Existing law, the Alcoholic Beverage Control Act, generally prohibits manufacturers, winegrowers, bottlers, importers, wholesalers, and others from performing certain activities, with specified exceptions. Existing law, until January 1, 2018, permits specified licensees, or any authorized agent of the above persons to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers at an invitation-only event, held on specified premises, in connection with the sale or distribution of wine or distilled spirits, as provided.

This bill would extend the repeal date for these provisions until January 1, 2023.

Existing law, the Alcoholic Beverage Control Act, generally prohibits manufacturers, winegrowers, bottlers, importers, wholesalers, and others from performing certain activities, with specified exceptions. Existing law, until January 1, 2018, permits specified licensees, or any authorized agent of the above persons to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers at an invitation-only event, held on specified premises, in connection with the sale or distribution of wine or distilled spirits, as provided.

This bill would extend the repeal date for these provisions until January 1, 2023.

Existing law, the Alcoholic Beverage Control Act, generally prohibits manufacturers, winegrowers, bottlers, importers, wholesalers, and others from performing certain activities, with specified exceptions. Existing law, until January 1, 2018, permits specified licensees, or any authorized agent of the above persons to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers at an invitation-only event, held on specified premises, in connection with the sale or distribution of wine or distilled spirits, as provided.

This bill would extend the repeal date for these provisions until January 1, 2023.

 THIRD READING  

Bill No: AB 609

Author:

:

Vote:

SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 6/13/17

AYES: Dodd, Bradford, Cannella, Gaines, Galgiani, Glazer, Hill, Hueso, Lara, Mendoza, Portantino, Vidak

NO VOTE RECORDED: Berryhill

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 76-0, 5/4/17 (Consent) - See last page for vote

SUBJECT:

SOURCE: The Distilled Spirits Council

DIGEST: This bill extends the sunset date for five years, from 2018 to 2023, for a specific provision in the Alcoholic Beverage Control (ABC) Act, which permits specified licensees (distilled spirits manufacturers and winegrowers) or an authorized agent, to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers at an invitation-only event, held on specified premises, in connection with the sale or distribution of wine or distilled spirits, as provided.

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 or occupation taxes for this purpose.
2. Separates the alcoholic beverage industry into three component parts, or tiers, of the manufacturer (including breweries, wineries, and distilleries), wholesaler, and retailer (both on-sale and off-sale). This is referred to as the “tied-house” law or “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. Numerous exceptions to these restrictions have been enacted throughout the years in those specific instances where the Legislature determined that the public's interests were protected.
4. Permits, until January 1, 2018, a manufacturer of distilled spirits, distilled spirits manufacturer’s agent, out-of-state distilled spirits shipper’s certificate holder, winegrower, rectifier, or distiller, or its authorized unlicensed agent, to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers at an invitation-only event in connection with the sale or distribution of wine or distilled spirits, subject to the following conditions:
   1. No licensee, other than those specified, may conduct or participate in any portion of the event.
   2. The event shall be conducted on either the:
      1. Premises for which a caterer’s authorization has been issued.
      2. Premises of a hotel holding an on-sale beer and wine or on-sale general license. Defines “hotel” to mean any hotel, motel, resort, bed and breakfast inn, or other similar transient lodging establishment, but it does not include any residential hotel, as defined in law. Further, imposes restrictions on where within the hotel premises the event can be held and requires the hotel to maintain, at all times while exercising its license privileges, other areas within the licensed premises for the public not attending the event.
5. Prohibits, except on the licensed hotel premises as provided, an event from being conducted on premises for which a permanent retail license has been issued.
6. Precludes a retail licensee, including the licensed caterer or the licensed hotel, from receiving, nor shall the licensee conducting the event give, any item of value or benefit in connection with the event, except for fair market value payments.
7. Requires the person authorized to provide, free of charge, entertainment, food, and beverages to be present during the event and to have sole responsibility for providing payment for the entertainment, food, beverages, and rental fees at the event. Payments for entertainment, food, beverages, and rental fees shall not exceed fair market value.
8. Stipulates that requests for attendance at the event shall be by invitation sent to consumers over 21 years of age at a specific address via mail or email, by telephone, or presented in person. Prohibits dissemination of invitations or advertisement of the event by any other means.
9. Provides that attendance at the hosted event shall be limited to consumers who receive and accept an invitation to the event. Allows invited consumers to each invite one guest. Provides all attendees shall be over 21 years of age, and the total number of consumers and their guests allowed at any event shall not exceed 600 people. Requires admittance to the event be controlled by a list containing the names of consumers who accepted the invitation and their guests.
10. Prohibits any premium, gift, free goods, or other thing of value from being given away in connection with the event.
11. Specifies that the duration of the event shall not exceed four hours.
12. Provides that a person authorized to conduct hosted events shall not conduct more than 12 events in a calendar year where the consumers and guests in attendance exceed 100 people, and not more than 24 events in a calendar year where the consumers and guests in attendance are 100 people or fewer, as specified. Prohibits a person authorized to conduct hosted events from holding such an event at the same location more than eight times in a calendar year.
13. Limits the ability to conduct a hosted event at a hotel by prohibiting a licensee from utilizing the same hotel or hotel chain more than two times in a calendar year.
14. Prohibits the licensee conducting the hosted event from advertising any retail licensee, with the specified exception of identification of the event’s location.
15. Prohibits, other than as provided, any alcoholic beverage promotions “in conjunction with” the hosted event. This restriction includes any discounted drink specials offered by the retail licensee to consumers.
16. Requires the retail licensee to offer for sale other alcoholic beverages in addition to those of the licensee conducting the hosted event.
17. Requires, at least 30 days prior, the licensee, or its authorized unlicensed agent, conducting the hosted event to apply to the Department of ABC for a permit authorizing the event. In addition to any other information required, the licensee shall provide the Department of ABC all of the following information:
    1. The name of the company authorized to conduct the event.
    2. The number of people planned to be in attendance.
    3. The start and end times for the event.
    4. The location of the event.
    5. The name of the caterer, if required, obtaining the caterer’s authorization for the event.
18. Requires a fee of $200 to be collected by the Department of ABC from the licensee, or its authorized unlicensed agent, holding a hosted event. This $200 fee is in addition to the prescribed fee imposed upon a licensed caterer.
19. Requires all alcoholic beverages provided at the event be purchased from the holder of the caterer’s permit or the licensed hotel, as applicable, and specifies that all alcoholic beverages shall be served in accordance with existing law related to hours or sale.
20. Allows the person authorized to conduct a hosted event to provide attendees at the event with a free ride home. The free rides shall only constitute free ground transportation to attendees’ homes or to hotels or motels where attendees are staying.
21. Provides findings and declarations relative to maintaining the integrity of the three-tier system.
22. Sunsets the provisions related to hosted events on January 1, 2018.

This bill extends the sunset date until January 1, 2023, for a specific provision in the ABC Act, which permits specified licensees (distilled spirits manufacturers and winegrowers) or an authorized agent, to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers at an invitation-only event, held on specified premises, in connection with the sale or distribution of wine or distilled spirits, as provided.

Background

History of the issue. AB 2293 (De León, Chapter 638, Statutes of 2008) created a stand-alone tied-house exception for hosted entertainment in the ABC Act, which first allowed specified licensees (distilled spirits manufacturers and winegrowers) or an authorized agent, to provide, free of charge, their product, as well as entertainment and food to consumers over 21 years of age during invitation-only events, subject to several conditions. These hosted events had to be held at a premise for which a caterer's permit authorization was issued. Proponents stated that the bill was an opportunity to introduce a new brand or varietals to the marketplace or to loyal customers in a tightly controlled environment.

In 2013, AB 1116 (Hall, Chapter 461) allowed the hosted entertainment events to also be held at a licensed hotel for which there is a supplier's permit authorization, but limited the events to areas of the hotel that are not open to the general public. Proponents noted that hotels are better venues to accommodate these events because they have larger spaces, equipment, staff, security, transportation, and amenities that did not naturally exist at the limited venues where prior events were allowed to take place before the passage of AB 1116. The bill also increased the number of persons that can attend the event from 400 to 600. In addition, the bill revised requirements for providing the Department of ABC with relevant information to ensure proper oversight of these invitation-only hosted events and extended the previous sunset provision by four years, from January 1, 2014, to January 1, 2018.

This bill extends the sunset date included in AB 1116 (Hall, Chapter 461, Statutes of 2013) from January 1, 2018, to January 1, 2023. It should be noted that no other changes to current law are being authorized under AB 609.

According to the Department of ABC, between 2008 and 2013, only 21 hosted events took place. The Department of ABC indicated that it did not identify any enforcement problems nor take any enforcement actions in connection with those events.

Between 2014 and 2016, following the enactment of AB 1116 (Hall, Chapter 461, Statutes of 2013) which allows hosted events to be held at hotels, the Department ABC reports that 76 events took place; 50 of these events took place in Los Angeles, 13 in San Diego, six in Alameda, and two hosted in San Francisco. Of the 76 hosted events held, the Department ABC conducted investigations of 29 of them. The Department of ABC issued six letters of warning and filed three administrative accusations resulting from these investigations. Separately, the Department of ABC filed eight administrative accusations for suppliers failing to obtain the proper permit. The Department ABC indicated the bulk of violations were technical in nature or the result of the supplier not securing a permit in a timely manner.

Comments

Purpose of the bill. According to the author’s office, “extending the sunset for five years on California’s hosted entertainment law will allow wine and spirits suppliers to continue to present their brands before a variety of audiences. AB 609 recognizes the value of this important marketing tool that benefits both consumers and suppliers while ensuring proper oversight of these invitation-only events by the Department of ABC.”

Related/Prior Legislation

AB 1116 (Hall, Chapter 461, Statutes of 2013) expanded an existing provision of law that permits certain alcoholic beverage producers to hold private, free of charge, invitational-only events, with entertainment, food, and beverages, for a limited number of consumers over 21 years of age. The bill also allowed such events to be held on the premises of a “hotel,” as defined, and extended the sunset on these provisions of law from January 1, 2014, to January 1, 2018.

AB 605 (Portantino, Chapter 230, Statutes of 2010) created a new type of license (instructional tasting license) that allows the tasting of beer, wine, and distilled spirits at off-sale licensed premises, subject to certain limitations.

AB 2134 (Chesbro, Chapter 149, Statutes of 2010) created a new tied-house exception in the ABC Act that allows licensed brewers to conduct and participate in events called "Beer Maker Dinners" for consumers held at an on-sale retail licensed premise.

AB 2293 (De Leon, Chapter 638, Statutes of 2008) permitted a manufacturer of distilled spirits, winegrower, rectifier, or distiller, or its authorized agent to provide, free of charge, their product, as well as entertainment and food to consumers over 21 years of age during invitation-only events, as specified. The events must occur on premises for which a caterer's permit authorization has been issued. The bill sunset on January 1, 2014.

SB 1548 (Murray, Chapter 670, Statutes of 2006) permitted a beer manufacturer, a licensed beer and wine importer general, or a licensed beer and wine wholesaler to instruct consumers regarding beer and allowed for the furnishing of a tasting at a retail on-sale licensee authorized to sell beer, under specified conditions.

AB 2285 (V. Brown, Chapter 248, Statutes of 1998) allowed on-sale retail licensees to offer limited tastings of wine or distilled spirits at the licensed establishment.

SB 993 (Burton, Chapter 544, Statutes of 1997) authorized, among other things, a licensed distilled spirits manufacturer to conduct tastings of distilled spirits on the licensed premises, under specified conditions.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 6/27/17)

The Distilled Spirits Council (source)

Diageo

Family Winemakers of California

OPPOSITION: (Verified 6/27/17)

Alcohol Justice

ARGUMENTS IN SUPPORT: Diageo states that, “this promotional opportunity has been very beneficial to manufacturers when conducting brand launches or product extension campaigns. To the best of our knowledge, the Department of ABC has not experienced any significant enforcement issues regarding the events authorized by this section.”

ARGUMENTS IN OPPOSITION: Alcohol Justice states that, “this was a bad idea the first time around, and now extends for five more years alcohol consumption at sales and distribution special events that have promotion of alcohol bulk-purchasing or branding.”

ASSEMBLY FLOOR: 76-0, 5/4/17

AYES: Acosta, Aguiar-Curry, Arambula, Baker, Berman, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Travis Allen, Bigelow, Cristina Garcia, Patterson

Prepared by:

6/28/17 15:29:49

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2017 - 2018 Regular

Bill No: 609 Hearing Date: 6/13/2017

SUBJECT: Alcoholic beverages: licensee promotion events: sunset

DIGEST: This bill extends the sunset date for five years, from 2018 to 2023, for a specific provision in the Alcoholic Beverage Control (ABC) Act, which permits specified licensees (distilled spirits manufacturers and winegrowers) or an authorized agent, to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers at an invitation-only event, held on specified premises, in connection with the sale or distribution of wine or distilled spirits, as provided.

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 or occupation taxes for this purpose.
2. Separates the alcoholic beverage industry into three component parts, or tiers, of the manufacturer (including breweries, wineries, and distilleries), wholesaler, and retailer (both on-sale and off-sale). This is referred to as the “tied-house” law or “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. Numerous exceptions to these restrictions have been enacted throughout the years in those specific instances where the Legislature determined that the public's interests were protected.
4. Permits, until January 1, 2018, a manufacturer of distilled spirits, distilled spirits manufacturer’s agent, out-of-state distilled spirits shipper’s certificate holder, winegrower, rectifier, or distiller, or its authorized unlicensed agent, to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers at an invitation-only event in connection with the sale or distribution of wine or distilled spirits, subject to the following conditions:
   1. No licensee, other than those specified, may conduct or participate in any portion of the event.
   2. The event shall be conducted on either the:
      1. Premises for which a caterer’s authorization has been issued.
      2. Premises of a hotel holding an on-sale beer and wine or on-sale general license. Defines “hotel” to mean any hotel, motel, resort, bed and breakfast inn, or other similar transient lodging establishment, but it does not include any residential hotel, as defined in law. Further, imposes restrictions on where within the hotel premises the event can be held and requires the hotel to maintain, at all times while exercising its license privileges, other areas within the licensed premises for the public not attending the event.
5. Prohibits, except on the licensed hotel premises as provided, an event from being conducted on premises for which a permanent retail license has been issued.
6. Precludes a retail licensee, including the licensed caterer or the licensed hotel, from receiving, nor shall the licensee conducting the event give, any item of value or benefit in connection with the event, except for fair market value payments.
7. Requires the person authorized to provide, free of charge, entertainment, food, and beverages to be present during the event and to have sole responsibility for providing payment for the entertainment, food, beverages, and rental fees at the event. Payments for entertainment, food, beverages, and rental fees shall not exceed fair market value.
8. Stipulates that requests for attendance at the event shall be by invitation sent to consumers over 21 years of age at a specific address via mail or email, by telephone, or presented in person. Prohibits dissemination of invitations or advertisement of the event by any other means.
9. Provides that attendance at the hosted event shall be limited to consumers who receive and accept an invitation to the event. Allows invited consumers to each invite one guest. Provides all attendees shall be over 21 years of age, and the total number of consumers and their guests allowed at any event shall not exceed 600 people. Requires admittance to the event be controlled by a list containing the names of consumers who accepted the invitation and their guests.
10. Prohibits any premium, gift, free goods, or other thing of value from being given away in connection with the event.
11. Specifies that the duration of the event shall not exceed four hours.
12. Provides that a person authorized to conduct hosted events shall not conduct more than 12 events in a calendar year where the consumers and guests in attendance exceed 100 people, and not more than 24 events in a calendar year where the consumers and guests in attendance are 100 people or fewer, as specified. Prohibits a person authorized to conduct hosted events from holding such an event at the same location more than eight times in a calendar year.
13. Limits the ability to conduct a hosted event at a hotel by prohibiting a licensee from utilizing the same hotel or hotel chain more than two times in a calendar year.
14. Prohibits the licensee conducting the hosted event from advertising any retail licensee, with the specified exception of identification of the event’s location.
15. Prohibits, other than as provided, any alcoholic beverage promotions “in conjunction with” the hosted event. This restriction includes any discounted drink specials offered by the retail licensee to consumers.
16. Requires the retail licensee to offer for sale other alcoholic beverages in addition to those of the licensee conducting the hosted event.
17. Requires, at least 30 days prior, the licensee, or its authorized unlicensed agent, conducting the hosted event to apply to the Department of ABC for a permit authorizing the event. In addition to any other information required, the licensee shall provide the Department of ABC all of the following information:
    1. The name of the company authorized to conduct the event.
    2. The number of people planned to be in attendance.
    3. The start and end times for the event.
    4. The location of the event.
    5. The name of the caterer, if required, obtaining the caterer’s authorization for the event.
18. Requires a fee of $200 to be collected by the Department of ABC from the licensee, or its authorized unlicensed agent, holding a hosted event. This $200 fee is in addition to the prescribed fee imposed upon a licensed caterer.
19. Requires all alcoholic beverages provided at the event be purchased from the holder of the caterer’s permit or the licensed hotel, as applicable, and specifies that all alcoholic beverages shall be served in accordance with existing law related to hours or sale.
20. Allows the person authorized to conduct a hosted event to provide attendees at the event with a free ride home. The free rides shall only constitute free ground transportation to attendees’ homes or to hotels or motels where attendees are staying.
21. Provides findings and declarations relative to maintaining the integrity of the three-tier system.
22. Sunsets the provisions related to hosted events on January 1, 2018.

This bill extends the sunset date until January 1, 2023, for a specific provision in the ABC Act, which permits specified licensees (distilled spirits manufacturers and winegrowers) or an authorized agent, to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers at an invitation-only event, held on specified premises, in connection with the sale or distribution of wine or distilled spirits, as provided.

Background

Purpose of the bill. According to the author’s office, “extending the sunset for five years on California’s hosted entertainment law will allow wine and spirits suppliers to continue to present their brands before a variety of audiences. AB 609 recognizes the value of this important marketing tool that benefits both consumers and suppliers while ensuring proper oversight of these invitation-only events by the Department of ABC.”

History of the issue. AB 2293 of 2008 (De León, Chapter 638) created a stand-alone tied-house exception for hosted entertainment in the ABC Act, which first allowed specified licensees (distilled spirits manufacturers and winegrowers) or an authorized agent, to provide, free of charge, their product, as well as entertainment and food to consumers over 21 years of age during invitation-only events, subject to several conditions. These hosted events had to be held at a premise for which a caterer's permit authorization was issued. Proponents stated that the bill was an opportunity to introduce a new brand or varietals to the marketplace or to loyal customers in a tightly controlled environment.

In 2013, AB 1116 (Hall, Chapter 461) allowed the hosted entertainment events to also be held at a licensed hotel for which there is a supplier's permit authorization, but limited the events to areas of the hotel that are not open to the general public. Proponents noted that hotels are better venues to accommodate these events because they have larger spaces, equipment, staff, security, transportation, and amenities that did not naturally exist at the limited venues where prior events were allowed to take place before the passage of AB 1116. The bill also increased the number of persons that can attend the event from 400 to 600. In addition, the bill revised requirements for providing the Department of ABC with relevant information to ensure proper oversight of these invitation-only hosted events and extended the previous sunset provision by four years, from January 1, 2014, to January 1, 2018.

This bill extends the sunset date included in AB 1116 (Hall, Chapter 461, Statutes of 2013) from January 1, 2018, to January 1, 2023. It should be noted that no other changes to current law are being authorized under AB 609.

According to the Department of ABC, between 2008 and 2013, only 21 hosted events took place. The Department of ABC indicated that it did not identify any enforcement problems nor take any enforcement actions in connection with those events.

Between 2014 and 2016, following the enactment of AB 1116 (Hall, Chapter 461, Statutes of 2013) which allows hosted events to be held at hotels, the Department ABC reports that 76 events took place; 50 of these events took place in Los Angeles, 13 in San Diego, six in Alameda, and two hosted in San Francisco. Of the 76 hosted events held, the Department ABC conducted investigations of 29 of them. The Department of ABC issued six letters of warning and filed three administrative accusations resulting from these investigations. Separately, the Department of ABC filed eight administrative accusations for suppliers failing to obtain the proper permit. The Department ABC indicated the bulk of violations were technical in nature or the result of the supplier not securing a permit in a timely manner.

Prior/Related Legislation

AB 1116 (Hall, Chapter 461, Statutes of 2013) expanded an existing provision of law that permits certain alcoholic beverage producers to hold private, free of charge, invitational-only events, with entertainment, food, and beverages, for a limited number of consumers over 21 years of age. This bill also allowed such events to be held on the premises of a “hotel,” as defined, and extended the sunset on these provisions of law from January 1, 2014, to January 1, 2018.

AB 605 (Portantino, Chapter 230, Statutes of 2010) created a new type of license (instructional tasting license) that allows the tasting of beer, wine, and distilled spirits at off-sale licensed premises, subject to certain limitations.

AB 2134 (Chesbro, Chapter 149, Statutes of 2010) created a new tied-house exception in the ABC Act that allows licensed brewers to conduct and participate in events called "Beer Maker Dinners" for consumers held at an on-sale retail licensed premise.

AB 2293 (De Leon, Chapter 638, Statutes of 2008) permitted a manufacturer of distilled spirits, winegrower, rectifier, or distiller, or its authorized agent to provide, free of charge, their product, as well as entertainment and food to consumers over 21 years of age during invitation-only events, as specified. The events must occur on premises for which a caterer's permit authorization has been issued. The bill sunset on January 1, 2014.

SB 1548 (Murray, Chapter 670, Statutes of 2006) permitted a beer manufacturer, a licensed beer and wine importer general, or a licensed beer and wine wholesaler to instruct consumers regarding beer and allowed for the furnishing of a tasting at a retail on-sale licensee authorized to sell beer, under specified conditions.

AB 2285 (V. Brown, Chapter 248, Statutes of 1998) allowed on-sale retail licensees to offer limited tastings of wine or distilled spirits at the licensed establishment.

SB 993 (Burton, Chapter 544, Statutes of 1997) among other things, authorized a licensed distilled spirits manufacturer to conduct tastings of distilled spirits on the licensed premises, under specified conditions.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

The Distilled Spirts Council (Source)

Diageo

Family Winemakers of California

OPPOSITION:

Alcohol Justice

ARGUMENTS IN SUPPORT: Diageo states that, “this promotional opportunity has been very beneficial to manufacturers when conducting brand launches or product extension campaigns. To the best of our knowledge, the Department of ABC has not experienced any significant enforcement issues regarding the events authorized by this section.”

ARGUMENTS IN OPPOSITION: Alcohol Justice states that, “this was a bad idea the first time around, and now extends for five more years alcohol consumption at sales and distribution special events that have promotion of alcohol bulk-purchasing or branding.”

Date of Hearing: April 26, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 609

Author:(Santiago) – As Introduced Ver:February 14, 2017

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

SUMMARY:

This bill extends the sunset on an existing provision of law that permits certain alcoholic producers to hold free invitation-only promotional events in connection with the sale or distribution of a distilled spirit or wine. This bill extends the sunset from January 1, 2018, to January 1, 2023.

FISCAL EFFECT:

No state costs.

COMMENTS:

Purpose and Background. Existing law generally prohibits an alcoholic beverage licensee, including a producer, from giving any gift or free goods in connection with the sale or distribution of any alcoholic beverage. However, a number of exceptions to these restrictions have been enacted. One such exception is related to hosted events where alcohol producers can promote a new brand or varietal. Specifically, AB 2293 (De León), Chapter 638, Statutes of 2008, allows specific alcohol producers to entertain consumers at private parties and events by invitation-only where potential buyers can sample their alcohol product. Subsequently, AB 1116 (Hall), Chapter 416, Statutes of 2013, expanded the exception and its oversight and extended the sunset to January 1, 2018.

AB 609 will extend the sunset of this exception from January 1, 2018 to January 1, 2023. Supporters of this bill note that these events are beneficial to manufacturers when they launch a new brand or conduct a product extension campaign.

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

Date of Hearing: March 29, 2017

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 609 (

Author:Santiago) – As Introduced Ver:February 14, 2017

SUBJECT: Alcoholic beverages: licensee promotion events: sunset

SUMMARY: Existing law, until January 1, 2018, permits specified licensees (distilled spirits manufacturers and winegrowers) or an authorized agent, to provide, free of charge, entertainment, food, and distilled spirits, wine, or nonalcoholic beverages to consumers at an invitation-only event, held on specified premises, in connection with the sale or distribution of wine or distilled spirits, as provided. This bill would extend the repeal date for this specific provision in the Alcoholic Beverage Control Act (Act) until January 1, 2023. (Business and Professions Code §25600.5)

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.

2) 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). This is known as the “tied-house” law.

3) Prohibits, generally, an alcoholic beverage licensee from giving any gift or free goods in connection with the sale or distribution of any alcoholic beverage, except as provided for in the Act or by rules adopted by ABC. 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.

4) Permits until January 1, 2018, a manufacturer of distilled spirits, distilled spirits manufacturer’s agent, out-of-state distilled spirits shipper’s certificate holder, winegrower, rectifier, or distiller, or its authorized unlicensed agent to hold private, free-of-charge, invitational-only promotional events, with entertainment, food and beverages, for a limited number of consumers over 21 years of age and subject to specified conditions, also allow such events to be held on the premises of a “hotel,” as defined.

5) Defines “hotel” to mean any hotel, motel, resort, bed and breakfast inn, or other similar transient lodging establishment but it does not include any residential hotel, as defined in law. Requires a hotel, where the authorized event is being held, to maintain, at all times while exercising its license privileges, other areas within the licensed premises for the public not attending the authorized event. Limits the ability to conduct an event at a hotel by requiring a licensee to not utilize the same hotel or hotel chain more than two times per calendar year.

6) Provides attendance at the event shall be limited to consumers who receive and accept an invitation to the event. Invited consumers may each invite one guest. All attendees shall be over 21 years of age. The total number of consumers and their guests allowed at any event, as defined, shall not exceed 600 people. Admittance to the event shall be controlled by a list containing the names of consumers who accepted the invitation and their guests.

7) Prohibits the advertisement of any retail licensee, with the specified exception of identification of the event’s location.

8) Prohibits any other alcohol promotion “in conjunction with,” the hosted event. Requires the retail licensee to sell other alcoholic beverages in addition to those of the licensee conducting the event.

9) Requires the licensee or authorized unlicensed agent, at least 30 days prior to the event, to apply and provide specified information to ABC for a permit authorizing the event. Clarifies that a caterer’s information, if required, must also be provided. All alcoholic beverages provided at any such event must be purchased from the holder of the caterer’s permit or the licensed hotel, as applicable.

10) States that the original $200 fee shall be paid by the authorized licensee.

11) Sunsets these provisions on January 1, 2018. (BPC §25600.5)

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the bill. According to the author's office, this bill will extend a sunset date for five years (2018 to 2023) for a specific provision in the Act, which allows authorized licensed distilled spirits manufacturers and winegrowers to entertain consumers at private parties, and events by invitation-only where potential buyers could consume alcoholic beverages and food free of charge, as specified.

AB 2293 of 2008 (De León, Chapter 638) created a stand-alone tied-house hosted entertainment exception in the Act which allowed a manufacturer of distilled spirits, winegrower, rectifier, or distiller, or its authorized agent to provide their product, as well as entertainment and food to consumers over 21 years of age during invitation-only events (free of charge), subject to specified conditions. The events had to be held at a premise for which a caterer's permit authorization was issued. Proponents stated that the bill was an opportunity to introduce a new brand or varietals to the marketplace or to loyal customers in a tightly controlled environment.

In 2013, AB 1116 (Hall, Chapter 461) allowed the hosted entertainment events to also be held at a licensed hotel for which there is a supplier's permit authorization, but limited the events to areas of the hotel that are not open to the general public. Supporters noted that hotels are better venues to accommodate these events because they have larger spaces, equipment, staff, security, transportation, and amenities that did not naturally exist at the limited venues where prior events were allowed to take place before the passage of AB 1116. The bill also increased the number of persons that can attend the event from 400 to 600. In addition, the bill revised requirements for providing ABC with relevant information to ensure proper oversight of these invitation-only events and extended the previous sunset provision by 4 years (January 1, 2014 to January 1, 2018).

AB 609 (Santiago) extends the sunset date for AB 1116 (Hall) of 2013 from January 1, 2018 to January 1, 2023. No other changes to current law (BPC §25600.5) are being authorized under the bill.

In support. Diageo writes this promotional opportunity has been beneficial to manufacturers when conducting brand launches or product extension campaigns. We are not aware of any significant ABC enforcement issues regarding the events authorized by current law.

Prior legislation: AB 1116 (Hall), Chapter 461, Statutes of 2013. Expanded an existing provision of law that permits certain alcoholic beverage producers to hold private, free-of-charge, invitational-only promotional events, with entertainment, food and beverages, for a limited number of consumers over 21 years of age and subject to specified conditions, to also allow such events to be held on the premises of a “hotel,” as defined; and extends the sunset from January 1, 2014 to January 1, 2018.

AB 605 (Portantino), Chapter 230, Statutes of 2010. Added provisions to the ABC Act authorizing the department to issue to the holder of an "off-sale" retail license an "instructional tasting license" for the purpose of furnishing tastings of alcoholic beverages to consumers, subject to certain limitations.

AB 2134 (Chesbro), Chapter 149, Statutes of 2010. Created a new tied-house exception in the ABC Act that allows licensed brewers to conduct and participate in events called "Beer Maker Dinners" for consumers held at an on-sale retail licensed premise.

AB 2293 (De Leon), Chapter 638, Statutes of 2008. Adds a new provision to the Alcoholic Beverage Control Act (ABC Act) that permits a manufacturer of distilled spirits, winegrower, rectifier, or distiller, or its authorized agent to provide their product, as well as entertainment and food to consumers over 21 years of age during invitation-only events (free of charge), as specified. The events must occur on premises for which a caterer's permit authorization has been issued. The bill sunset on January 1, 2014.

SB 1548 (Murray), Chapter 670, Statutes of 2006. Permits a beer manufacturer, a licensed beer and wine importer general, or a licensed beer and wine wholesaler to instruct consumers regarding beer and allows for the furnishing of a tasting at a retail on-sale licensee authorized to sell beer, under specified conditions.

AB 2285 (Valerie Brown), Chapter 248, Statutes of 1998. Allowed on-sale retail licensees to offer limited tastings of wine or distilled spirits at the licensed establishment.

SB 993 (Burton) Chapter 544, Statutes of 1997. Among other things, authorized a licensed distilled spirits manufacturer to conduct tastings of distilled spirits on the licensed premises under specified conditions.

REGISTERED SUPPORT / OPPOSITION:

Support

Diageo

The Distilled Spirts Council

Opposition

Alcohol Justice

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