AB 344: Alcoholic beverages: beer price posting and marketing regulations: definitions.
- Session Year: 2025-2026
- House: Assembly
- Latest Version Date: 2025-10-06
Current Status:
Passed
(2025-10-06: Chaptered by Secretary of State - Chapter 360, Statutes of 2025.)
Introduced
In Committee
Awaiting First Chamber Vote
Passed First Chamber
In Committee
Awaiting Second Chamber Vote
Passed Second Chamber
Enacted
Existing law, the Alcoholic Beverage Control Act, which is administered by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses. Existing law imposes requirements on a successor beer manufacturer, defined as a beer manufacturer that acquires the rights to manufacture, import, or distribute a product, who cancels any of the existing beer wholesalers rights to distribute the product, as provided, and defines terms for this purpose.
This bill would modify the definition of successor beer manufacturer to specify that a successor beer manufacturer may be a beer manufacturer or any person, as defined, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
The Alcoholic Beverage Control Act provides that a violation of specified provisions of the act is a misdemeanor.
This bill, by expanding the scope of entities subject to the requirements applicable to successor beer manufacturers, would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Alcoholic Beverage Control Act, which is administered by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses. Existing law imposes requirements on a successor beer manufacturer, defined as a beer manufacturer that acquires the rights to manufacture, import, or distribute a product, who cancels any of the existing beer wholesalers rights to distribute the product, as provided, and defines terms for this purpose.
This bill would modify the definition of successor beer manufacturer to specify that a successor beer manufacturer may be a beer manufacturer or any person, as defined, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
The Alcoholic Beverage Control Act provides that a violation of specified provisions of the act is a misdemeanor.
This bill, by expanding the scope of entities subject to the requirements applicable to successor beer manufacturers, would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Alcoholic Beverage Control Act, which is administered by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses. Existing law imposes requirements on a successor beer manufacturer, defined as a beer manufacturer that acquires the rights to manufacture, import, or distribute a product, who cancels any of the existing beer wholesalers rights to distribute the product, as provided, and defines terms for this purpose.
This bill would modify the definition of successor beer manufacturer to specify that a successor beer manufacturer may be licensed or unlicensed and would establish additional criteria for the person from whom the successor acquires the rights to manufacture, import, or distribute a product. The bill would also make a conforming change, as well as remove the definition of beer manufacturer for the purposes of these provisions. a beer manufacturer or any person, as defined, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
The Alcoholic Beverage Control Act provides that a violation of specified provisions of the act is a misdemeanor.
This bill, by expanding the scope of entities subject to the requirements applicable to successor beer manufacturers, would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Alcoholic Beverage Control Act, which is administered by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses. Existing law imposes requirements on a successor beer manufacturer, defined as a beer manufacturer that acquires the rights to manufacture, import, or distribute a product, who cancels any of the existing beer wholesalers rights to distribute the product, as provided, and defines terms for this purpose.
This bill would modify the definition of successor beer manufacturer to specify that a successor beer manufacturer may be licensed or unlicensed and would establish additional criteria in order to fall under the definition of successor beer manufacturer. for the person from whom the successor acquires the rights to manufacture, import, or distribute a product. The bill would also make a conforming change, as well as remove the definition of beer manufacturer for the purposes of these provisions.
The Alcoholic Beverage Control Act provides that a violation of specified provisions of the act is a misdemeanor.
This bill, by expanding the scope of entities subject to the requirements applicable to successor beer manufacturers, would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Alcoholic Beverage Control Act, which is administered by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses. Existing law imposes requirements on a successor beer manufacturer, defined as a beer manufacturer that acquires the rights to manufacture, import, or distribute a product, who cancels any of the existing beer wholesalers rights to distribute the product, as provided, and defines terms for this purpose.
This bill would modify the definition of successor beer manufacturer to specify that a successor beer manufacturer may be licensed or unlicensed and would establish additional criteria in order to fall under the definition of successor beer manufacturer. The bill would also make a conforming change, as well as remove the definition of beer manufacturer for the purposes of these provisions.
The Alcoholic Beverage Control Act provides that a violation of specified provisions of the act is a misdemeanor.
This bill, by expanding the scope of entities subject to the requirements applicable to successor beer manufacturers, would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
(a)For purposes of this section:
(1)Acquire means to purchase, receive, assume, obtain, or otherwise come into possession or control of.
(2)Affected distribution rights means the distribution rights to the product held by the existing beer wholesaler prior to the acquisition of the right to manufacture, import, or distribute the product by the successor beer manufacturer.
(3)Beer manufacturer includes any holder of a beer manufacturers license, any holder of an out-of-state beer manufacturers certificate, or any holder of a beer and wine importers general license.
(4)Cancel means to terminate, reduce, not renew, not appoint or reappoint, or cause any of the same.
(5)Existing beer wholesaler means a beer wholesaler that distributes a product at the time a successor beer manufacturer acquires the rights to manufacture, import, or distribute that product.
(6)Fair market value includes all elements of value, including, but not limited to, goodwill.
(7)Product means a brand or brands of beer, as defined by Section 23006.
(8)Successor beer manufacturer means a beer manufacturer or any person as defined by Section 23008, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
(9)Successor beer manufacturers designee means one or more distributors designated by the successor beer manufacturer to replace the existing beer wholesaler, for all or part of the existing beer wholesalers territory, in the distribution of the product.
(b)(1)Any successor beer manufacturer that acquires the rights to manufacture, import, or distribute a product, and who cancels any of the existing beer wholesalers rights to distribute the product, shall comply with this section.
(2)A successor beer manufacturers designee shall comply with this section.
(c)(1)The successor beer manufacturer shall notify the existing beer wholesaler of the successor beer manufacturers intent to cancel any of the existing beer wholesalers rights to distribute the product.
(2)The successor beer manufacturer shall mail the notice by certified mail, return receipt requested, to the existing beer wholesaler. The successor beer manufacturer shall include in the notice the name, address, and telephone number of the successor beer manufacturers designee or designees.
(d)The successor beer manufacturers designee shall negotiate with the existing beer wholesaler to determine the fair market value of the affected distribution rights and, if the existing beer wholesaler and the successor beer manufacturers designee agree to the fair market value of the affected distribution rights, shall compensate the existing beer wholesaler in the agreed amount. The successor beer manufacturers designee and the existing beer wholesaler shall negotiate in good faith.
(e)The existing beer wholesaler shall continue to distribute the product to at least the same extent that it distributed the product immediately before the successor beer manufacturer acquired rights to the product until receipt of the payment of the compensation agreed to under subdivision (d) is made or is awarded under subdivision (f). The successor beer manufacturer and the existing beer wholesaler shall act in good faith regarding the ongoing supply and distribution of the product.
(f)If the successor beer manufacturers designee and the existing beer wholesaler are unable to mutually agree on the fair market value of the affected distribution rights within 30 days of the existing beer wholesalers receipt of the successor beer manufacturers notice pursuant to subdivision (c), the successor beer manufacturers designee or the existing beer wholesaler shall initiate arbitration against each other to determine the issue of compensation for the fair market value of the affected distribution rights no later than 40 days after the existing beer wholesalers receipt of the successor beer manufacturers notice pursuant to subdivision (c). Upon submission to arbitration, the arbitration shall be the means of determining compensation to the existing beer wholesaler for the fair market value of the affected distribution rights, and the fair market value of the affected distribution rights shall be the purpose of the arbitration unless the parties agree otherwise.
(1)An arbitration held under this subdivision shall be held in California through a private arbitration services provider with at least three offices in California and a statewide roster of at least 70 neutral arbitrators, of which at least 30 have prior experience as a sole arbitrator in franchise, distribution, or related business litigation.
(2)The direct costs of the arbitration, including any fees charged by the arbitrator, shall be borne equally by the parties engaged in the arbitration. All other costs shall be paid by the party incurring them.
(3)The parties shall mutually agree on an arbitrator. If the parties cannot agree on the arbitrator, the arbitration provider shall select an impartial arbitrator.
(4)(A)No later than 20 days after receipt of a notification to arbitrate, the parties shall complete an initial exchange of all nonprivileged documents and other information relevant to the fair market value of the affected distribution rights in their possession and control, including, without limitation, copies of all documents and the names of individuals who may be called to testify at the arbitration hearing. No later than 45 days after receipt of notification to arbitrate, the parties shall complete an exchange of the names of any experts who may be called to testify at the arbitration hearing, together with each experts report that may be introduced at the arbitration hearing.
(B)The arbitrator may modify the requirements of subparagraph (A) on a showing of good cause. The arbitrator shall permit third-party discovery and additional discovery between beer wholesalers, including depositions, which the arbitrator finds appropriate for a period of time not to exceed 90 days after receipt of a notification to arbitrate. No discovery shall be permitted against a beer manufacturer.
(5)The decision of the arbitrator shall be final and binding on the parties unless notice of appeal is filed, within 10 business days after service of the arbitration award, with the superior court of the county in which the hearing was held. Upon filing of the appeal, the court shall review the arbitration award for errors of fact or law by determining whether the award is supported by the sufficiency of the evidence presented at the arbitration. This subdivision shall further permit any other appeal or review that is authorized by the California Arbitration Act (Title 9 (commencing with Section 1280) of Part 3 of the Code of Civil Procedure).
(6)The arbitrators award shall be monetary only and shall not enjoin or compel conduct.
(7)The arbitration hearing shall conclude not more than 180 days after receipt of a notification to arbitrate, unless the time period is extended by mutual agreement of the parties or by the arbitrator.
(8)The arbitrator shall render a decision not later than 15 days after the conclusion of the arbitration unless this time period is extended by mutual agreement of the parties or by the arbitrator.
(9)A party who fails to participate in the arbitration hearings waives all rights the party would have had in the arbitration and is considered to have consented to the determination of the arbitrator.
(10)The Legislature finds and declares that several unique factors in combination warrant the Legislature authorizing limited mandatory arbitration between an existing beer wholesaler and a successor beer manufacturers designee solely to determine the issue of compensation for the fair market value of the affected distribution rights:
(A)On the issue of the fair market value of the affected distribution rights, the parties are sophisticated and in an equal position in their knowledge of this legal issue and understand the law and their legal rights, including their jury trial rights.
(B)The parties desire a mandatory arbitration provision to resolve the question of compensation for the fair market value of the affected distribution rights if the parties are not able to reach a mutual settlement so that product distribution can be continued in an orderly manner and the determination of compensation can be made in a timely manner.
(C)The states regulatory interest in maintaining orderly markets for the safe and efficient transportation, distribution, and sale of beer within the state warrants the statutory authorization for mandatory arbitration as provided in this section.
(g)If the existing beer wholesaler does not receive payment of the compensation under subdivision (d) or (f) not later than 10 business days after the date of the settlement or service of the arbitration award, and if there is no appeal or review filed under paragraph (5) of subdivision (f), the existing beer wholesaler shall remain the distributor of the product in the existing beer wholesalers territory to at least the same extent that the existing beer wholesaler distributed the product immediately before the successor beer manufacturer acquired rights to the product, and the existing beer wholesaler is not entitled to the settlement or arbitration award.
(h)Nothing in this section shall be construed to limit or prohibit good faith settlements voluntarily entered into by the parties subsequent to the successor beer manufacturers notice pursuant to subdivision (c).
SEC. 2.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)For purposes of this section:
(1)Acquire means to purchase, receive, assume, obtain, or otherwise come into possession or control of.
(2)Affected distribution rights means the distribution rights to the product held by the existing beer wholesaler prior to the acquisition of the right to manufacture, import, or distribute the product by the successor beer manufacturer.
(3)Beer manufacturer includes any holder of a beer manufacturers license, any holder of an out-of-state beer manufacturers certificate, or any holder of a beer and wine importers general license.
(4)Cancel means to terminate, reduce, not renew, not appoint or reappoint, or cause any of the same.
(5)Existing beer wholesaler means a beer wholesaler that distributes a product at the time a successor beer manufacturer acquires the rights to manufacture, import, or distribute that product.
(6)Fair market value includes all elements of value, including, but not limited to, goodwill.
(7)Product means a brand or brands of beer, as defined by Section 23006.
(8)Successor beer manufacturer means a beer manufacturer or any person as defined by Section 23008, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
(9)Successor beer manufacturers designee means one or more distributors designated by the successor beer manufacturer to replace the existing beer wholesaler, for all or part of the existing beer wholesalers territory, in the distribution of the product.
(b)(1)Any successor beer manufacturer that acquires the rights to manufacture, import, or distribute a product, and who cancels any of the existing beer wholesalers rights to distribute the product, shall comply with this section.
(2)A successor beer manufacturers designee shall comply with this section.
(c)(1)The successor beer manufacturer shall notify the existing beer wholesaler of the successor beer manufacturers intent to cancel any of the existing beer wholesalers rights to distribute the product.
(2)The successor beer manufacturer shall mail the notice by certified mail, return receipt requested, to the existing beer wholesaler. The successor beer manufacturer shall include in the notice the name, address, and telephone number of the successor beer manufacturers designee or designees.
(d)The successor beer manufacturers designee shall negotiate with the existing beer wholesaler to determine the fair market value of the affected distribution rights and, if the existing beer wholesaler and the successor beer manufacturers designee agree to the fair market value of the affected distribution rights, shall compensate the existing beer wholesaler in the agreed amount. The successor beer manufacturers designee and the existing beer wholesaler shall negotiate in good faith.
(e)The existing beer wholesaler shall continue to distribute the product to at least the same extent that it distributed the product immediately before the successor beer manufacturer acquired rights to the product until receipt of the payment of the compensation agreed to under subdivision (d) is made or is awarded under subdivision (f). The successor beer manufacturer and the existing beer wholesaler shall act in good faith regarding the ongoing supply and distribution of the product.
(f)If the successor beer manufacturers designee and the existing beer wholesaler are unable to mutually agree on the fair market value of the affected distribution rights within 30 days of the existing beer wholesalers receipt of the successor beer manufacturers notice pursuant to subdivision (c), the successor beer manufacturers designee or the existing beer wholesaler shall initiate arbitration against each other to determine the issue of compensation for the fair market value of the affected distribution rights no later than 40 days after the existing beer wholesalers receipt of the successor beer manufacturers notice pursuant to subdivision (c). Upon submission to arbitration, the arbitration shall be the means of determining compensation to the existing beer wholesaler for the fair market value of the affected distribution rights, and the fair market value of the affected distribution rights shall be the purpose of the arbitration unless the parties agree otherwise.
(1)An arbitration held under this subdivision shall be held in California through a private arbitration services provider with at least three offices in California and a statewide roster of at least 70 neutral arbitrators, of which at least 30 have prior experience as a sole arbitrator in franchise, distribution, or related business litigation.
(2)The direct costs of the arbitration, including any fees charged by the arbitrator, shall be borne equally by the parties engaged in the arbitration. All other costs shall be paid by the party incurring them.
(3)The parties shall mutually agree on an arbitrator. If the parties cannot agree on the arbitrator, the arbitration provider shall select an impartial arbitrator.
(4)(A)No later than 20 days after receipt of a notification to arbitrate, the parties shall complete an initial exchange of all nonprivileged documents and other information relevant to the fair market value of the affected distribution rights in their possession and control, including, without limitation, copies of all documents and the names of individuals who may be called to testify at the arbitration hearing. No later than 45 days after receipt of notification to arbitrate, the parties shall complete an exchange of the names of any experts who may be called to testify at the arbitration hearing, together with each experts report that may be introduced at the arbitration hearing.
(B)The arbitrator may modify the requirements of subparagraph (A) on a showing of good cause. The arbitrator shall permit third-party discovery and additional discovery between beer wholesalers, including depositions, which the arbitrator finds appropriate for a period of time not to exceed 90 days after receipt of a notification to arbitrate. No discovery shall be permitted against a beer manufacturer.
(5)The decision of the arbitrator shall be final and binding on the parties unless notice of appeal is filed, within 10 business days after service of the arbitration award, with the superior court of the county in which the hearing was held. Upon filing of the appeal, the court shall review the arbitration award for errors of fact or law by determining whether the award is supported by the sufficiency of the evidence presented at the arbitration. This subdivision shall further permit any other appeal or review that is authorized by the California Arbitration Act (Title 9 (commencing with Section 1280) of Part 3 of the Code of Civil Procedure).
(6)The arbitrators award shall be monetary only and shall not enjoin or compel conduct.
(7)The arbitration hearing shall conclude not more than 180 days after receipt of a notification to arbitrate, unless the time period is extended by mutual agreement of the parties or by the arbitrator.
(8)The arbitrator shall render a decision not later than 15 days after the conclusion of the arbitration unless this time period is extended by mutual agreement of the parties or by the arbitrator.
(9)A party who fails to participate in the arbitration hearings waives all rights the party would have had in the arbitration and is considered to have consented to the determination of the arbitrator.
(10)The Legislature finds and declares that several unique factors in combination warrant the Legislature authorizing limited mandatory arbitration between an existing beer wholesaler and a successor beer manufacturers designee solely to determine the issue of compensation for the fair market value of the affected distribution rights:
(A)On the issue of the fair market value of the affected distribution rights, the parties are sophisticated and in an equal position in their knowledge of this legal issue and understand the law and their legal rights, including their jury trial rights.
(B)The parties desire a mandatory arbitration provision to resolve the question of compensation for the fair market value of the affected distribution rights if the parties are not able to reach a mutual settlement so that product distribution can be continued in an orderly manner and the determination of compensation can be made in a timely manner.
(C)The states regulatory interest in maintaining orderly markets for the safe and efficient transportation, distribution, and sale of beer within the state warrants the statutory authorization for mandatory arbitration as provided in this section.
(g)If the existing beer wholesaler does not receive payment of the compensation under subdivision (d) or (f) not later than 10 business days after the date of the settlement or service of the arbitration award, and if there is no appeal or review filed under paragraph (5) of subdivision (f), the existing beer wholesaler shall remain the distributor of the product in the existing beer wholesalers territory to at least the same extent that the existing beer wholesaler distributed the product immediately before the successor beer manufacturer acquired rights to the product, and the existing beer wholesaler is not entitled to the settlement or arbitration award.
(h)Nothing in this section shall be construed to limit or prohibit good faith settlements voluntarily entered into by the parties subsequent to the successor beer manufacturers notice pursuant to subdivision (c).
SEC. 2.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)For purposes of this section:
(1)Acquire means to purchase, receive, assume, obtain, or otherwise come into possession or control of.
(2)Affected distribution rights means the distribution rights to the product held by the existing beer wholesaler prior to the acquisition of the right to manufacture, import, or distribute the product by the successor beer manufacturer.
(3)Beer manufacturer includes any holder of a beer manufacturers license, any holder of an out-of-state beer manufacturers certificate, or any holder of a beer and wine importers general license.
(3)(4)Cancel means to terminate, reduce, not renew, not appoint or reappoint, or cause any of the same.
(4)(5)Existing beer wholesaler means a beer wholesaler that distributes a product at the time a successor beer manufacturer acquires the rights to manufacture, import, or distribute that product.
(5)(6)Fair market value includes all elements of value, including, but not limited to, goodwill.
(6)(7)Product means a brand or brands of beer, as defined by Section 23006.
(7)Successor beer manufacturer means any person as defined by Section 23008, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product from any person as defined by Section 23008 who meets any of the following criteria:(A)Has facilities and equipment for the commercial manufacture of the product.(B)Engages in contract brewing for the commercial manufacture of the product and holds the right to direct the sale and distribution of the product.(C)Otherwise holds the right to control or direct the commercial sale and distribution of the product, including, without limitation, the products recipe or recipes, branding, or trademarks.(8)Successor beer manufacturer means a beer manufacturer or any person as defined by Section 23008, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
(8)(9)Successor beer manufacturers designee means one or more distributors designated by the successor beer manufacturer to replace the existing beer wholesaler, for all or part of the existing beer wholesalers territory, in the distribution of the product.
(b)(1)Any successor beer manufacturer that acquires the rights to manufacture, import, or distribute a product, and who cancels any of the existing beer wholesalers rights to distribute the product, shall comply with this section.
(2)A successor beer manufacturers designee shall comply with this section.
(c)(1)The successor beer manufacturer shall notify the existing beer wholesaler of the successor beer manufacturers intent to cancel any of the existing beer wholesalers rights to distribute the product.
(2)The successor beer manufacturer shall mail the notice by certified mail, return receipt requested, to the existing beer wholesaler. The successor beer manufacturer shall include in the notice the name, address, and telephone number of the successor beer manufacturers designee or designees.
(d)The successor beer manufacturers designee shall negotiate with the existing beer wholesaler to determine the fair market value of the affected distribution rights and, if the existing beer wholesaler and the successor beer manufacturers designee agree to the fair market value of the affected distribution rights, shall compensate the existing beer wholesaler in the agreed amount. The successor beer manufacturers designee and the existing beer wholesaler shall negotiate in good faith.
(e)The existing beer wholesaler shall continue to distribute the product to at least the same extent that it distributed the product immediately before the successor beer manufacturer acquired rights to the product until receipt of the payment of the compensation agreed to under subdivision (d) is made or is awarded under subdivision (f). The successor beer manufacturer and the existing beer wholesaler shall act in good faith regarding the ongoing supply and distribution of the product.
(f)If the successor beer manufacturers designee and the existing beer wholesaler are unable to mutually agree on the fair market value of the affected distribution rights within 30 days of the existing beer wholesalers receipt of the successor beer manufacturers notice pursuant to subdivision (c), the successor beer manufacturers designee or the existing beer wholesaler shall initiate arbitration against each other to determine the issue of compensation for the fair market value of the affected distribution rights no later than 40 days after the existing beer wholesalers receipt of the successor beer manufacturers notice pursuant to subdivision (c). Upon submission to arbitration, the arbitration shall be the means of determining compensation to the existing beer wholesaler for the fair market value of the affected distribution rights, and the fair market value of the affected distribution rights shall be the purpose of the arbitration unless the parties agree otherwise.
(1)An arbitration held under this subdivision shall be held in California through a private arbitration services provider with at least three offices in California and a statewide roster of at least 70 neutral arbitrators, of which at least 30 have prior experience as a sole arbitrator in franchise, distribution, or related business litigation.
(2)The direct costs of the arbitration, including any fees charged by the arbitrator, shall be borne equally by the parties engaged in the arbitration. All other costs shall be paid by the party incurring them.
(3)The parties shall mutually agree on an arbitrator. If the parties cannot agree on the arbitrator, the arbitration provider shall select an impartial arbitrator.
(4)(A)No later than 20 days after receipt of a notification to arbitrate, the parties shall complete an initial exchange of all nonprivileged documents and other information relevant to the fair market value of the affected distribution rights in their possession and control, including, without limitation, copies of all documents and the names of individuals who may be called to testify at the arbitration hearing. No later than 45 days after receipt of notification to arbitrate, the parties shall complete an exchange of the names of any experts who may be called to testify at the arbitration hearing, together with each experts report that may be introduced at the arbitration hearing.
(B)The arbitrator may modify the requirements of subparagraph (A) on a showing of good cause. The arbitrator shall permit third-party discovery and additional discovery between beer wholesalers, including depositions, which the arbitrator finds appropriate for a period of time not to exceed 90 days after receipt of a notification to arbitrate. No discovery shall be permitted against a beer manufacturer.
(5)The decision of the arbitrator shall be final and binding on the parties unless notice of appeal is filed, within 10 business days after service of the arbitration award, with the superior court of the county in which the hearing was held. Upon filing of the appeal, the court shall review the arbitration award for errors of fact or law by determining whether the award is supported by the sufficiency of the evidence presented at the arbitration. This subdivision shall further permit any other appeal or review that is authorized by the California Arbitration Act (Title 9 (commencing with Section 1280) of Part 3 of the Code of Civil Procedure).
(6)The arbitrators award shall be monetary only and shall not enjoin or compel conduct.
(7)The arbitration hearing shall conclude not more than 180 days after receipt of a notification to arbitrate, unless the time period is extended by mutual agreement of the parties or by the arbitrator.
(8)The arbitrator shall render a decision not later than 15 days after the conclusion of the arbitration unless this time period is extended by mutual agreement of the parties or by the arbitrator.
(9)A party who fails to participate in the arbitration hearings waives all rights the party would have had in the arbitration and is considered to have consented to the determination of the arbitrator.
(10)The Legislature finds and declares that several unique factors in combination warrant the Legislature authorizing limited mandatory arbitration between an existing beer wholesaler and a successor beer manufacturers designee solely to determine the issue of compensation for the fair market value of the affected distribution rights:
(A)On the issue of the fair market value of the affected distribution rights, the parties are sophisticated and in an equal position in their knowledge of this legal issue and understand the law and their legal rights, including their jury trial rights.
(B)The parties desire a mandatory arbitration provision to resolve the question of compensation for the fair market value of the affected distribution rights if the parties are not able to reach a mutual settlement so that product distribution can be continued in an orderly manner and the determination of compensation can be made in a timely manner.
(C)The states regulatory interest in maintaining orderly markets for the safe and efficient transportation, distribution, and sale of beer within the state warrants the statutory authorization for mandatory arbitration as provided in this section.
(g)If the existing beer wholesaler does not receive payment of the compensation under subdivision (d) or (f) not later than 10 business days after the date of the settlement or service of the arbitration award, and if there is no appeal or review filed under paragraph (5) of subdivision (f), the existing beer wholesaler shall remain the distributor of the product in the existing beer wholesalers territory to at least the same extent that the existing beer wholesaler distributed the product immediately before the successor beer manufacturer acquired rights to the product, and the existing beer wholesaler is not entitled to the settlement or arbitration award.
(h)Nothing in this section shall be construed to limit or prohibit good faith settlements voluntarily entered into by the parties subsequent to the successor beer manufacturers notice pursuant to subdivision (c).
SEC. 2.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)For purposes of this section:
(1)Acquire means to purchase, receive, assume, obtain, or otherwise come into possession or control of.
(2)Affected distribution rights means the distribution rights to the product held by the existing beer wholesaler prior to the acquisition of the right to manufacture, import, or distribute the product by the successor beer manufacturer.
(3)Cancel means to terminate, reduce, not renew, not appoint or reappoint, or cause any of the same.
(4)Existing beer wholesaler means a beer wholesaler that distributes a product at the time a successor beer manufacturer acquires the rights to manufacture, import, or distribute that product.
(5)Fair market value includes all elements of value, including, but not limited to, goodwill.
(6)Product means a brand or brands of beer, as defined by Section 23006.
(7)Successor beer manufacturer means any person, person as defined by Section 23008, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product from any person, person as defined by Section 23008, 23008 who meets any of the following criteria:
(A)Has facilities and equipment for the commercial manufacture of the product.
(B)Engages in contract brewing for the commercial manufacture of the product and holds the right to direct the sale and distribution of the product.
(C)Otherwise holds the right to control or direct the commercial sale and distribution of the product, including, without limitation, the products recipe or recipes, branding, or trademarks.
(8)Successor beer manufacturers designee means one or more distributors designated by the successor beer manufacturer to replace the existing beer wholesaler, for all or part of the existing beer wholesalers territory, in the distribution of the product.
(b)(1)Any successor beer manufacturer who cancels any of the existing beer wholesalers rights to distribute the product, shall comply with this section.
(2)A successor beer manufacturers designee shall comply with this section.
(c)(1)The successor beer manufacturer shall notify the existing beer wholesaler of the successor beer manufacturers intent to cancel any of the existing beer wholesalers rights to distribute the product.
(2)The successor beer manufacturer shall mail the notice by certified mail, return receipt requested, to the existing beer wholesaler. The successor beer manufacturer shall include in the notice the name, address, and telephone number of the successor beer manufacturers designee or designees.
(d)The successor beer manufacturers designee shall negotiate with the existing beer wholesaler to determine the fair market value of the affected distribution rights and, if the existing beer wholesaler and the successor beer manufacturers designee agree to the fair market value of the affected distribution rights, shall compensate the existing beer wholesaler in the agreed amount. The successor beer manufacturers designee and the existing beer wholesaler shall negotiate in good faith.
(e)The existing beer wholesaler shall continue to distribute the product to at least the same extent that it distributed the product immediately before the successor beer manufacturer acquired rights to the product until receipt of the payment of the compensation agreed to under subdivision (d) is made or is awarded under subdivision (f). The successor beer manufacturer and the existing beer wholesaler shall act in good faith regarding the ongoing supply and distribution of the product.
(f)If the successor beer manufacturers designee and the existing beer wholesaler are unable to mutually agree on the fair market value of the affected distribution rights within 30 days of the existing beer wholesalers receipt of the successor beer manufacturers notice pursuant to subdivision (c), the successor beer manufacturers designee or the existing beer wholesaler shall initiate arbitration against each other to determine the issue of compensation for the fair market value of the affected distribution rights no later than 40 days after the existing beer wholesalers receipt of the successor beer manufacturers notice pursuant to subdivision (c). Upon submission to arbitration, the arbitration shall be the means of determining compensation to the existing beer wholesaler for the fair market value of the affected distribution rights, and the fair market value of the affected distribution rights shall be the purpose of the arbitration unless the parties agree otherwise.
(1)An arbitration held under this subdivision shall be held in California through a private arbitration services provider with at least three offices in California and a statewide roster of at least 70 neutral arbitrators, of which at least 30 have prior experience as a sole arbitrator in franchise, distribution, or related business litigation.
(2)The direct costs of the arbitration, including any fees charged by the arbitrator, shall be borne equally by the parties engaged in the arbitration. All other costs shall be paid by the party incurring them.
(3)The parties shall mutually agree on an arbitrator. If the parties cannot agree on the arbitrator, the arbitration provider shall select an impartial arbitrator.
(4)(A)No later than 20 days after receipt of a notification to arbitrate, the parties shall complete an initial exchange of all nonprivileged documents and other information relevant to the fair market value of the affected distribution rights in their possession and control, including, without limitation, copies of all documents and the names of individuals who may be called to testify at the arbitration hearing. No later than 45 days after receipt of notification to arbitrate, the parties shall complete an exchange of the names of any experts who may be called to testify at the arbitration hearing, together with each experts report that may be introduced at the arbitration hearing.
(B)The arbitrator may modify the requirements of subparagraph (A) on a showing of good cause. The arbitrator shall permit third-party discovery and additional discovery between beer wholesalers, including depositions, which the arbitrator finds appropriate for a period of time not to exceed 90 days after receipt of a notification to arbitrate. No discovery shall be permitted against a beer manufacturer.
(5)The decision of the arbitrator shall be final and binding on the parties unless notice of appeal is filed, within 10 business days after service of the arbitration award, with the superior court of the county in which the hearing was held. Upon filing of the appeal, the court shall review the arbitration award for errors of fact or law by determining whether the award is supported by the sufficiency of the evidence presented at the arbitration. This subdivision shall further permit any other appeal or review that is authorized by the California Arbitration Act (Title 9 (commencing with Section 1280) of Part 3 of the Code of Civil Procedure).
(6)The arbitrators award shall be monetary only and shall not enjoin or compel conduct.
(7)The arbitration hearing shall conclude not more than 180 days after receipt of a notification to arbitrate, unless the time period is extended by mutual agreement of the parties or by the arbitrator.
(8)The arbitrator shall render a decision not later than 15 days after the conclusion of the arbitration unless this time period is extended by mutual agreement of the parties or by the arbitrator.
(9)A party who fails to participate in the arbitration hearings waives all rights the party would have had in the arbitration and is considered to have consented to the determination of the arbitrator.
(10)The Legislature finds and declares that several unique factors in combination warrant the Legislature authorizing limited mandatory arbitration between an existing beer wholesaler and a successor beer manufacturers designee solely to determine the issue of compensation for the fair market value of the affected distribution rights:
(A)On the issue of the fair market value of the affected distribution rights, the parties are sophisticated and in an equal position in their knowledge of this legal issue and understand the law and their legal rights, including their jury trial rights.
(B)The parties desire a mandatory arbitration provision to resolve the question of compensation for the fair market value of the affected distribution rights if the parties are not able to reach a mutual settlement so that product distribution can be continued in an orderly manner and the determination of compensation can be made in a timely manner.
(C)The states regulatory interest in maintaining orderly markets for the safe and efficient transportation, distribution, and sale of beer within the state warrants the statutory authorization for mandatory arbitration as provided in this section.
(g)If the existing beer wholesaler does not receive payment of the compensation under subdivision (d) or (f) not later than 10 business days after the date of the settlement or service of the arbitration award, and if there is no appeal or review filed under paragraph (5) of subdivision (f), the existing beer wholesaler shall remain the distributor of the product in the existing beer wholesalers territory to at least the same extent that the existing beer wholesaler distributed the product immediately before the successor beer manufacturer acquired rights to the product, and the existing beer wholesaler is not entitled to the settlement or arbitration award.
(h)Nothing in this section shall be construed to limit or prohibit good faith settlements voluntarily entered into by the parties subsequent to the successor beer manufacturers notice pursuant to subdivision (c).
SEC. 2.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)For purposes of this section:
(1)Acquire means to purchase, receive, assume, obtain, or otherwise come into possession or control of.
(2)Affected distribution rights means the distribution rights to the product held by the existing beer wholesaler prior to the acquisition of the right to manufacture, import, or distribute the product by the successor beer manufacturer.
(3)Beer manufacturer includes any holder of a beer manufacturers license, any holder of an out-of-state beer manufacturers certificate, or any holder of a beer and wine importers general license.(4)(3)Cancel means to terminate, reduce, not renew, not appoint or reappoint, or cause any of the same.
(5)(4)Existing beer wholesaler means a beer wholesaler that distributes a product at the time a successor beer manufacturer acquires the rights to manufacture, import, or distribute that product.
(6)(5)Fair market value includes all elements of value, including, but not limited to, goodwill.
(7)(6)Product means a brand or brands of beer, as defined by Section 23006.
(8)(7)Successor beer manufacturer means a beer manufacturer that any person, as defined by Section 23008, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product. product from any person, as defined by Section 23008, who meets any of the following criteria:
(A)Has facilities and equipment for the commercial manufacture of the product.
(B)Engages in contract brewing for the commercial manufacture of the product and holds the right to direct the sale and distribution of the product.
(C)Otherwise holds the right to control or direct the commercial sale and distribution of the product, including, without limitation, the products recipe or recipes, branding, or trademarks.
(9)(8)Successor beer manufacturers designee means one or more distributors designated by the successor beer manufacturer to replace the existing beer wholesaler, for all or part of the existing beer wholesalers territory, in the distribution of the product.
(b)(1)Any successor beer manufacturer that acquires the rights to manufacture, import, or distribute a product, and who cancels any of the existing beer wholesalers rights to distribute the product, shall comply with this section.
(2)A successor beer manufacturers designee shall comply with this section.
(c)(1)The successor beer manufacturer shall notify the existing beer wholesaler of the successor beer manufacturers intent to cancel any of the existing beer wholesalers rights to distribute the product.
(2)The successor beer manufacturer shall mail the notice by certified mail, return receipt requested, to the existing beer wholesaler. The successor beer manufacturer shall include in the notice the name, address, and telephone number of the successor beer manufacturers designee or designees.
(d)The successor beer manufacturers designee shall negotiate with the existing beer wholesaler to determine the fair market value of the affected distribution rights and, if the existing beer wholesaler and the successor beer manufacturers designee agree to the fair market value of the affected distribution rights, shall compensate the existing beer wholesaler in the agreed amount. The successor beer manufacturers designee and the existing beer wholesaler shall negotiate in good faith.
(e)The existing beer wholesaler shall continue to distribute the product to at least the same extent that it distributed the product immediately before the successor beer manufacturer acquired rights to the product until receipt of the payment of the compensation agreed to under subdivision (d) is made or is awarded under subdivision (f). The successor beer manufacturer and the existing beer wholesaler shall act in good faith regarding the ongoing supply and distribution of the product.
(f)If the successor beer manufacturers designee and the existing beer wholesaler are unable to mutually agree on the fair market value of the affected distribution rights within 30 days of the existing beer wholesalers receipt of the successor beer manufacturers notice pursuant to subdivision (c), the successor beer manufacturers designee or the existing beer wholesaler shall initiate arbitration against each other to determine the issue of compensation for the fair market value of the affected distribution rights no later than 40 days after the existing beer wholesalers receipt of the successor beer manufacturers notice pursuant to subdivision (c). Upon submission to arbitration, the arbitration shall be the means of determining compensation to the existing beer wholesaler for the fair market value of the affected distribution rights, and the fair market value of the affected distribution rights shall be the purpose of the arbitration unless the parties agree otherwise.
(1)An arbitration held under this subdivision shall be held in California through a private arbitration services provider with at least three offices in California and a statewide roster of at least 70 neutral arbitrators, of which at least 30 have prior experience as a sole arbitrator in franchise, distribution, or related business litigation.
(2)The direct costs of the arbitration, including any fees charged by the arbitrator, shall be borne equally by the parties engaged in the arbitration. All other costs shall be paid by the party incurring them.
(3)The parties shall mutually agree on an arbitrator. If the parties cannot agree on the arbitrator, the arbitration provider shall select an impartial arbitrator.
(4)(A)No later than 20 days after receipt of a notification to arbitrate, the parties shall complete an initial exchange of all nonprivileged documents and other information relevant to the fair market value of the affected distribution rights in their possession and control, including, without limitation, copies of all documents and the names of individuals who may be called to testify at the arbitration hearing. No later than 45 days after receipt of notification to arbitrate, the parties shall complete an exchange of the names of any experts who may be called to testify at the arbitration hearing, together with each experts report that may be introduced at the arbitration hearing.
(B)The arbitrator may modify the requirements of subparagraph (A) on a showing of good cause. The arbitrator shall permit third-party discovery and additional discovery between beer wholesalers, including depositions, which the arbitrator finds appropriate for a period of time not to exceed 90 days after receipt of a notification to arbitrate. No discovery shall be permitted against a beer manufacturer.
(5)The decision of the arbitrator shall be final and binding on the parties unless notice of appeal is filed, within 10 business days after service of the arbitration award, with the superior court of the county in which the hearing was held. Upon filing of the appeal, the court shall review the arbitration award for errors of fact or law by determining whether the award is supported by the sufficiency of the evidence presented at the arbitration. This subdivision shall further permit any other appeal or review that is authorized by the California Arbitration Act (Title 9 (commencing with Section 1280) of Part 3 of the Code of Civil Procedure).
(6)The arbitrators award shall be monetary only and shall not enjoin or compel conduct.
(7)The arbitration hearing shall conclude not more than 180 days after receipt of a notification to arbitrate, unless the time period is extended by mutual agreement of the parties or by the arbitrator.
(8)The arbitrator shall render a decision not later than 15 days after the conclusion of the arbitration unless this time period is extended by mutual agreement of the parties or by the arbitrator.
(9)A party who fails to participate in the arbitration hearings waives all rights the party would have had in the arbitration and is considered to have consented to the determination of the arbitrator.
(10)The Legislature finds and declares that several unique factors in combination warrant the Legislature authorizing limited mandatory arbitration between an existing beer wholesaler and a successor beer manufacturers designee solely to determine the issue of compensation for the fair market value of the affected distribution rights:
(A)On the issue of the fair market value of the affected distribution rights, the parties are sophisticated and in an equal position in their knowledge of this legal issue and understand the law and their legal rights, including their jury trial rights.
(B)The parties desire a mandatory arbitration provision to resolve the question of compensation for the fair market value of the affected distribution rights if the parties are not able to reach a mutual settlement so that product distribution can be continued in an orderly manner and the determination of compensation can be made in a timely manner.
(C)The states regulatory interest in maintaining orderly markets for the safe and efficient transportation, distribution, and sale of beer within the state warrants the statutory authorization for mandatory arbitration as provided in this section.
(g)If the existing beer wholesaler does not receive payment of the compensation under subdivision (d) or (f) not later than 10 business days after the date of the settlement or service of the arbitration award, and if there is no appeal or review filed under paragraph (5) of subdivision (f), the existing beer wholesaler shall remain the distributor of the product in the existing beer wholesalers territory to at least the same extent that the existing beer wholesaler distributed the product immediately before the successor beer manufacturer acquired rights to the product, and the existing beer wholesaler is not entitled to the settlement or arbitration award.
(h)Nothing in this section shall be construed to limit or prohibit good faith settlements voluntarily entered into by the parties subsequent to the successor beer manufacturers notice pursuant to subdivision (c).
SEC. 2.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
|
Date
|
Status
|
|---|---|
| Oct 6, 2025 | Chaptered by Secretary of State - Chapter 360, Statutes of 2025. |
| Oct 6, 2025 | Approved by the Governor. |
| Sep 9, 2025 | Enrolled and presented to the Governor at 3 p.m. |
| Sep 2, 2025 | In Assembly. Ordered to Engrossing and Enrolling. |
| Sep 2, 2025 | Read third time. Passed. Ordered to the Assembly. (Ayes 40. Noes 0. Page 2412.). |
| Jun 24, 2025 | Read second time. Ordered to third reading. |
| Jun 23, 2025 | From committee: Be ordered to second reading pursuant to Senate Rule 28.8. |
| Jun 10, 2025 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 14. Noes 0.) (June 10). Re-referred to Com. on APPR. |
| May 28, 2025 | Referred to Com. on G.O. |
| May 20, 2025 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 19, 2025 | Read third time. Passed. Ordered to the Senate. (Ayes 75. Noes 0. Page 1584.) |
| May 12, 2025 | Read third time and amended. Ordered to third reading. (Page 1525.) |
| May 12, 2025 | Read third time and amended. Ordered to third reading. |
| Apr 10, 2025 | Read second time. Ordered to third reading. |
| Apr 9, 2025 | From committee: Do pass. (Ayes 14. Noes 0.) (April 9). |
| Mar 19, 2025 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 19. Noes 0.) (March 19). Re-referred to Com. on APPR. |
| Mar 10, 2025 | Re-referred to Com. on G.O. |
| Mar 6, 2025 | From committee chair, with author's amendments: Amend, and re-refer to Com. on G.O. Read second time and amended. |
| Feb 10, 2025 | Referred to Com. on G.O. |
| Jan 30, 2025 | From printer. May be heard in committee March 1. |
| Jan 29, 2025 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Sep 2, 2025 | The committee(s) on JDC recommend(s) that the measure be PASSED, UNAMENDED | Senate Floor |
Passed |
|
| Jun 10, 2025 | Do pass, but first be re-referred to the Committee on [Appropriations] | Senate Standing Committee on Governmental Organization |
Passed |
|
| May 19, 2025 | AB 344 Valencia Assembly Third Reading | Assembly Floor |
Passed |
|
| Apr 9, 2025 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Mar 19, 2025 | Do pass and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Governmental Organization |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| California Beer and Beverage Distributors | ** Support | |
| California Family Beer Distributors | ** Support |
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB 344 |
THIRD READING
Bill No: AB 344
Author: Valencia (D)
Amended: 5/12/25 in Assembly
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE: 14-0, 6/10/25
AYES: Padilla, Valladares, Ashby, Blakespear, Cervantes, Dahle, Hurtado, Jones, Ochoa Bogh, Richardson, Rubio, Smallwood-Cuevas, Wahab, Weber Pierson
NO VOTE RECORDED: Archuleta
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 75-0, 5/19/25 - See last page for vote
SUBJECT: Alcoholic beverages: beer price posting and marketing regulations: definitions
SOURCE: California Family Beer Distributors
DIGEST: This bill modifies the definition of “successor beer manufacturer” in the Alcoholic Beverage Control Act to specify that a successor beer manufacturer is a beer manufacturer or any person, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
ANALYSIS:
Existing law:
- Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation, and sale of alcoholic beverages in this State and the collection of license fees.
- 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. 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.
- Generally, makes it unlawful for any person other than a license to sell, manufacture, or import alcoholic beverages in this state.
- Establishes the beer and wine wholesaler license, which allows the licensee to acquire beer and wine from suppliers and sell to other wholesalers and to retailers.
- Provides that if a successor beer manufacturer, as defined, acquires the rights to manufacture, import, or distribute a brand or brands of beer, and then cancels the distribution rights of an existing beer wholesaler, as defined, the successor beer manufacturer shall notify the existing beer wholesaler of his or her intent to cancel those rights (Business and Professions Code § 25000.2)
- Provides that the successor beer manufacturer’s designee, as defined, and the existing beer wholesaler shall negotiate in good faith to determine the fair market value, as defined, of the distribution rights and require the designee to compensate the existing beer wholesaler in the agreed amount of the fair market value, or if they are unable to agree on the fair market value, shall engage in arbitration subject to specified conditions, as provided.
- Defines “successor beer manufacturer” to mean a beer manufacturer that acquires the rights to manufacture, import, or distribute a product.
This bill modifies the definition of “successor beer manufacturer” in the ABC Act to specify that a successor beer manufacturer is a beer manufacturer or any person, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
Background
Author Statement. According to the author’s office, “AB 344 will protect previously negotiated and agreed upon distributor rights and fair market value, in the future event that a brewery is sold to an entity who does not value the relationship between the wholesaler and their original brewery partner. Fair market value compensation has long been protected legally in the event of a brewery sale and protections like this are common across nearly every state. There is no reason why a company who plans to manufacture beer should be viewed differently simply because they had not done so prior to purchasing a brewery. AB 344 will provide financial stability and once again protect wholesalers’ long-term investments with their brewery partners.”
Harbor Distributing LLC v. Mainsheet Capital Inc. Under existing law, a “successor beer manufacturer” is required to pay fair market value when a beer brand changes ownership and then proceeds to move that brand from one wholesaler to another, as specified. Specifically, BPC § 25000.2 has long been interpreted by beer distributors to guarantee beer wholesalers in California retain "fair market value" in the event that a brewery they partnered with, sells the brewery to another entity. The law requires the successor beer manufacturer’s designee to negotiate with the existing beer wholesaler to determine the fair market value of the affected distribution rights. In the event that the existing beer wholesaler and the successor beer manufacturer’s designee agree to the fair market value of the affected distribution rights, the existing wholesaler would be compensated for the outgoing distribution rights in the agreed amount. If the parties are unable to agree, then arbitration shall be used to determine the fair market value of the distribution rights to be transferred.
Harbor Distributing LLC, operating as Golden Brands and owned by Reyes Holdings—the largest beer wholesaler in the United States—had been distributing products for Anderson Valley Brewing Company. In 2019, Mainsheet Capital Inc. acquired Anderson Valley Brewing and decided to transfer its distribution rights to other wholesalers within California. After the acquisition, the brewery notified the distributor of its intention to transfer its distribution rights to a different wholesaler, without compensation for the existing contract or its current market value.
In response, Harbor Distributing LLC, filed a lawsuit in the Superior Court of California in Sacramento County contending that under California Law, Anderson Valley was required to compensate them with the fair market value of the distribution rights they were relinquishing. The central legal issue revolved around whether Anderson Valley's new ownership qualified as a "successor beer manufacturer" under California law. Current law requires that when a beer brand changes ownership, the new owner must pay fair market value to the existing distributor if the brand is moved to a different wholesaler.
The new owners of the brewery presented their argument in court, contending that they were not legally obligated to provide fair market value, as they had never engaged in the production of beer and, as a result, should not be categorized as “successor beer manufacturer” under the applicable legal definition. This distinction, they argued, exempted them from the requirements typically imposed on such entities.
The case, which had been progressing through the legal system for approximately five years, concluded in favor of Anderson Valley Brewing. The presiding judge sided with the new owners, ruling that the statute in question did not apply to their situation. The judge's decision was based on the fact that the new owners did not possess a beer manufacturer's license at the time of that transition, which is a necessary criterion for the enforcement of the current legal provisions in this context.
According to the sponsor, AB 344 will reinforce California’s long-standing protection of beer wholesalers, when manufacturers sell their business to another entity.
Tied-House Laws. State and federal law prohibit certain relations between those engaged in the production, distribution, and retail sale of alcoholic beverages. The term “tied-house” is derived from a common practice in England whereby a bar or public house was “tied” - by ownership, contractual obligations, or other influences - to a specific manufacturer. In some instances, that model encouraged intemperance in alcohol consumption, as retailers would offer to manufacturers generous favors, such as expensive business meals and gifts, which added costs that needed to be recouped through aggressive product promotion. Tied houses were also subject to undue influence from manufacturers, who sometimes used their influence to force tied houses to sell their products and exclude other manufacturers’ products.
As a result, after the repeal of prohibition in 1933, California’s current “three-tier” system was introduced. 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.
Related/Prior Legislation
SB 410 (Archuleta, 2019) would have removed the beer and wine importer license, the beer and wine importer’s general license, and the beer and wine wholesaler license and replace them with a separate beer or wine license, as specified. (Never Heard in the Assembly Governmental Organization)
SB 574 (McLeod, Chapter 350, Statutes of 2007) established, within the ABC Act, a framework to determine fair market value to be paid to an existing beer wholesaler by a successor beer wholesaler when distribution rights to a brand are canceled and that right is granted to a successor beer wholesaler.
SB 1957 (Burton, Chapter 1083, Statutes of 2000) prohibits a beer manufacturer from terminating a wholesaler solely because of the beer wholesaler’s failure to meet and unreasonable sales goal or quota, as specified, and requires a beer manufacturer to pay compensation to a beer wholesaler for unreasonable denial of sale or transfer of brands.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes
According to the Senate Appropriations Committee, the Department of ABC’s activities are funded by regulatory and license fees and generally, the department does not receive support from the General Fund. New legislative mandates, although modest in scope, may in totality create new cost pressures and impact the department’s operating costs and future budget requests.
SUPPORT: (Verified 6/23/25)
California Family Beer Distributors (Source)
California Beer and Beverage Distributors
OPPOSITION: (Verified 6/23/25)
None received
ARGUMENTS IN SUPPORT: According to the California Family Beer Distributors, “AB 344 provides a necessary solution by reaffirming the historical interpretation of B&P Code Section 25000.2. It ensures that beer wholesalers are protected in the event of a brewery sale, preventing unfair business practices that could undermine competition and investment in the industry. Similar protections exist in most other states, and it crucial that California maintains its commitment to fostering a fair and balanced marketplace.”
ASSEMBLY FLOOR: 75-0, 5/19/25
AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Elhawary, Ellis, Fong, Gabriel, Gallagher, Garcia, Gipson, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NO VOTE RECORDED: Dixon, Flora, Jeff Gonzalez, Papan
Prepared by: Felipe Lopez / G.O. / (916) 651-1530
6/24/25 16:32:49
**** END ****
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Steve Padilla
Chair
2025 - 2026 Regular
Bill No: AB Hearing Date: 6/10/2025
Author: | Valencia | ||
Version: | Amended | ||
Urgency: | Fiscal: | ||
Consultant: | |||
SUBJECT:
DIGEST: This bill modifies the definition of “successor beer manufacturer” in the Alcoholic Beverage Control Act to specify that a successor beer manufacturer is a beer manufacturer or any person, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
ANALYSIS:
Existing law:
- Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation, and sale of alcoholic beverages in this State and the collection of license fees.
- 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. 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.
- Generally, makes it unlawful for any person other than a licensee to sell, manufacture, or import alcoholic beverages in this state.
- Establishes the beer and wine wholesaler license, which allows the licensee to acquire beer and wine from suppliers and sell to other wholesalers and to retailers.
- Provides that if a successor beer manufacturer, as defined, acquires the rights to manufacture, import, or distribute a brand or brands of beer, and then cancels the distribution rights of an existing beer wholesaler, as defined, the successor beer manufacturer shall notify the existing beer wholesaler of his or her intent to cancel those rights (Business and Professions Code § 25000.2)
- Provides that the successor beer manufacturer’s designee, as defined, and the existing beer wholesaler shall negotiate in good faith to determine the fair market value, as defined, of the distribution rights and require the designee to compensate the existing beer wholesaler in the agreed amount of the fair market value, or if they are unable to agree on the fair market value, shall engage in arbitration subject to specified conditions, as provided.
- Defines “successor beer manufacturer” to mean a beer manufacturer that acquires the rights to manufacture, import, or distribute a product.
This bill modifies the definition of “successor beer manufacturer” in the ABC Act to specify that a successor beer manufacturer is a beer manufacturer or any person, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
Background
Author Statement. According to the author’s office, “AB 344 will protect previously negotiated and agreed upon distributor rights and fair market value, in the future event that a brewery is sold to an entity who does not value the relationship between the wholesaler and their original brewery partner. Fair market value compensation has long been protected legally in the event of a brewery sale and protections like this are common across nearly every state. There is no reason why a company who plans to manufacture beer should be viewed differently simply because they had not done so prior to purchasing a brewery. AB 344 will provide financial stability and once again protect wholesalers’ long-term investments with their brewery partners.”
Harbor Distributing LLC v. Mainsheet Capital Inc. Under existing law, a “successor beer manufacturer” is required to pay fair market value when a beer brand changes ownership and then proceeds to move that brand from one wholesaler to another, as specified. Specifically, BPC § 25000.2 has long been interpreted by beer distributors to guarantee beer wholesalers in California retain "fair market value" in the event that a brewery they partnered with, sells the brewery to another entity. The law requires the successor beer manufacturer’s designee to negotiate with the existing beer wholesaler to determine the fair market value of the affected distribution rights. In the event that the existing beer wholesaler and the successor beer manufacturer’s designee agree to the fair market value of the affected distribution rights, the existing wholesaler would be compensated for the outgoing distribution rights in the agreed amount. If the parties are unable to agree, then arbitration shall be used to determine the fair market value of the distribution rights to be transferred.
Harbor Distributing LLC, operating as Golden Brands and owned by Reyes Holdings—the largest beer wholesaler in the United States—had been distributing products for Anderson Valley Brewing Company. In 2019, Mainsheet Capital Inc. acquired Anderson Valley Brewing and decided to transfer its distribution rights to other wholesalers within California. After the acquisition, the brewery notified the distributor of its intention to transfer its distribution rights to a different wholesaler, without compensation for the existing contract or its current market value.
In response, Harbor Distributing LLC, filed a lawsuit in the Superior Court of California in Sacramento County contending that under California Law, Anderson Valley was required to compensate them with the fair market value of the distribution rights they were relinquishing. The central legal issue revolved around whether Anderson Valley's new ownership qualified as a "successor beer manufacturer" under California law. Current law requires that when a beer brand changes ownership, the new owner must pay fair market value to the existing distributor if the brand is moved to a different wholesaler.
The new owners of the brewery presented their argument in court, contending that they were not legally obligated to provide fair market value, as they had never engaged in the production of beer and, as a result, should not be categorized as “successor beer manufacturer” under the applicable legal definition. This distinction, they argued, exempted them from the requirements typically imposed on such entities.
The case, which had been progressing through the legal system for approximately five years, concluded in favor of Anderson Valley Brewing. The presiding judge sided with the new owners, ruling that the statute in question did not apply to their situation. The judge's decision was based on the fact that the new owners did not possess a beer manufacturer's license at the time of that transition, which is a necessary criterion for the enforcement of the current legal provisions in this context.
According to the sponsor, AB 344 will reinforce California’s long-standing protection of beer wholesalers, when manufacturers sell their business to another entity.
Tied-House Laws. State and federal law prohibit certain relations between those engaged in the production, distribution, and retail sale of alcoholic beverages. The term “tied-house” is derived from a common practice in England whereby a bar or public house was “tied” - by ownership, contractual obligations, or other influences - to a specific manufacturer. In some instances, that model encouraged intemperance in alcohol consumption, as retailers would offer to manufacturers generous favors, such as expensive business meals and gifts, which added costs that needed to be recouped through aggressive product promotion. Tied houses were also subject to undue influence from manufacturers, who sometimes used their influence to force tied houses to sell their products and exclude other manufacturers’ products.
As a result, after the repeal of prohibition in 1933, California’s current “three-tier” system was introduced. 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.
Prior/Related Legislation
SB 410 (Archuleta, 2019) would have removed the beer and wine importer license, the beer and wine importer’s general license, and the beer and wine wholesaler license and replace them with a separate beer or wine license, as specified. (Never Heard in the Assembly Governmental Organization)
SB 574 (McLeod, Chapter 350, Statutes of 2007) established, within the ABC Act, a framework to determine fair market value to be paid to an existing beer wholesaler by a successor beer wholesaler when distribution rights to a brand are canceled and that right is granted to a successor beer wholesaler.
SB 1957 (Burton, Chapter 1083, Statutes of 2000) prohibits a beer manufacturer from terminating a wholesaler solely because of the beer wholesaler’s failure to meet and unreasonable sales goal or quota, as specified, and requires a beer manufacturer to pay compensation to a beer wholesaler for unreasonable denial of sale or transfer of brands.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes
SUPPORT:
California Family Beer Distributors (Source)
California Beer and Beverage Distributors
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: According to the California Family Beer Distributors, “AB 344 provides a necessary solution by reaffirming the historical interpretation of B&P Code Section 25000.2. It ensures that beer wholesalers are protected in the event of a brewery sale, preventing unfair business practices that could undermine competition and investment in the industry. Similar protections exist in most other states, and it crucial that California maintains its commitment to fostering a fair and balanced marketplace.”
ASSEMBLY THIRD READING
ATR Bill Id:AB 344
Author:(Valencia)
As Amended Ver:May 12, 2025
Majority vote
SUMMARY
This bill would modify the definition of "successor beer manufacturer" in the Alcoholic Beverage Control Act (Act) to specify that a successor beer manufacturer may be a beer manufacturer or any person, as defined, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
Major Provisions
1) Defines "beer manufacturer" to further include any holder of a beer manufacturer's license, any holder of an out-of-state beer manufacturer's certificate, or any holder of a beer and wine importer's general license.
2) Defines "successor beer manufacturer" to mean a beer manufacturer or any person, as defined, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product.
3) Provides any successor beer manufacturer that acquires the rights to manufacture, import, or distribute a product, and who cancels any of the existing beer wholesaler's rights to distribute the product, shall comply with specified requirements.
3) Makes technical and clarifying changes.
COMMENTS
Background.
Under existing law, a "successor beer manufacturer" is required to pay fair market value when a beer brand changes ownership and then proceeds to move that brand from one wholesaler to another, as specified. Specifically, California's Business and Professions Code (BPC) Section 25000.2 has long been interpreted by beer distributors to guarantee beer wholesalers in California to retain "fair market value" in the event that a brewery they partnered with, sells the brewery to another entity. The law requires the successor beer manufacturer's designee to negotiate with the existing beer wholesaler, to determine the fair market value of the affected distribution rights. In the event that the existing beer wholesaler and the successor beer manufacturer's designee agree to the fair market value of the affected distribution rights, the existing wholesaler would be compensated for the outgoing distribution rights in the agreed amount. If the parties are unable to agree, then arbitration shall be used to determine the fair market value of the distribution rights to be transferred.
What is the problem? In 2020, a non-brewing entity acquired a brewery with a longstanding contractual relationship with a distributor. After the acquisition, the brewery notified the distributor of its intention to transfer its distribution rights to a different wholesaler, without compensation for the existing contract or its current market value. In response, the distributor filed a lawsuit in the Superior Court of California in Sacramento County.
The new owners of the brewery presented their argument in court, contending that they were not legally obligated to provide fair market value, as they had never engaged in the production of beer and, as a result, should not be categorized as 'successor beer manufacturer' under the applicable legal definition. This distinction, they argued, exempted them from the requirements typically imposed on such entities. The presiding judge sided with the new brewery owners, ruling that the statute in question did not apply to their situation, as the new owners did not possess a beer manufacturer's license.
This bill expands the definition of a "successor beer manufacturer" to include an unlicensed person who acquires the rights to a product from another person meeting certain criteria. Thus, if a non-brewing entity acquires a brewery and cancels the existing wholesaler's distribution rights, this bill assures the wholesaler still receives fair market value of the canceled contract.
According to the Author
According to the author's office, "AB 344 reaffirms the historical interpretation of BPC Section 25000.2 to protect wholesalers' long-term investments with their brewery partners. In the future event that a brewery is sold to an entity who does not value the relationship between the wholesaler and their original brewery partner, AB 344 ensures the successor is protected and receives fair market value for their contract." The author points out that "protections like this are common across nearly every state and there are is no reason why a company who plans to manufacture beer should be viewed differently simply because they had not done so prior to purchasing a brewery."
Arguments in Support
The California Family Beer Distributors writes in support, "AB 344 reinforces the long-standing protection of beer wholesalers in California. This bill is critical to ensuring that our state's well-established tied-house laws continue to uphold fair and competitive business practices in the alcohol distribution industry. AB 344 reaffirms the historical interpretation of BPC Section 25000.2. It ensures that beer wholesalers are protected in the event of a brewery sale, preventing unfair business practices that could undermine competition and investment in the industry. Similar protections exist in most other states, and it is crucial that California maintains its commitment to fostering a fair and balanced marketplace."
Arguments in Opposition
None on file.
FISCAL COMMENTS
According the Assembly Committee on Appropriations analysis, "Likely minor and absorbable enforcement costs to the Department of Alcoholic Beverage Control (ABC), which oversees the activity of licensees under the Alcoholic Beverage Control Act. This committee sees a wide array of bills that propose to modify the scope of alcohol laws. Generally, the majority of proposals do not generate significant new enforcement workload for ABC, but taken together, these proposals could lead to significant new costs and future budget requests. In this case, there are likely few instances of a change in ownership of a brewery to an unlicensed person."
VOTES
ASM GOVERNMENTAL ORGANIZATION: 19-0-3
YES: Blanca Rubio, Davies, Berman, Bryan, Carrillo, DeMaio, Dixon, Fong, Gipson, Nguyen, Pacheco, Ramos, Michelle Rodriguez, Sanchez, Solache, Soria, Ta, Valencia, Wallis
ABS, ABST OR NV: Alvarez, Gabriel, McKinnor
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Sanchez, Arambula, Calderon, Caloza, Dixon, Elhawary, Fong, Mark González, Hadwick, Hart, Pacheco, Solache, Ta
ABS, ABST OR NV: Pellerin
UPDATED
VERSION: May 12, 2025
CONSULTANT: Eric Johnson / G.O. / (916) 319-2531 FN: 0000390
ASSEMBLY THIRD READING
ATR Bill Id:AB 344
Author:(Valencia)
As Amended Ver:March 6, 2025
Majority vote
SUMMARY
This bill would modify the definition of "successor beer manufacturer" in the Alcoholic Beverage Control Act (Act) to specify that a successor beer manufacturer may be licensed or unlicensed and would establish additional criteria for the person from whom the successor acquires the rights to manufacture, import, or distribute a product, as specified.
Major Provisions
1) Modifies the definition of "Successor beer manufacturer" to mean any person, as defined in the Act, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product from any person, as defined, who meets any of the following criteria:
- Has facilities and equipment for the commercial manufacture of the product.
- Engages in contract brewing for the commercial manufacture of the product and holds the right to direct the sale and distribution of the product.
- Otherwise holds the right to control or direct the commercial sale and distribution of the product, including, without limitation, the product's recipe or recipes, branding, or trademarks.
2) Provides any successor beer manufacturer who cancels any of the existing beer wholesaler's rights to distribute the product, shall comply with the requirements of this bill.
3) Makes technical and clarifying changes.
COMMENTS
Background.
Under existing law, a "successor beer manufacturer" is required to pay fair market value when a beer brand changes ownership and then proceeds to move that brand from one wholesaler to another, as specified. Specifically, BPC Section 25000.2 has long been interpreted by beer distributors to guarantee beer wholesalers in California to retain "fair market value" in the event that a brewery they partnered with, sells the brewery to another entity. The law requires the successor beer manufacturer's designee to negotiate with the existing beer wholesaler, to determine the fair market value of the affected distribution rights. In the event that the existing beer wholesaler and the successor beer manufacturer's designee agree to the fair market value of the affected distribution rights, the existing wholesaler would be compensated for the outgoing distribution rights in the agreed amount. If the parties are unable to agree, then arbitration shall be used to determine the fair market value of the distribution rights to be transferred.
What is the problem? In 2020, a non-brewing entity acquired a brewery with a longstanding contractual relationship with a distributor. After the acquisition, the brewery notified the distributor of its intention to transfer its distribution rights to a different wholesaler, without compensation for the existing contract or its current market value. In response, the distributor filed a lawsuit in the Superior Court of California in Sacramento County.
The new owners of the brewery presented their argument in court, contending that they were not legally obligated to provide fair market value, as they had never engaged in the production of beer and, as a result, should not be categorized as 'successor beer manufacturer' under the applicable legal definition. This distinction, they argued, exempted them from the requirements typically imposed on such entities. The presiding judge sided with the new brewery owners, ruling that the statute in question did not apply to their situation, as the new owners did not possess a beer manufacturer's license.
This bill expands the definition of a "successor beer manufacturer" to include an unlicensed person who acquires the rights to a product from another person meeting certain criteria. Thus, if a non-brewing entity acquires a brewery and cancels the existing wholesaler's distribution rights, this bill assures the wholesaler still receives fair market value of the canceled contract.
According to the Author
According to the author's office, "AB 344 reaffirms the historical interpretation of BPC Section 25000.2 to protect wholesalers' long-term investments with their brewery partners. In the future event that a brewery is sold to an entity who does not value the relationship between the wholesaler and their original brewery partner, AB 344 ensures the successor is protected and receives fair market value for their contract." The author points out that "protections like this are common across nearly every state and there are is no reason why a company who plans to manufacture beer should be viewed differently simply because they had not done so prior to purchasing a brewery."
Arguments in Support
The California Family Beer Distributors writes in support, "AB 344 reinforces the long-standing protection of beer wholesalers in California. This bill is critical to ensuring that our state's well-established tied-house laws continue to uphold fair and competitive business practices in the alcohol distribution industry. AB 344 reaffirms the historical interpretation of BPC Section 25000.2. It ensures that beer wholesalers are protected in the event of a brewery sale, preventing unfair business practices that could undermine competition and investment in the industry. Similar protections exist in most other states, and it is crucial that California maintains its commitment to fostering a fair and balanced marketplace."
Arguments in Opposition
None on file.
FISCAL COMMENTS
According the Assembly Committee on Appropriations analysis, "Likely minor and absorbable enforcement costs to the Department of Alcoholic Beverage Control (ABC), which oversees the activity of licensees under the Alcoholic Beverage Control Act. This committee sees a wide array of bills that propose to modify the scope of alcohol laws. Generally, the majority of proposals do not generate significant new enforcement workload for ABC, but taken together, these proposals could lead to significant new costs and future budget requests. In this case, there are likely few instances of a change in ownership of a brewery to an unlicensed person."
VOTES
ASM GOVERNMENTAL ORGANIZATION: 19-0-3
YES: Blanca Rubio, Davies, Berman, Bryan, Carrillo, DeMaio, Dixon, Fong, Gipson, Nguyen, Pacheco, Ramos, Michelle Rodriguez, Sanchez, Solache, Soria, Ta, Valencia, Wallis
ABS, ABST OR NV: Alvarez, Gabriel, McKinnor
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Sanchez, Arambula, Calderon, Caloza, Dixon, Elhawary, Fong, Mark González, Hadwick, Hart, Pacheco, Solache, Ta
ABS, ABST OR NV: Pellerin
UPDATED
VERSION: March 6, 2025
CONSULTANT: Eric Johnson / G.O. / (916) 319-2531 FN: 0000234
Date of Hearing: April 9, 2025
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
ABPCA Bill Id:AB 344
Author:(Valencia) – As Amended Ver:March 6, 2025
Policy Committee: | Governmental Organization | Vote: | 19 - 0 |
|
| ||
|
|
Urgency: No State Mandated Local Program: Yes Reimbursable: No
SUMMARY:
This bill revises the definition of a “successor beer manufacturer.”
Specifically, this bill provides that a “successor beer manufacturer” is any licensed or unlicensed person, instead of a licensed beer manufacturer only, who acquires the rights to manufacture, import, or distribute a product from a person meeting certain criteria.
FISCAL EFFECT:
Likely minor and absorbable enforcement costs to the Department of Alcoholic Beverage Control (ABC), which oversees the activity of licensees under the Alcoholic Beverage Control Act.
This committee sees a wide array of bills that propose to modify the scope of alcohol laws. Generally, the majority of proposals do not generate significant new enforcement workload for ABC, but taken together, these proposals could lead to significant new costs and future budget requests. In this case, there are likely few instances of a change in ownership of a brewery to an unlicensed person.
COMMENTS:
- Purpose. According to the author:
AB 344 reaffirms the historical interpretation of BPC § 25000.2 to protect wholesalers’ long-term investments with their brewery partners. In the future event that a brewery is sold to an entity who does not value the relationship between the wholesaler and their original brewery partner, AB 344 ensures the successor is protected and receives fair market value for their contract.
This bill is sponsored by the California Beer and Beverage Distributors and supported by the California Family Beer Distributors.
- Background.
Tied-House Law. Existing law separates the alcoholic beverage industry into three component parts of manufacturer (first tier), wholesaler (second tier), and retailer (third tier) to prohibit the vertical integration of the alcohol industry and protect the public from predatory marketing practices.
Fair Market Value. Under existing law, the designee of a “successor beer manufacturer” is required to pay the fair market value of a distribution contract to the current beer wholesaler when a beer brand changes ownership and the successor beer manufacturer proceeds to move distribution of that brand from the current beer wholesaler to a new wholesaler. Specifically, Business and Professions Code Section 25000.2 has long been interpreted by beer wholesalers to guarantee a beer wholesaler in California the “fair market value” of a cancelled distribution contract in the event that a brewery the wholesaler partnered with for distribution is sold to another entity.
In 2020, a non-brewing entity acquired a brewery that had a longstanding contractual relationship with a wholesaler. The brewery then notified the wholesaler of the brewery’s intention to transfer distribution rights to a different wholesaler, without compensation for the wholesaler’s existing contract or the contract’s current market value. In response, the wholesaler filed a lawsuit in the Superior Court of California in Sacramento County. The new brewery owners contended that they were not legally obligated to provide fair market value to the wholesaler, as the new owners had never engaged in the production of beer and should therefore not be categorized as a “successor beer manufacturer” under existing law. The presiding judge sided with the new brewery owners, ruling that the statute in question did not apply to their situation, as the new owners did not possess a beer manufacturer’s license.
This bill expands the definition of a “successor beer manufacturer” to include an unlicensed person who acquires the rights to a product from another person meeting certain criteria. Thus, if a non-brewing entity acquires a brewery and cancels the existing wholesaler’s distribution rights, this bill assures the wholesaler still receives fair market value of the canceled contract.
- Prior Legislation. SB 574 (Negrete McLeod), Chapter 350, Statutes of 2007, established a framework to determine the fair market value a successor beer manufacturer’s designee must pay an existing beer wholesaler when the existing wholesaler’s distribution rights to a brand are canceled and given to a successor wholesaler.
Analysis Prepared by: Sophia Karperos & Irene Ho / APPR. / (916) 319-2081
Date of Hearing: March 19, 2025
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Blanca Rubio, Chair
ABPCA Bill Id:AB 344 (
Author:Valencia) – As Introduced Ver:January 29, 2025
SUBJECT: Alcoholic beverages: beer price posting and marketing regulations: definitions
SUMMARY: This bill would modify the definition of “successor beer manufacturer” in the Alcoholic Beverage Control Act (Act) to specify that a successor beer manufacturer may be licensed or unlicensed and would establish additional criteria for the person from whom the successor acquires the rights to manufacture, import, or distribute a product. Specifically, this bill:
1) Modifies the definition of “Successor beer manufacturer” to mean any person, as defined in the Act, whether licensed or unlicensed, who acquires the rights to manufacture, import, or distribute a product from any person, as defined, who meets any of the following criteria:
- Has facilities and equipment for the commercial manufacture of the product.
- Engages in contract brewing for the commercial manufacture of the product and holds the right to direct the sale and distribution of the product.
- Otherwise holds the right to control or direct the commercial sale and distribution of the product, including, without limitation, the product’s recipe or recipes, branding, or trademarks.
2) Provides any successor beer manufacturer who cancels any of the existing beer wholesaler’s rights to distribute the product, shall comply with the requirements of this bill.
3) Makes technical and clarifying 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. 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) Generally, makes it unlawful for any person other than a licensee of the ABC to sell, manufacture, or import alcoholic beverages in this state.
3) Specifies that the "Tied-House" law or "three-tier" system, separates the alcoholic beverage industry into three component parts of manufacturer (first tier), wholesaler (second tier), and retailer (third tier). The original policy rationale for this body of law was to prohibit the vertical integration of the alcohol industry and to protect the public from predatory marketing practices.
4) Prohibits generally, under Tied-House laws, suppliers and retailers from sharing common owners and legally restricts alcohol beverage suppliers' ability to gain control over retailers through indirect means. Generally, other than exemptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the "three-tier" system. California law currently allows beer manufacturers to hold ownership interest in distributors, but as a practical matter, integration between brewers and wholesalers is not common.
5) Establishes the beer and wine wholesaler license, which allows the licensee to acquire beer and wine from suppliers and sell to other wholesalers and to retailers. (California Business and Professions Code § 23779)
6) Provides that if a successor beer manufacturer, as defined, acquires the rights to manufacture, import, or distribute a brand or brands of beer, and then cancels the distribution rights of an existing beer wholesaler, as defined, the successor beer manufacturer shall notify the existing beer wholesaler of his or her intent to cancel those rights. (California Business and Professions Code § 25000.2)
7) Provides that the successor beer manufacturer’s designee, as defined, and the existing beer wholesaler shall negotiate in good faith to determine the fair market value, as defined, of the distribution rights and require the designee to compensate the existing beer wholesaler in the agreed amount of the fair market value, or if they are unable to agree on the fair market value, shall engage in arbitration subject to specified conditions, as provided.
FISCAL EFFECT: This bill is keyed fiscal by Legislative Counsel.
COMMENTS:
Purpose of the bill. According to the author’s office, “AB 344 reaffirms the historical interpretation of BPC § 25000.2 to protect wholesalers’ long-term investments with their brewery partners. In the future event that a brewery is sold to an entity who does not value the relationship between the wholesaler and their original brewery partner, AB 344 ensures the successor is protected and receives fair market value for their contract.” The author points out that “protections like this are common across nearly every state and there are is no reason why a company who plans to manufacture beer should be viewed differently simply because they had not done so prior to purchasing a brewery.”
Background.
In California, ABC oversees the issuance of various types of licenses, including the wholesale liquor license. A Type 17 license permits incidental sales to other supplier-type licensees. However, to qualify as a bona fide wholesaler, a licensee must generally sell to retailers (BPC § 23779). Under the Act, a person cannot engage in the commercial manufacture of beer without a beer manufacturing license. The Act allows for the manufacture of beer for personal or family use without a license under defined circumstances.
Under existing law, a “successor beer manufacturer” is required to pay fair market value when a beer brand changes ownership and then proceeds to move that brand from one wholesaler to another, as specified. Specifically, BPC § 25000.2 has long been interpreted by beer distributors to guarantee beer wholesalers in California to retain "fair market value" in the event that a brewery they partnered with, sells the brewery to another entity. The law requires the successor beer manufacturer’s designee to negotiate with the existing beer wholesaler, to determine the fair market value of the affected distribution rights. In the event that the existing beer wholesaler and the successor beer manufacturer’s designee agree to the fair market value of the affected distribution rights, the existing wholesaler would be compensated for the outgoing distribution rights in the agreed amount. If the parties are unable to agree, then arbitration shall be used to determine the fair market value of the distribution rights to be transferred.
What is the problem? In 2020, a non-brewing entity acquired a brewery with a longstanding contractual relationship with a distributor. After the acquisition, the brewery notified the distributor of its intention to transfer its distribution rights to a different wholesaler, without compensation for the existing contract or its current market value. In response, the distributor filed a lawsuit in the Superior Court of California in Sacramento County.
The new owners of the brewery presented their argument in court, contending that they were not legally obligated to provide fair market value, as they had never engaged in the production of beer and, as a result, should not be categorized as 'successor beer manufacturer' under the applicable legal definition. This distinction, they argued, exempted them from the requirements typically imposed on such entities. The presiding judge sided with the new owners, ruling that the statute in question did not apply to their situation. The judge's decision was based on the fact that the new owners did not possess a beer manufacturer's license, which is a necessary criterion for the enforcement of the current legal provisions in this context.
According to the sponsor, AB 344 will reinforce California’s long-standing protection of beer wholesalers, when manufacturers sell their business to another entity.
Beer and wine wholesaler license. The beer and wine wholesaler license, also known as a Type 17 license, allows the licensee to acquire beer and wine from suppliers and sell to other wholesalers and to retailers. While the license does permit sales to other supplier type licensees, to qualify for this license, the licensee must generally sell to retailers. The most common types of businesses that use this license are traditional beer and wine wholesalers and boutique wine wholesalers.
The current annual fee for a beer and wine wholesaler license is $490. The ABC also mandates that non-retail alcoholic beverage licensees register with the Board of Equalization. This registration is part of the broader regulatory framework that ensures the responsible sale, distribution, and importation of alcoholic beverages in California.
In support. The California Family Beer Distributors writes in support, “AB 344 reinforces the long-standing protection of beer wholesalers in California. This bill is critical to ensuring that our state’s well-established tied-house laws continue to uphold fair and competitive business practices in the alcohol distribution industry. AB 344 reaffirms the historical interpretation of
BPC § 25000.2. It ensures that beer wholesalers are protected in the event of a brewery sale, preventing unfair business practices that could undermine competition and investment in the industry. Similar protections exist in most other states, and it is crucial that California maintains its commitment to fostering a fair and balanced marketplace.”
The California Beer & Beverage Distributors writes, “this bill updates and clarifies the present definition of “successor beer manufacturer” to reflect today’s expanding range of modern business entities, regardless of license status, that may acquire the right to direct and control the commercial sale and distribution of products under the statute. The intent of the legislation is to ensure fair market value compensation is paid when distribution right change hands.”
Prior legislation. SB 420 (Archuleta) of 2019. Would have removed the beer and wine importer license, the beer and wine importer’s general license, and the beer and wine wholesaler license and replaces them with a separate beer or wine license, as specified, and makes relating changes within the Act with regard to the privileges and restrictions of these licenses. (Never heard in the Assembly)
SB 574 (Negrete McLeod), Chapter 350, Statutes of 2007. Established, within the Act, a framework to determine fair market value to be paid to an existing beer wholesaler by a successor beer wholesaler when distribution right to a brand are canceled and that right is granted to a successor beer wholesaler.
SB 1957 (Burton), Chapter 1083, Statutes of 2000. Prohibited a beer manufacturer from terminating a wholesaler solely because of the beer wholesaler’s failure to meet an unreasonable sales goal or quota, as specified, and requires a beer manufacturer to pay compensation to a beer wholesaler for unreasonable denial of sale or transfer of brands.
REGISTERED SUPPORT / OPPOSITION:
Support
California Family Beer Distributors (Sponsor)
California Beer & Beverage Distributors
Opposition
None on file
Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531
Discussed in Hearing
1MIN
Senate Floor
2MIN
Senate Standing Committee on Governmental Organization
57SEC
Assembly Floor
4MIN
Assembly Standing Committee on Governmental Organization
Bill Author
Bill Co-Author(s):