(3)The act authorizes the holder of a winegrowers license, a beer manufacturer, a distilled spirits manufacturer, or a distilled spirits manufacturers agent, to purchase advertising space and time from, or on behalf of, an on-sale retail licensee, under certain conditions, if the on-sale retail licensee is the owner, manager, agent of the owner, assignee of the owners advertising rights, or major tenant of facilities meeting specified criteria, including, including location in a specified city, county, or university campus.

This bill would, in a addition, allow a beer manufacturer, the holder of a winegrowers winegrowers license, a rectifier, a distilled spirits manufacturer, or distilled spirits manufacturers agent to purchase advertising time and space from, or on behalf of, an on-sale retail licensee if the licensee is the owner, manager, agent of the owner, assignee of the owners advertising rights, or major tenant of stadiums and arenas subject to specified conditions, including that the advertising time and space is purchased only in connection with events to be held on the premises of those stadiums or arenas, but without specifying the location of the facility.

Existing law authorizes the holder of a winegrowers license, a beer manufacturer, a distilled spirits manufacturer, or a distilled spirits manufacturers agent, to purchase advertising space and time from, or on behalf of, an on-sale retail licensee, under certain conditions, if the on-sale retail licensee is the owner, manager, agent of the owner, assignee of the owners advertising rights, or major tenant of facilities meeting specified criteria, including, location in a specified city, county, or university campus.

This bill would, in a addition, allow a beer manufacturer, the holder of a winegrowers license, a distilled spirits rectifier, a distilled spirits manufacturer, or distilled spirits manufacturers agent to purchase advertising time and space from, or on behalf of, an on-sale retail licensee if the licensee is the owner, manager, agent of the owner, assignee of the owners advertising rights, or major tenant of stadiums and arenas subject to specified conditions, including that the advertising time and space is purchased only in connection with events be held on the premises of those stadiums or arenas, but without specifying the location of the facility.

Existing law authorizes the holder of a winegrowers license, a beer manufacturer, a distilled spirits manufacturer, or a distilled spirits manufacturers agent, to purchase advertising space and time from, or on behalf of, an on-sale retail licensee, under certain conditions, if the on-sale retail licensee is the owner, manager, agent of the owner, assignee of the owners advertising rights, or major tenant of facilities meeting specified criteria, including, location in a specified city, county, or university campus.

This bill would, in a addition, allow a beer manufacturer, the holder of a winegrowers license, a distilled spirits rectifier, a distilled spirits manufacturer, or distilled spirits manufacturers agent to purchase advertising time and space from, or on behalf of, an on-sale retail licensee if the licensee is the owner, manager, agent of the owner, assignee of the owners advertising rights, or major tenant of stadiums and arenas subject to specified conditions, including that the advertising time and space is purchased only in connection with events be held on the premises of those stadiums or arenas, but without specifying the location of the facility.

 THIRD READING  

Bill No: AB 1971

Author:

:

Vote:

SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 6/14/16

AYES: Hall, Bates, Block, Gaines, Galgiani, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Vidak

NO VOTE RECORDED: Berryhill

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 78-0, 5/12/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill creates a stand-alone tied-house exception in the Alcoholic Beverage Control (ABC) Act to allow holders of manufacturer licenses, as specified, to purchase advertising from retail licensees at outdoor stadiums and indoor arenas, subject to specified conditions. This bill also creates a new section in the ABC Act that requires the Department of ABC to utilize an audio recording as the official record of any administrative hearings and clarifies the procedure for requesting a transcript where the hearing was audio recorded. Additionally, this bill revises the fee for a brewery event permit, as specified.

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. The ABC Act also grants the Department authority to hear appeals of licensing and enforcement actions.
   
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, the Forum in the City of Inglewood, Levi’s Stadium in the City of Santa Clara, and other venues].
   
5. Authorizes a licensee under an on-sale general license or an on-sale beer and wine license to apply to the Department of ABC for an event permit that allows the sale of alcoholic beverages under that license for consumption on property adjacent to the licensed premises and owned or under the control of the licensee. A licensed beer manufacturer may also apply for a brewery event permit that allows the sale of beer produced by that beer manufacturer for consumption on property contiguous and adjacent to the licensed premises of the manufacturer. The fee for an event permit issued to an on-sale general licensee or an on-sale beer and wine licensee is $110 for permits issued during the 2004 calendar year and indexed for inflation thereafter, and the fee for a brewery event permit issued during the 2017 calendar year is $110 and indexed for inflation thereafter, as specified.
   
6. Authorizes the Department of ABC to conduct administrative hearings for, among other things, violations of the Act by a licensee. Additionally, the law allows a licensee to appeal specified decisions to the ABC Appeals Board, authorizes a person to request a transcript of a hearing from the department for a case on appeal, and allows a party to an appeal to request the right to appear before the board for argument.

This bill:

1. Provides that a beer manufacturer, the holder of a winegrowers license, a rectifier, a distilled spirits manufacturer, or distilled spirits manufacturer’s agent may purchase advertising time and space from, or on behalf of, an on-sale retail licensee subject to all of the following conditions:
   
   1. 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 outdoor stadium or fully enclosed arena with a fixed seating capacity in excess of 1,500 seats;
      
   2. The outdoor stadium or fully enclosed arena is not owned by a community college district;
      
   3. The advertising space or time is purchased only in connection with events to be held on the premises of the outdoor stadium or fully enclosed arena;
      
   4. The on-sale licensee serves other brands of beer distributed by a competing beer wholesaler in addition to the brand manufactured or marketed by the beer manufacturer, other brands of wine distributed by a competing wine wholesaler in addition to the brand produced by the winegrower, and other brands of distilled spirits distributed by a competing distilled spirits wholesaler in addition to the brand manufactured or marketed by the rectifier, distilled spirits manufacturer, or the distilled spirits manufacturer’s agent that purchased the advertising space or time.
      
2. Makes it explicit that this bill includes all stadiums and arenas licensed prior to the effective date of this bill.
   
3. Requires that an audio record be kept as the official record of any administrative hearing conducted by the Department of ABC. Also, requires the Department of ABC to provide an audio recording, when one has been made, of a hearing to the ABC Appeals Board and each party in lieu of a transcript for a case on appeal and requires an audio record to be kept of an argument before the ABC Appeals Board.
   
4. Prohibits the Department of ABC from creating an official record of any administrative hearing by videographic recording and provides that this type of recording is inadmissible in any proceeding before the ABC Appeals Board.

Background

Purpose of AB 1971. The author’s office notes that over the past 20 years, numerous individual exceptions to the tied-house laws have been enacted to allow manufacturers or suppliers to pay for advertising or become sponsors of specific entertainment venues. In recent years advertising arrangements between cities, stadiums, major tenants, and owners have become more fluid and ever changing. Because the Department of ABC continues to have the authority to investigate any complaints of alcohol related violations at these stadiums, the ABC believes that it is no longer necessary to make legislative changes to address every advertising arrangement. This bill creates a general exception allowing holders of manufacturer licenses to purchase advertising from retail licensees at indoor arenas and outdoor stadiums with fixed seating capacities in excess of 1,500 seats. This bill essentially allows the exemption for similar situated facilities without requiring specific and separate legislation for each facility.

This bill also addresses an inconsistency in existing law relative to certain ABC permit fees. Specifically, existing law (Business and Professions Code Section 23399.65) allows a licensed beer manufacturer to apply to the Department of ABC for a brewery event permit (Type 77 license). The brewery event permit mirrors, in most respects, the existing event permit for on-sale licensees (also a Type 77) as set forth in Section 23399. As initially proposed, the intent was for the fee for this new permit to be consistent with the fee for the on-sale event permit. However, due to a drafting error, the fee for a brewery event permit was erroneously set at one hundred ten dollars ($110) although the on-sale event permit fee has been set to $127.

Additionally, this bill is intended to address a problem identified by ABC staff relative to stenographic reporting provisions. According to ABC staff, existing law requires the Department to utilize a stenographic reporter for all administrative hearings, unless each of the parties consents to an electronic record. However, respondents in ABC hearings generally do not consent to an electronic record because the use of a stenographic reporter adds 50-75 day delays to the appeals process waiting for preparation of the transcript.  Delayed appeals, delay the imposition of penalties (fines, suspensions, license revocation), and potentially endanger the public. Stenographic reporter appearance fees alone cost the Department $200-500 per day, per hearing, with more spent by the ABC Appeals Board, the Department, and the parties for transcripts and copies of transcripts. Based upon the number of hearings held annually, the costs for court reporters simply to appear can exceed $42,000. In addition, it is estimated that the Department spends in excess of $47,000 annually to prepare transcripts of hearings.

Furthermore, existing law requires that a Department Administrative Law Judge (ALJ) issue a proposed decision within 30 days of the hearing. The expense and time associated with the preparation of a transcript from a stenographic record prohibits the Department from routinely providing transcripts prior to the issuance of a proposed decision. As a result, ALJs prepare decisions without the benefit of a copy of the record. Existing law requires both the ABC Appeals Board and the judicial branch to give deference to the ALJs findings of fact, yet those findings must be reached without the ability to review testimonial evidence.

Existing law also requires the ABC Appeals Board to hear oral argument on an appeal where a party requests it. The statute does not require a record of said hearing. According to ABC staff, the lack of clear statutory direction creates two problems. First, there is no mandate to create a record of the hearing. The ABC Appeals Board currently does not record, by audio or stenographic reporter, its hearings. Second, to the extent that a record is created, the lack of authority for the record may create issues on appeal.

The proposed solution recommended by ABC staff is to: (a) create a new section of law that requires the Department to utilize audio recordings for administrative hearings and prohibit video recordings at such hearings; (b) amend existing law to clarify the procedure for requesting a transcript where the hearing was audio recorded; and (c) amend existing law to require the ABC Appeals Board to create a record of oral argument hearings and authorize such record to be by audio recording.

ABC staff note that other agencies have been exempted from the stenographic reporting provisions.

Alcohol Justice has expressed opposition to the provisions in AB 1971 that would allow certain alcoholic beverage suppliers to purchase advertising from retail licensees at outdoor stadiums and indoor arenas. Alcohol Justice states “granting yet another regulatory exemption for a segment of the alcohol industry only further erodes fair and effective alcohol regulation in California. The state already suffers more than $22 billion in alcohol-related harm and over 10,000 alcohol-related deaths annually.”

Prior/Related Legislation

AB 866 (Garcia, 2016) 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 outdoor stadiums with specified seating capacities located in the Cities of Inglewood and San Diego, specifically, the future home of the National Football League Los Angeles Rams and Petco Park, home of the San Diego Padres Major League Baseball team. (Pending on Senate floor)

SB 557 (Hall, Chapter 420, Statutes of 2015) extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a fairgrounds with a horse racetrack and equestrian and sports facilities located in the County of San Diego.

SB 462 (Wolk, Chapter 315, Statutes of 2015) among other things, extended an existing tied-house exception 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.

AB 600 (Bonta, Chapter 139, Statutes of 2014) extended an existing tied-house exception 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.

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

SUPPORT:

(Verified 8/3/16)

Department of Alcoholic Beverage Control

OPPOSITION: (Verified 8/3/16)

Alcohol Justice

ASSEMBLY FLOOR: 78-0, 5/12/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon, Campos, Chang, Chau, Chávez, 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, Harper, Roger Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Burke, Jones-Sawyer

Prepared by:

8/3/16 19:24:10

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Isadore Hall, III

Chair

2015 - 2016 Regular

Bill No: AB Hearing Date: 6/14/2016

SUBJECT:

DIGEST: This bill creates a stand-alone tied-house exception in the Alcoholic Beverage Control (ABC) Act to allow holders of manufacturer licenses, as specified, to purchase advertising from retail licensees at outdoor stadiums and indoor arenas, subject to 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, the Forum in the City of Inglewood, Levi’s Stadium in the City of Santa Clara, and other venues].

This bill:

1. Provides that a beer manufacturer, the holder of a winegrowers license, a distilled spirits rectifier, a distilled spirits manufacturer, or distilled spirits manufacturer’s agent may purchase advertising time and space from, or on behalf of, an on-sale retail licensee subject to all of the following conditions:
   
   1. 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 outdoor stadium or fully enclosed arena with a fixed seating capacity in excess of 1,500 seats;
      
   2. The outdoor stadium or fully enclosed arena is not owned by a community college district;
      
   3. The advertising space or time is purchased only in connection with events to be held on the premises of the outdoor stadium or fully enclosed arena;
      
   4. The on-sale licensee serves other brands of beer distributed by a competing beer wholesaler in addition to the brand manufactured or marketed by the beer manufacturer, other brands of wine distributed by a competing wine wholesaler in addition to the brand produced by the winegrower, and other brands of distilled spirits distributed by a competing distilled spirits wholesaler in addition to the brand manufactured or marketed by the distilled spirits rectifier, distilled spirits manufacturer, or the distilled spirits manufacturer’s agent that purchased the advertising space or time.
      
2. Makes it explicit that this bill includes all stadiums and arenas licensed prior to the effective date of this bill.

Background

Purpose of AB 1971. The author’s office notes that over the past 20 years, numerous individual exceptions to the tied-house laws have been enacted to allow manufacturers or suppliers to pay for advertising or become sponsors of specific entertainment venues. In recent years advertising arrangements between cities, stadiums, major tenants, and owners have become more fluid and ever changing. Because the Department of ABC continues to have the authority to investigate any complaints of alcohol related violations at these stadiums, the ABC believes that it is no longer necessary to make legislative changes to address every advertising arrangement. This bill creates a general exception allowing holders of manufacturer licenses to purchase advertising from retail licensees at indoor arenas and outdoor stadiums with fixed seating capacities in excess of 1,500 seats. This bill essentially allows the exemption for similar situated facilities without requiring specific and separate legislation for each facility.

Technical amendments.

1. On page 2, lines 5 & 6, strike “distilled spirits rectifier” and add “rectifier”
   
2. On page 2, lines 27 & 28, strike “distilled spirits rectifier” and add “rectifier”
   

Prior/Related Legislation

AB 866 (Garcia, 2016) 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 outdoor stadiums with specified seating capacities located in the Cities of Inglewood and San Diego, specifically, the future home of the National Football League Los Angeles Rams and Petco Park, home of the San Diego Padres Major League Baseball team. (Pending in Senate Appropriations Committee)

AB 1767 (Bigelow, 2016) expands the specified conditions under which designated alcoholic beverage licensees may purchase advertising space or time in connection with events held on the premises of an exposition, park, stadium or arena owned by the on-sale licensee to include circumstances in which the premises are “leased” by the on-sale licensee. (Pending in this Committee)

SB 557 (Hall, Chapter 420, Statutes of 2015) extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a fairgrounds with a horse racetrack and equestrian and sports facilities located in the County of San Diego.

SB 462 (Wolk, Chapter 315, Statutes of 2015) among other things, extended an existing tied-house exception 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.

AB 600 (Bonta, Chapter 139, Statutes of 2014) extended an existing tied-house exception 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.

SB 351 (Negrete-McLeod, 2007) would have extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees so that alcoholic beverage manufacturers may purchase advertising from on-sale retail licensees in order to promote “safe ride home programs” at specified stadiums and arenas. (Placed on Assembly inactive file)

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.

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.

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 licensees 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 licensees to the Visalia Oaks Stadium in Visalia and the California Speedway in Fontana.

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

SUPPORT:

Department of Alcoholic Beverage Control

OPPOSITION:

Alcohol Justice

ARGUMENTS IN OPPOSITION: Alcohol Justice states that “granting yet another regulatory exemption for a segment of the alcohol industry only further erodes fair and effective alcohol regulation in California. The state already suffers more than $22 billion in alcohol-related harm and over 10,000 alcohol-related deaths annually. We believe AB 1971 will ultimately increase those catastrophic alcohol-related harms and costs in the state.”

Date of Hearing: May 4, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1971

Author:(Cooper) – As Introduced Ver:February 16, 2016

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

SUMMARY:

This bill modifies the Alcohol Beverage Control Act’s prohibition against advertising arrangements among retail, wholesale, and manufacturing licensees to allow an exception for stadiums and arenas subject to the following conditions:

1. The stadium or arena has a fixed seating capacity of more than 1,500 people;
2. The stadium or arena is not owned by a community college district;
3. The advertising space is purchased only in connection to the events to be held at the stadium or arena; and
4. Other competing brands of the type of alcoholic beverage being advertised are also sold.

FISCAL EFFECT:

Minor and absorbable costs to the California Department of Alcoholic Beverage Control (ABC).

COMMENTS:

1. Purpose. This bill aims to standardize “tied-house” policy regarding advertisements in larger stadiums and arenas. The author and ABC contend that standardizing this exception is preferable to creating individual exceptions by statute.
2. Background. Current "tied-house" law, also called “three-tier” law, prohibits paid advertising by winegrowers, beer manufacturers and distilled spirits producers in cases where a retail licensee also owns a sports or entertainment venue. California’s three-tier law is designed to prevent vertical integration between alcohol producers, wholesalers, and retailers. Limiting the ability for an alcoholic beverage producer or winegrower to pay a retail licensee, including a stadium or arena, for advertising its product is one way to protect consumers from predatory marketing.

However, over the years numerous exceptions to this prohibition have been added to the ABC Act (such as Sleep Train Arena in Sacramento, Oakland Coliseum in Oakland, Levi’s Stadium in Santa Clara). In these cases, an owner in one tier (Bud Light, for example) can pay a retail licensee (Santa Clara Stadium Authority, for example) for displaying advertising.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: April 20, 2016

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 1971 (

Author:Cooper) – As Introduced Ver:February 16, 2016

SUBJECT: Alcoholic beverages: tied-house restrictions: advertising

SUMMARY: Creates a new section in the Alcoholic Beverage Control Act (Act) to allow holders of manufacturer’s licenses, as defined, to purchase advertising and space from, retail licensees at indoor arenas and outdoor stadiums with fixed seating capacities in excess of 1,500, subject to specified conditions. Specifically, this bill:

1) Specifies that a beer manufacturer, the holder of a winegrowers license, a distilled spirits rectifier, a distilled spirits manufacturer, or distilled spirits manufacturer’s agent may purchase advertising time and space from, or on behalf of, an on-sale retail licensee subject to all of the following conditions:

(a) 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 outdoor stadium or fully enclosed arena with a fixed seating capacity in excess of 1,500. This subdivision includes all stadiums and arenas licensed prior to the effective date of the measure adding this section.

(b) The outdoor stadium or fully enclosed arena, as described, is not owned by a community college district.

(c) The advertising space or time is purchased only in connection with events to be held on the premises of the outdoor stadium or fully enclosed arena.

(d) The on-sale licensee serves other brands of beer distributed by a competing beer wholesaler in addition to the brand manufactured or marked by the beer manufacturer, other brands of wine distributed by a competing wine wholesaler in addition to the brand produced by the winegrower, and other brands of distilled spirits distributed by a competing distilled spirits wholesaler in addition to the brand manufactured or marketed by the distilled spirits rectifier, the distilled spirits manufacturer, or the distilled spirits manufacturer’s agent that purchased the advertising space or time.

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)

FISCAL EFFECT: Unknown

COMMENTS:

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 Act encompassing various venues throughout the state.

This bill will create a stand-alone tied-house exception applicable to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees at any stadium or fully enclosed arena in the state. This exception would include current stadiums and arenas licensed prior to the effective date of this measure and any future enclosed arena or outdoor stadium with a fixed seating capacity in excess of 1,500.

According to the author's office, at many arenas and stadiums, the owner of the facility is also the alcoholic beverage retail licensee or leases the alcoholic beverage concessions to a third party. Alcoholic beverage manufacturers are prohibited from purchasing advertising from retail licensees and are prohibited from paying for placing advertising in licensed retail premises. Over the years, numerous exceptions to these tied-house laws have been enacted to allow manufacturers or suppliers to pay for advertising or become sponsors of these facilities (outdoor stadium or fully enclosed arena). Numerous facilities throughout the state have specifically been exempt from this prohibition within Business and Professions Code Section 25503.6. Each facility has been the subject of legislation to obtain its specific exemption. Moreover, similarly situated facilities must seek legislation to obtain an exemption specific to the particular facility and their proposed business models. During the 2014 legislative session two pieces of legislation (AB 600 Bonta and AB 1424 (G.O. Committee) were required to address the advertising arrangement desired for Levi Stadium in Santa Clara, California. The author states this bill will create consistency in the privileges afforded to similarly situated licensees throughout the state.

Currently, there are two major professional sporting venues, AT&T Park in San Francisco and Petco Park in San Diego, with retail ABC licenses where alcohol manufacturers or suppliers are advertising without this specific statutory authorization since their opening in 2000 and 2004 respectively. Each of these venues seat over 41,000 spectators and hold hundreds of events annually without this exception with no apparent detriment to the attending public, the three-tier system, or public interest.

The author further states although this proposal will add more exceptions to the ABC Act, this addition does not harm the public interest, grants the same privileges to similarly situated licensees, and facilitates business investments in local communities.

In support: Writing in support, ABC states, "Numerous exceptions to the tied-house laws have been enacted to allow manufacturers or suppliers to pay for advertising or become sponsors of entertainment venues. In recent years, advertising arrangements between cities, stadiums, arenas, major tenants, and owners have become more fluid and ever changing. Making legislative changes to address every advertising arrangement is not necessary as ABC continues to have the authority to investigate any complaints of alcohol related violations at these stadiums." ABC has the authority to suspend, revoke, or deny a license if it determines that granting or continuance of the license would be contrary to public welfare or morals.

Prior legislation: AB 1320 (Maienschein), Chapter 527, Statutes of 2015. Creates a new tied-house exception in the 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.

SB 600 (Bonta), Chapter 139, Statutes of 2014. Extended a 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 (Levi's Stadium) with a fixed seating capacity of at least 68,000 seats located in the City of Santa Clara.

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 813 (John A. Pérez), Chapter 647, Statutes of 2009. Created a tied-house exception by allowing 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.

SB 520 (Governmental Organization Committee), Chapter 349, Statutes of 2007. Provided 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.

AB 776 (Aghazarian) Chapter 221, Statutes of 2007. Created a 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 a 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 3046 (Chavez) Chapter 587, Statutes of 2006. Extended a 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.

AB 1442 (Horton) Chapter 617, Statutes of 2005. Extended a 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.

SB 1647 (Perata) Chapter 275, Statutes of 2004. Extended a 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 a 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

Department of Alcoholic Beverage Control

Opposition

None on file

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