITION:

Support

KAABOO Entertainment

Family Winemakers of California

Opposition

None on file

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531

Date of Hearing: April 27, 2015

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 1320

Author:(Maienschein) – As Amended Ver:March 26, 2015

SUBJECT: Alcoholic beverages: tied-house restrictions: fairgrounds

SUMMARY: Extends an existing “Tied-house” exception in the Alcoholic Beverage Control Act (ABC Act) pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a state or county-owned fairgrounds, under specified conditions. Specifically, this bill:

1) Authorizes a beer manufacturer, holder of a winegrower’s license, winegrower’s agent, holder of an importer’s general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturer’s agent to sponsor events promoted by or own, sponsor, conduct, or purchase advertising space and time from, or on behalf of, an on-sale retail licensee that is the owner, manager, agent of the owner, assignee of the owner’s advertising rights, or major tenant of a state or county-owned fairground, under specified conditions.

2) Makes a beer manufacturer, holder of a winegrower’s license, winegrower’s agent, holder of an importer’s general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturer’s agent who, through coercion or other illegal means, induces the holder of a wholesaler’s license to fulfill those contractual obligations entered into pursuant to these provisions guilty of a misdemeanor.

3) Makes an on-sale retail licensee, as described, who solicits or coerces a holder of a wholesaler’s license to solicit a beer manufacturer, holder of a winegrower’s license, winegrower’s agent, holder of an importer’s general license, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturer’s agent to purchase advertising time or space pursuant to these provisions guilty of a misdemeanor.

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 for this purpose.

2) Existing law, known as the "Tied-house" law or "three-tier" system, separates the alcoholic beverage industry into three component parts of manufacturer (the first tier), wholesaler (the second tier), and retailer (the third tier). 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.

3) Generally prohibits suppliers and retailers from sharing common owners and legally restrict alcohol beverage suppliers' ability to gain control over retailers through indirect means. 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.

4) Prohibits paid advertising by winegrowers, beer manufacturers and distilled spirits producers in cases where a retail licensee also owns a sports or entertainment venue. Over the years numerous exceptions to this prohibition have been added to the ABC Act

5) Grants a Tied-house exception to any holder of a beer manufacturer's or winegrower's license authorizing the purchase of advertising from, or on behalf of, an on-sale licensee if the on-sale licensee is the owner, manager, agent of the owner, assignee of the owner's advertising rights, or the major tenant of the owner of any of the following:

a) An outdoor stadium or a fully enclosed arena with a fixed seating capacity in excess of 10,000 seats located in Sacramento County or Alameda County;

b) A fully enclosed arena with a fixed seating capacity in excess of 18,000 seats located in Orange County or Los Angeles County;

c) An outdoor stadium or fully enclosed arena with a fixed seating capacity in excess of 8,500 seats located in Kern County;

d) An exposition park of not less than 50 acres that includes an outdoor stadium with a fixed seating capacity in excess of 8,000 seats and a fully enclosed arena with an attendance capacity in excess of 4,500 people, located in San Bernardino County;

e) An outdoor stadium with a fixed seating capacity in excess of 10,000 seats located in Yolo County;

f) An outdoor stadium and a fully enclosed arena with fixed seating capacities in excess of 10,000 seats located in Fresno County;

g) An athletic and entertainment complex of not less than 50 acres that includes within its boundaries an outdoor stadium with a fixed seating capacity of at least 8,000 seats and a second outdoor stadium with a fixed seating capacity of at least 3,500 seats located within Riverside County;

h) An outdoor stadium with a fixed seating capacity in excess of 1,500 seats located in Tulare County;

i) A motorsports entertainment complex of not less than 50 acres that includes within its boundaries an outdoor speedway with a fixed seating capacity of at least 50,000 seats, located within San Bernardino County;

j) An exposition park, owned or operated by a bona fide nonprofit organization, of not less than 400 acres with facilities including a grandstand with a seating capacity of at least 8,000 people, at least one exhibition hall greater than 100,000 square feet, and at least four exhibition halls, each greater than 30,000 square feet, located in the City of Pomona or the City of La Verne in Los Angeles County;

k) An outdoor soccer stadium with a fixed seating capacity of at least 25,000 seats, an outdoor tennis stadium with a fixed capacity of at least 7,000 seats, an outdoor track and field facility with a fixed seating capacity of at least 7,000 seats, and an indoor velodrome with a fixed seating capacity of at least 2,000 seats, all located within a sports and athletic complex built before January 1, 2005, within the City of Carson in Los Angeles County;

l) An outdoor professional sports facility with a fixed seating capacity of at least 4,200 seats located within San Joaquin County;

m) A fully enclosed arena with a fixed seating capacity in excess of 13,000 seats in the City of Inglewood; and

n) An outdoor stadium with a fixed seating capacity of at least 68,000 seats located in the City of Santa Clara.

6) Defines a state-supported fair organization as any fair that conducts an annual fair and submits an annual statement of operations to the CDFA. The generic term of "fairs" refers to District Agricultural Associations (DAA's), county fairs, citrus fairs, and the California State Fair.

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the bill: According to the author’s office, this bill amends ABC “Tied-house” provisions to include state-or county-owned fairgrounds on the list of exemptions in the law, thereby allowing these fairs to develop certain alcoholic beverage sponsorships with various manufacturers and distributors.

The author’s office points out that existing law precludes any signage paid for by an alcoholic beverage manufacturer or distributor unless such an exception is created. The author’s office emphasizes that such an exemption which would put the network of California fairs on an even playing field with other entertainment business in California and help support the industry’s efforts to make fairs more economically sustainable.

This Tied-house exemption is narrowly crafted and similar to those granted to the Los Angeles Forum in the City of Inglewood, the Los Angeles County Fair in Los Angeles County, the National Orange Show in San Bernardino, a theme or amusement park located in Orange County (Disneyland), the California Speedway in Fontana, the Indian Wells Tennis Club in Riverside County, non-profit theatre organizations, and maritime museums, among others.

Background: The network of California fairs includes 77 fair organizations divided into four categories: 52 DAA's - state government entities, 22 county fairs - County government or not-for-profit organizations, 2 citrus fruit fairs - not-for-profit organizations and the California Exposition and State Fair (Cal Expo) - a state agency. California’s 77 fairs are located throughout the Golden State and host fairs from early spring to the fall of each year.

The California Department of Food & Agriculture (CDFA) is responsible for the oversight of California's agricultural industry, including the network of California fairs. The Division of Fairs and Expositions (F&E), provides fiscal and policy oversight of the network of California fairs and ensures the best use of available funding and services.

An annual fair is just one of many year-round activities for fair organizations in California. They must facilitate use of the fairgrounds for interim events sponsored by community groups and private entities as well as manage ongoing maintenance and capital improvement projects. As a result, the fair network creates the opportunity for small-to medium-sized businesses and nonprofit community groups to make money from these year-round activities. These interim events further boost jobs, incomes and tax revenues in every county throughout the state. While the California fair network makes it possible for this economic activity to occur, fair organizations are public, not-for-profit entities that exist to promote industries of the state and provide a community gathering place. They do not receive state general fund monies in support of these efforts.

Tied-house law: Tied-House Law refers to the statutory scheme restricting any cross-ownership among the three independent tiers of the alcohol industry: a) manufacturers; b) distributors/wholesalers; and, c) retailers. The term "Tied-House" refers to a practice which was common in this country prior to prohibition, and is still occurring in England today, where a bar or "public house" is tied to the products of a particular manufacturer. The original rationale for

Tied-house restrictions are in place to promote the state's interest in maintaining an orderly market, to prohibit the vertical integration of the alcohol industry, to protect the public from predatory marketing practices, and to prevent the intemperate consumption of alcoholic beverages. In order to further these policy goals, the Legislature has generally prohibited forms of cross-ownership between manufacturers and retailers, and discouraged manufacturers from providing anything of value to distributors or retailers, be it free goods, services or advertising.

Numerous exceptions to these restrictions have been enacted through the years in those specific instances where the Legislature determined that the public's interests were protected. Generally, the business community is interested in removing unnecessary business regulations and creating conditions that facilitate investment and expansion opportunities for companies that have some degree of ownership in multiple segments of the industry. However, the Legislature traditionally does not grant exemptions that favors the products of the entity seeking the exemption, or exemptions that unfairly compromise the role of the distributors.

Related legislation: AB 527 (Dodd) of 2015. Would allow alcohol manufacturers and distributors to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a live entertainment company that has its principal place of business in the County of Napa, under specified conditions. (Pending in Assembly Appropriations Committee)

Prior legislation: SB 600 (Bonta), Chapter 139, Statutes of 2014. Extends an existing “Tied-house” exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor stadium with a fixed seating capacity of at least 68,000 seats located in the City of Santa Clara (Levi’s Stadium – San Francisco 49ers new stadium).

SB 324 (Wright), Chapter 164, Statutes of 2013. Provided a "Tied-house" exception to the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees and the Los Angeles Forum in the City of Inglewood.

AB 776 (Aghazarian) Chapter 221, Statutes of 2007. Created a new "Tied-house" exception by authorizing a beer manufacturer to sponsor or purchase advertising space and time from, or on behalf of, an off-sale retail licensee that is an owner or co-owner of a professional sports team (California Cougars indoor soccer team) that plays its home games, in an arena with a fixed seating capacity of 10,000 seats (Stockton Arena) located in San Joaquin County.

AB 663 (Galgiani) Chapter 745, Statutes of 2007. Extended an existing “Tied-house” exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor professional sports facility with a fixed seating capacity of at least 4,200 (Banner Island Ballpark) located in San Joaquin County.

AB 1442 (Horton) Chapter 617, Statutes of 2005. Extended an existing “Tied-house” exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to the Home Depot Center, a sports and athletic complex within the City of Carson in Los Angeles and the Nokia Theater, located within the Los Angeles Sports and Entertainment District, adjacent to Staples Center.

AB 3085 (Governmental Organization Committee), Chapter 437, Statutes of 2004. Provided the Los Angeles County Fair with an exemption from tied-house laws so that so that alcohol manufacturers may purchase advertising from, or on behalf of, the on-sale licensees at this venue.

SB 1647 (Perata) Chapter 275, Statutes of 2004. Extended an existing "Tied-house" exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licenses to the Oakland Coliseum in Alameda County.

SB 1189 (Costa) Chapter 47, Statutes of 2002. Extended an existing "Tied-house" exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licenses to the Visalia Oaks Stadium in Visalia and the California Speedway in Fontana.

REGISTERED SUPPORT / OPPOSITION:

Support

KAABOO Entertainment

Opposition

None on file

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531