The Alcoholic Beverage Control Act generally prohibits a manufacturer, winegrower, manufacturers agent, California winegrowers agent, rectifier, distiller, bottler, importer, or wholesaler from furnishing or lending money or other thing of value to a person engaged in operating, owning, or maintaining an on-sale licensed premises. The act provides that the listing of the names, addresses, telephone numbers, email addresses, Internet Web site addresses, or other electronic media, of 2 or more unaffiliated on-sale retailers selling beer, wine, or distilled spirits of a nonretail industry member, as defined, in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement, if certain conditions are met. The act includes among those conditions the requirement that the listing not refer to only one on-sale retailer or only to on-sale retail establishments controlled by the same retailer. The act creates a parallel exception from the general prohibition on furnishing or lending money or things of value for off-sale retailers, except that it does not reference other electronic media.

This bill would broaden the exception for on-sale retailers described above by removing the requirement that the listing be in response to a direct inquiry and would include within the definition of a nonretail industry member brandy manufacturers and rectifiers. The bill would also permit the listing of contact information pursuant to these provisions for off-sale retailers, make conforming changes to reflect this inclusion, and delete provisions that would be redundant regarding off-sale retailers, as described above.

The Alcoholic Beverage Control Act generally prohibits a manufacturer, winegrower, manufacturers agent, California winegrowers agent, rectifier, distiller, bottler, importer, or wholesaler from furnishing or lending money or other thing of value to a person engaged in operating, owning, or maintaining an on-sale licensed premises. The act provides that the listing of the names, addresses, telephone numbers, email addresses, Internet Web site addresses, or other electronic media, of 2 or more unaffiliated on-sale retailers selling beer, wine, or distilled spirits of a nonretail industry member, as defined, in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement, if certain conditions are met. The act includes among those conditions the requirement that the listing not refer to only one on-sale retailer or only to on-sale retail establishments controlled by the same retailer. The act creates a parallel exception from the general prohibition on furnishing or lending money or things of value for off-sale retailers, except that it does not reference other electronic media.

This bill would broaden the exception for on-sale retailers described above by removing the requirement that the listing be in response to a direct inquiry and would include within the definition of a nonretail industry member brandy manufacturers and rectifiers. The bill would also permit the listing of contact information pursuant to these provisions for off-sale retailers, make conforming changes to reflect this inclusion, and delete provisions that would be redundant regarding off-sale retailers, as described above.

The Alcoholic Beverage Control Act generally prohibits a manufacturer, winegrower, manufacturers agent, California winegrowers agent, rectifier, distiller, bottler, importer, or wholesaler from furnishing or lending money or other thing of value to a person engaged in operating, owning, or maintaining an on-sale licensed premises. The act provides that the listing of the names, addresses, telephone numbers, email addresses, Internet Web site addresses, or other electronic media, of 2 or more unaffiliated on-sale retailers selling beer, wine, or distilled spirits, as specified, spirits of a nonretail industry member, as defined, in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement, if specified certain conditions are met. The act includes among those conditions the requirement that the listing not refer to only one on-sale retailer or only to on-sale retail establishments controlled by the same retailer. The act creates a parallel exception from the general prohibition on furnishing or lending money or things of value for off-sale retailers, except that it does not reference other electronic media.

This bill would broaden the exception for on-sale retailers described above by removing the requirement that the listing be in response to a direct inquiry, as specified. inquiry and would include within the definition of a nonretail industry member brandy manufacturers and rectifiers. The bill would also permit the listing of contact information pursuant to these provisions for off-sale retailers and would retailers, make conforming changes to reflect this inclusion. inclusion, and delete provisions that would be redundant regarding off-sale retailers, as described above.

The Alcoholic Beverage Control Act generally prohibits a manufacturer, winegrower, manufacturers agent, California winegrowers agent, rectifier, distiller, bottler, importer, or wholesaler from furnishing or lending money or other thing of value to a person engaged in operating, owning, or maintaining an on-sale licensed premises. The act provides that the listing of the names, addresses, telephone numbers, email addresses, Internet Web site addresses, or other electronic media, of 2 or more unaffiliated on-sale retailers selling beer, wine, or distilled spirits, as specified, in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement, if specified conditions are met. The act includes among those conditions the requirement that the listing not refer to only one on-sale retailer or only to on-sale retail establishments controlled by the same retailer.

This bill would broaden the exception described above by removing the requirement that the listing refer to two or more unaffiliated retailers or be in response to a direct inquiry, as specified. The bill would also remove the condition that the listing not refer to only one on-sale retailer or only to on-sale retail establishments controlled by the same retailer. The bill would also permit the listing of contact information for off-sale retailers and would make conforming changes to reflect this inclusion.

The Alcoholic Beverage Control Act generally prohibits a manufacturer, winegrower, manufacturers agent, California winegrowers agent, rectifier, distiller, bottler, importer, or wholesaler from furnishing or lending money or other thing of value to a person engaged in operating, owning, or maintaining an on-sale licensed premises. The act provides that the listing of the names, addresses, telephone numbers, email addresses, Internet Web site addresses, or other electronic media, of 2 or more unaffiliated on-sale retailers selling beer, wine, or distilled spirits, as specified, in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement, if specified conditions are met. The act includes among those conditions the requirement that the listing not refer to only one on-sale retailer or only to on-sale retail establishments controlled by the same retailer.

This bill would broaden the exception described above by removing the requirement that the listing refer to two or more unaffiliated retailers or be in response to a direct inquiry, as specified. The bill would also remove the condition that the listing not refer to only one on-sale retailer or only to on-sale retail establishments controlled by the same retailer.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 780

Author:(Williams)

As Amended Ver:June 15, 2015

Majority vote

Original Committee Reference: G.O.

SUMMARY: Makes clarifying and conforming changes to existing provisions of the Alcoholic Beverage Control Act (Act) relating to the listing of on-sale and off-sale retailers as a thing of value in order to enable licensees to connect with each other for normal commercial purposes. Specifically, this bill:

1. Consolidates two similar tied-house exceptions (one pertaining to on-sale retailers and the other to off-sale retailers) which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers.

2. Eliminates the requirement that the dissemination of information be in response to a direct inquiry from a consumer, thus broadening the exception.

3. Includes brandy manufacturers and rectifiers within the definition of non-retail industry member.

4. Contains boilerplate 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.

5. Makes other minor conforming changes.

The Senate amendments:

1. Add boilerplate 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.

2. Include brandy manufacturers and rectifiers within the definition of non-retail industry member.

3. Add coauthors.

4. Make other minor conforming changes.

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.

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. Provides that the listing of the names, addresses, telephone numbers, email addresses, or Internet Web site addresses, of two or more unaffiliated off-sale retailers selling beer, wine, or distilled spirits and operating and licensed as bona fide public eating places selling the beer, wine, or distilled spirits produced, distributed, or imported by a nonretail industry member in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement to the listed off-sale retailer, if specified conditions are met.

5. Includes similar provisions applicable to on-sale licensed premises, except that those provisions also extend the exception described in item 4) above, to others forms of "electronic" media.

6. Defines an on-sale license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An off-sale license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

AS PASSED BY THE ASSEMBLY, this bill amended a provision in the Act that authorizes the dissemination of information regarding retail availability of alcoholic products to remove the requirement that the dissemination be in response to a direct inquiry from a consumer, and broadens the provision to include both on-sale and off-sale retailers.

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 this bill. According to the author's office, this bill is intended to provide small distillers, brewers, and wineries with an additional tool to promote their businesses. The author's office contends that social media is a free form of advertisement to the public; therefore, it should not be subject to the traditional notion of advertising as a "gift" under current tied-house laws.

The author's office emphasizes this bill will provide greater flexibility and protect the ability of specified alcohol interests to engage in social media communications with consumers, while preserving the original intent of the tied-house law of prohibiting gifts of advertisement from alcoholic beverage producers, distributors or importers.

Prior Legislation: AB 2349 (Nestande), Chapter 374, Statutes of 2012 provided that the listing of names, addresses, telephone numbers, or email addresses in other forms of electronic media do not constitute a thing of value.

SB 1096 (Wiggins), Chapter 285, Statutes of 2010 revised the direct inquiry provisions in the ABC Act pertaining to the authority of producers, wholesalers and importers to respond to consumer inquiries as to where their products may be found to include any "electronic" inquiries from consumers.

SB 1423 (Chesbro), Chapter 205, Statutes of 2000 authorized wineries and brandy manufacturers to advertise the name and location of restaurants that sell their products.

SB 1233 (Chesbro), Chapter 666, Statutes of 1999 allowed for the limited dissemination of information regarding the off-sale availability of alcoholic beverages.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0001445

 CONSENT  

Bill No: AB 780

Author: Williams (D), et al.

Amended: 6/15/15 in Senate

Vote: 21

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: 77-0, 5/7/15 (Consent) - See last page for vote

SUBJECT: Alcoholic beverages: tied-house restrictions: on-sale retailers advertising

SOURCE: Author

DIGEST: This bill makes clarifying and conforming changes to existing provisions of the Alcoholic Beverage Control (ABC) Act relating to the listing of on-sale and off-sale retailers as a thing of value in order to enable licensees to connect with each other for normal commercial purposes.

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.
   
   

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. Provides that the listing of the names, addresses, telephone numbers, email addresses, or Internet Web site addresses, of two or more unaffiliated off-sale retailers selling beer, wine, or distilled spirits and operating and licensed as bona fide public eating places selling the beer, wine, or distilled spirits produced, distributed, or imported by a nonretail industry member in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement to the listed off-sale retailer, if specified conditions are met.
   
   

5. Includes similar provisions applicable to on-sale licensed premises, except that those provisions also extend the exception described in item #4 above to others forms of “electronic” media.

6. Defines an on-sale license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An off-sale license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Consolidates two similar tied-house exceptions (one pertaining to on-sale retailers and the other to off-sale retailers) which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers.
   
   

2. Eliminates the requirement that the dissemination of information be in response to a direct inquiry from a consumer, thus broadening the exception.
   
   

3. Includes brandy manufacturers and rectifiers within the definition of non-retail industry member.

4. 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.
   
   

5. Makes other minor conforming changes.
   
   

Background

Tied-house laws. Tied-house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the “house” of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer’s products. Existing tied-house laws generally prohibit a manufacturer, importer or wholesaler from furnishing, giving, or lending any money or other thing of value to any person engaged in operating, owning, or maintaining any off-sale or on-sale licensed retail premise. Existing law also provides two separate tied-house exceptions (one pertaining to on-sale retailers and the other to off-sale retailers) relative to the listing of a licensed retailer as a thing of value or prohibited inducement.

Purpose of AB 780. According to the author’s office, this bill is intended to provide small distillers, brewers, and wineries with an additional tool to promote their businesses. The author’s office contends that social media is a free form of advertisement to the public; therefore, it should not be subject to the traditional notion of advertising as a “gift” under current tied-house laws.

The author’s office emphasizes that AB 780 will provide greater flexibility and protect the ability of specified alcohol interests to engage in social media communications with consumers, while preserving the original intent of the tied-house law of prohibiting gifts of advertisement from alcoholic beverage producers, distributors or importers.

Prior/Related Legislation

SB 327 (Hall, 2015) consolidates two similar tied-house exceptions within the ABC Act which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers. (Pending on the Assembly Floor)

AB 973 (Gray, 2015) consolidates two similar tied-house exceptions within the ABC Act which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers. (Pending on the Senate Floor)

AB 2349 (Nestande, Chapter 374, Statutes of 2012) provided that the listing of names, addresses, telephone numbers, or email addresses in other forms of electronic media do not constitute a thing of value.

SB 1096 (Wiggins, Chapter 285, Statutes of 2010) revised the direct inquiry provisions in the ABC Act pertaining to the authority of producers, wholesalers and importers to respond to consumer inquiries as to where their products may be found to include any “electronic” inquiries from consumers.

SB 1423 (Chesbro, Chapter 205, Statutes of 2000) authorized wineries and brandy manufacturers to advertise the name and location of restaurants that sell their products.

SB 1233 (Chesbro, Chapter 666, Statutes of 1999) allowed for the limited dissemination of information regarding the off-sale availability of alcoholic beverages.

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

SUPPORT:

(Verified 8/7/15)

Ascendant Spirits, Inc.

California Craft Brewers Association

Family Winemakers of California

Wine Institute

OPPOSITION: (Verified 8/7/15)

None received

ARGUMENTS IN SUPPORT: Proponents contend that this bill is a “win-win-win for wineries, consumers, and retailers. It would remove for wineries, other suppliers, and wholesalers the awkwardness of only reacting to consumer inquiries. The information would be able to be routinely posted on the business’ website or other forms of social media, which provides easy access for interested consumers. This information could drive business to retailers carrying the supplier’s or wholesaler’s products.”

Additionally, proponents argue that AB 780 “recognizes the exponential progress in how consumers communicate and find products on-line. It allows wineries to affirmatively communicate where their wines are available without being asked. This helps in a highly competitive marketplace where the sale of non-California wine is projected to capture 43% of all sales in the United States, according to a new Gomberg-Fredrickson report.”

ASSEMBLY FLOOR: 77-0, 5/7/15

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

NO VOTE RECORDED: Campos, Roger Hernández, Steinorth

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

8/18/15 17:03:37

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Isadore Hall, III

Chair

2015 - 2016 Regular

Bill No: AB 780 Hearing Date: 6/29/2015

SUBJECT: Alcoholic beverages: tied-house restrictions: on-sale retailers advertising

DIGEST: This bill makes clarifying and conforming changes to existing provisions of the Alcoholic Beverage Control (ABC) Act relating to the listing of on-sale and off-sale retailers as a thing of value in order to enable licensees to connect with each other for normal commercial purposes.

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.
   
   

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. Provides that the listing of the names, addresses, telephone numbers, email addresses, or Internet Web site addresses, of two or more unaffiliated off-sale retailers selling beer, wine, or distilled spirits and operating and licensed as bona fide public eating places selling the beer, wine, or distilled spirits produced, distributed, or imported by a nonretail industry member in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement to the listed off-sale retailer, if specified conditions are met.
   
   

5. Includes similar provisions applicable to on-sale licensed premises, except that those provisions also extend the exception described in item #4 above to others forms of “electronic” media.

6. Defines an on-sale license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar). An off-sale license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.

This bill:

1. Consolidates two similar tied-house exceptions (one pertaining to on-sale retailers and the other to off-sale retailers) which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers.
   
   

2. Eliminates the requirement that the dissemination of information be in response to a direct inquiry from a consumer, thus broadening the exception.
   
   

3. Includes brandy manufacturers and rectifiers within the definition of non-retail industry member.

4. 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.
   
   

5. Makes other minor conforming changes.
   
   

Background

Tied-house laws. Tied-house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the “house” of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer’s products. Existing tied-house laws generally prohibit a manufacturer, importer or wholesaler from furnishing, giving, or lending any money or other thing of value to any person engaged in operating, owning, or maintaining any off-sale or on-sale licensed retail premise. Existing law also provides two separate tied-house exceptions (one pertaining to on-sale retailers and the other to off-sale retailers) relative to the listing of a licensed retailer as a thing of value or prohibited inducement.

Purpose of AB 780. According to the author's office, this bill is intended to provide small distillers, brewers, and wineries with an additional tool to promote their businesses. The author's office contends that social media is a free form of advertisement to the public; therefore, it should not be subject to the traditional notion of advertising as a “gift” under current tied-house laws.

The author’s office emphasizes that AB 780 will provide greater flexibility and protect the ability of specified alcohol interests to engage in social media communications with consumers, while preserving the original intent of the tied-house law of prohibiting gifts of advertisement from alcoholic beverage producers, distributors or importers.

Prior/Related Legislation

SB 327 (Hall, 2015) consolidates two similar tied-house exceptions within the ABC Act which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers. (Pending in Assembly policy committee)

AB 973 (Gray, 2015) consolidates two similar tied-house exceptions within the ABC Act which authorize the dissemination of information pertaining to the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct inquiries from consumers. (Pending in Senate Governmental Organization Committee)

AB 2349 (Nestande, Chapter 374, Statutes of 2012) provided that the listing of names, addresses, telephone numbers, or email addresses in other forms of electronic media do not constitute a thing of value.

SB 1096 (Wiggins, Chapter 285, Statutes of 2010) revised the direct inquiry provisions in the ABC Act pertaining to the authority of producers, wholesalers and importers to respond to consumer inquiries as to where their products may be found to include any “electronic” inquiries from consumers.

SB 1423 (Chesbro, Chapter 205, Statutes of 2000) authorized wineries and brandy manufacturers to advertise the name and location of restaurants that sell their products.

SB 1233 (Chesbro, Chapter 666, Statutes of 1999) allowed for the limited dissemination of information regarding the off-sale availability of alcoholic beverages.

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

SUPPORT:

Ascendant Spirits, Inc.

California Craft Brewers Association

Family Winemakers of California

Wine Institute

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: Proponents contend that this bill is a “win-win-win for wineries, consumers, and retailers. It would remove for wineries, other suppliers, and wholesalers the awkwardness of only reacting to consumer inquiries. The information would be able to be routinely posted on the business’ website or other forms of social media, which provides easy access for interested consumers. This information could drive business to retailers carrying the supplier’s or wholesaler’s products.”

Additionally, proponents argue that AB 780 “recognizes the exponential progress in how consumers communicate and find products on-line. It allows wineries to affirmatively communicate where their wines are available without being asked. This helps in a highly competitive marketplace where the sale of non-California wine is projected to capture 43% of all sales in the United States, according to a new Gomberg-Fredrickson report.”

Date of Hearing: April 29, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 780

Author:(Williams) – As Amended Ver:April 8, 2015

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

SUMMARY:

This bill amends a provision in the Alcoholic Beverage Control Act that authorizes the dissemination of information regarding retail availability of alcoholic products to remove the requirement that the dissemination be in response to a direct inquiry from a consumer, and broadens the provision to include both on-sale and off-sale retailers.

FISCAL EFFECT:

Minor and absorbable enforcement costs to the Department of Alcoholic Beverage Control.

COMMENTS:

1) Purpose. According to the author, this bill provides small distillers, brewers, and wineries with an additional tool to promote their businesses. The author believes social media is an important form of free communication, and should not be subject to the traditional notion of advertising as a "gift" under the current tied-house rules. This bill eliminates the requirement that the names, addresses, telephone numbers, email addresses, or web information of two or more retailers only be provided in response to a direct inquiry from a consumer.

2) Related Legislation. AB 973 (Gray) of this legislative session merges two provisions in the Alcoholic Beverage Control Act that authorize the dissemination of information regarding retail availability of alcoholic products, one which pertains to on-sale retailers and one which pertains to off-sale retailers. This bill modifies the same code section, is intended to achieve many of the same policy aims, and could easily be incorporated into that bill. The Committee may wish to consider whether the Legislature requires two different vehicles to make this minor code change.

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

Date of Hearing: April 22, 2015

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 780

Author:Williams – As Amended Ver:April 8, 2015

SUBJECT: Alcoholic beverages: tied-house restrictions: on-sale retailers advertising

SUMMARY: Broadens the exception in the Alcoholic Beverage Control Act (Act) by removing the requirement that the listing be in response to a direct inquiry, as specified. The bill would also permit the listing of contact information for off-sale retailers and would make conforming changes to reflect this inclusion. Specifically, this bill:

1) Provides the listing of the names, addresses, telephone numbers, email addresses, or Internet web site addresses, or other electronic media, of two or more unaffiliated on-sale or off-sale retailers selling beer, wine, or distilled spirits produced, distributed, or imported by a non-retail industry member does not constitute a thing of value or prohibited inducement to the listed on-sale or off-sale retailer, provided all of the following conditions are met:

a) The listing is the only reference to the on-sale or off-sale retailers in the direct communication.

b) The listing does not refer only to one on-sale or off-sale retailer or only to on-sale or off- sale retail establishments controlled directly or indirectly by the same retailer.

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 or occupation taxes for this purpose.

2. Existing law, known as the "Tied-house" law, separates the alcoholic beverage industry into three component parts, or tiers: manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale).

3. Prohibits a manufacturer, winegrower, manufacturer’s agent, California winegrower’s agent, rectifier, distiller, bottler, importer, or wholesaler from furnishing or lending money or other thing of value to a person engaged in operating, owning, or maintaining an on-sale licensed premise.

4. Provides that the listing of the names, addresses, telephone numbers, email addresses, Internet Web site addresses, or other electronic media, of 2 or more unaffiliated on-sale retailers selling beer, wine, or distilled spirits, as specified, in response to a direct inquiry from a consumer, as specified, does not constitute a thing of value or prohibited inducement, if specified conditions are met. The Act includes among those conditions the requirement that the listing not refer to only one on-sale retailer or only to on-sale retail establishments controlled by the same retailer.

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the bill: The author's office notes that current ABC law prohibits a supplier (manufacturer and distributor) from giving or lending money or anything of value to anyone who operates, owns or maintains any off-sale licensed premise. However, these licensed entities may list or publish, in response to a direct inquiry from a consumer, the name, address, telephone numbers, e-mail, or web address of two or more retailers who sell their products so long as the retailer operates and is licensed as a bona fide public eating-place (restaurant).

The author's office states, this bill "will provide small distillers, brewers and wineries with an additional tool to promote their start-up businesses. Social media has forever changed basic communication, and by not allowing small businesses to participate in this integral form of free communication, the Tied-House laws have disadvantaged them from connecting with customers and distributors.

The author's office states, "Social media is a free form of advertisement to the public; therefore, it should not be defined as a gift of advertisement. For many millennials, social media is the equivalent of personal speech and is ingrained in today’s society. Current law needs to provide flexibility for the small manufacturers, who do not always have the start-up money to spend on advertising. With the societal shift towards craft breweries, and small wineries, manufacturers should be allowed to use social media as a communication tool."

AB 780 will provide greater flexibility and protect the ability of specified alcohol interests to engage in social media communications with consumers, while preserving the original intent of the Tied-house law of prohibiting gifts of advertisement from alcoholic beverage producers, distributors or importers.

Background: Existing law, known as the “Tied-house” law, separates the alcoholic beverage industry into three component parts, or tiers, of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale).

Tied-house refers to a practice in this country prior to Prohibition and still occurring in England today where a bar or public house, from whence comes the “house” of tied house, is tied to the products of a particular manufacturer, either because the manufacturer owns the house, or the house is contractually obligated to carry only a particular manufacturer’s products.

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 marketplace; (c) prohibit commercial bribery and 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.

Existing law provides that no licensee shall, directly or indirectly, give any premium, gift, free goods, or other thing of value in connection with the sale, distribution, or sale and distribution of alcoholic beverages, and no retailer shall, directly or indirectly, receive any premium, gift, free goods or other thing of value from a supplier of alcoholic beverages, except as authorized by ABC.

In Support: Writing in support, the California Craft Brewers Association states, "Craft beer enthusiasts are extremely interested in learning about new beer releases and product availability in their cities. The use of social media communications between beer manufacturers and their customers has become a primary means of communication in recent years to provide this information. However, a substantial amount of confusion exists within the industry about form and content of social media communications when it comes to compliance with California’s alcohol beverage laws and regulations. AB 780 seeks to reduce this confusion and increase industry compliance by making minor modifications to state law."

Related legislation: AB 973 (Gray) of the 2015-16 Legislative Session. Merges two similar tied-house exceptions (one pertaining to "on-sale" retailers the other to "off-sale" retailers) within the Alcoholic Beverage Control (ABC) Act, which authorizes the dissemination of information regarding the retail availability of products by alcoholic beverage producers, distributors or importers in response to direct requests from consumers. (Pending in Assembly Appropriations Committee)

Prior legislation: AB 2349 (Nestande), Chapter 374, Statutes of 2012. Revised the direct inquiry provisions in the Act to remove the requirement that manufacturers and distributors can only provide consumer information on where they can find a specific product at an on-sale establishment if that on-sale retailer operates and is licensed as a restaurant. By removing that requirement, manufacturers and distributors can add bars to the list they provide consumers of on-sale establishments that serve their specific products.

SB 1423 (Chesbro) Chapter 205, Statutes of 2000. Authorized wineries and brandy manufacturers to advertise the name and location of restaurants that sell their products.

SB 1233 (Chesbro) Chapter 666, Statutes of 1999. Allowed for the limited dissemination of information regarding the off-sale availability of alcoholic beverages.

AB 2777 (Granlund), Chapter 980, Statutes of 2000. Among other things, broadened an existing tied-house exception relating to the purchase of alcoholic beverage advertisements at specified venues to include distilled spirits manufacturers. Also, authorized a non-retail alcohol industry member to list specified information relating to the availability of alcoholic beverages at no more than two restaurants in response to a direct inquiry from a consumer received by telephone, mail, or the Internet.

REGISTERED SUPPORT / OPPOSITION:

Support

California Craft Brewers Association

Family Winemakers of California

Opposition

None on file

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