Assembly Standing Committee on Privacy and Consumer Protection

We'll be having two witnesses in support and opposition on each measure. Each witness will be allowed two minutes to present their testimony. Additional supporters and opponent, those in opposition will be invited up to give their name, affiliation, and position for the record. We'll do that for all the bills except those on consent.

And just so everybody knows, of course, you can provide written testimony on the Committee's website. And we also need a quorum, so I don't think we have a quorum yet. These Members of the Committee are invited to join us here in the committee room as we get started.

And as soon as we have an author, we will begin. Senator Wiener, you are here first. So, you are up, sir. What happens when you show up promptly to Committee. So, we will hear SB 1047 as the first bill. Senator Wiener, when you're ready.

And, Senator Wiener, I may interrupt you to establish a quorum if we get one more Member.

Okay, thank you very much, Madam Chair and Members. And I'm here today to present Senate Bill 1047. First, I want to really thank the Chair and your staff for working very intensively on this bill. So, I very much appreciate that.

And I do accept the committee amendments outlined in the analysis, including the removal of limited duty exemption, the removal of covered guidance. FM actually, I won't even state those. They are stated in the analysis. And I also want to acknowledge that, as outlined in the analysis, that we've agreed to continue to work on a few areas as outlined.

So again, thank you very much. The purpose of this legislation is twofold. First, to support competition and innovation in AI. And I want to just be very clear that to me, especially as the person who represents the heartland of AI innovation, the great City of San Francisco, that is incredibly important to me.

AI has so much promise in terms of making the world a better place, and it is incredibly important that we foster that innovation, including in the open-source space.

But we also, as with any powerful technology, and I don't want to say new technology, because AI machine learning has been around for many, many years, but it is accelerating. And for any powerful technology, we need to also be very real in acknowledging both the benefits but also the risks.

And the responsible thing to do is to take action to try to reduce the risks, not eliminate risks. That's not the way the world works, but to reduce those risks.

And we know that some of the most respected voices in the AI world, including some of the inventors of what we now think of as AI, support this legislation, support the notion that we should be mindful of safety.

With the Federal Government and congressional fairly paralyzed around tech policy, with the exception of banning TikTok, Congress has not passed a significant piece of technology legislation since the 1990s. And so, it is important for California to lead in the absence of federal action. SB 1047 sets out clear standards for developers of extremely powerful AI systems.

And I want to be clear that this is not about smaller AI models. This is about incredibly large and powerful models that, as far as we know, do not exist today, but will exist in the near future.

And we have been clear in the amendments that we made both before this Committee and in the Committee, that we are focused on only the largest of these models that cost at least $100 million to train, and that is staying unchanged in the bill. Per the Committee analysis, it's $100 million and it goes up by inflation.

So, that's what we're really focused on, these large, very powerful models. This is not about regulating startups. There's been, I'll just be honest, some inaccurate information and some scare tactics online, in particular about how this is going to sweep in tiny startups. And that is absolutely not the case. This is about really the large labs.

And so SB 1047 will require that before training and then before releasing these incredibly powerful models that the developers should engage in basic safety evaluation to identify is there a risk.

And not a remote or theoretical risk, but a concrete risk, that this model could lead to catastrophic harm, defined as either deploying or leading to nuclear, chemical, biological weapon, or harm exceeding $500 million, and if so, to mitigate those risks, not to eliminate them, but to mitigate them.

So, this is something that the large labs all say that they are doing or intend to do. It is a step that CEO's have gone to Congress in the White House. Companies have gone to South Korea just a few weeks ago, signing and making public statements, agreeing to perform safety evaluations on these large models.

And so, any notion that this is somehow not possible or somehow not real, I just want to just stress that they are literally going and publicly saying that they're going to do this. And so, I think good policy means not just trusting that they'll do it.

Because even if all of the companies are fully intending to do that today, we don't know who's going to be running these companies tomorrow or in a year or five years, and what the profit pressure is going to be at that moment in time.

SB 1047, in addition to requiring these basic sales safety evaluations, and I want to be clear, also we're not requiring licensing or any kind of, you don't have to get permission from the government to release or develop these models. It's about safety evaluation.

But in addition to doing that, we also have some pro-consumer, pro-competition aspects of the bill, including pricing transparency for compute, so that the startups can actually have a shot at actually accessing this compute. We have whistleblower protections in the bill that been in the bill since the very beginning.

As noted in the analysis, we're working with Judiciary Committee on some refinements to that aspect. We have a know your customer requirement for cloud providers, so that if someone is buying up enough cloud space to develop these massive models, the cloud provider should at least know who's actually making those purchases.

And then the bill creates something called Cal Compute, which will conduct research into safe and secure deployment of large-scale AI models while allowing smaller startups, researchers, and community groups to access that compute. So. this will be an equalizer in terms of access to the ability to innovate.

As I said before, there's been a lot of hyperbole around this bill, and you're going to hear a lot of, I think, hyperbole today about how this is somehow going to delay or undercut innovation. Respectfully, that is utterly untrue. We can innovate powerfully in AI while also being mindful of identifying and mitigating extreme safety risks.

That's what this bill is about. And I respectfully ask for an aye vote. With me today to testify from two of our sponsors is Sneha Revanur from the founder and President of Encode Justice, and Ari Kagan with the Economic Security Project.

With me today, also for technical responses if necessary, is Chris Painter, Policy Director of the Model Evaluation and Threat Research, METR, which has worked with various labs, including OpenAI and Anthropic, on safety testing endeavors. Thank you.

Thank you, Senator. So, we'll do two minutes each, and the opposition will get the same. Thank you.

Perfect. Chair Bauer Cahan and Members, I'm honored to testify here today in support of SB 1047. My name is Sneha Ravenur, and I'm the 19-year-old leader of Encode Justice, a global youth movement for safe, equitable AI. We're one of three co-sponsors of this critical legislation.

I created Encode Justice in 2020 as a teen growing up in San Jose. Since then, the movement has expanded far beyond California. But our state, home to the top tech giants, is still front and center in the global fight for AI guardrails. Right now, we're watching as trust in the largest AI companies crumbles.

They're racing to release increasingly powerful AI models without regard for the large-scale risks that emerge with exponential progress, risks that are being borne by consumers and the public.

Even though we've been robbed of a say in how this transformative technology is developed, history shows us that industry cannot be blindly trusted to self-regulate, especially when it cuts into companies' bottom line. AI is no exception.

Without our knowledge or consent, a handful of AI companies are quietly shaping our future, the future that my generation will soon inherit. As Congress stalls, the moral responsibility of AI oversight now falls on California.

We must urgently pass SB 1047, which would set common sense AI safety standards, clarify the duty of care for developers by building upon existing tort law, and establish a public computing cluster to democratize transformative innovation. Big tech is fighting hard against this bill through destructive fearmongering. But ironically, they've already made similar commitments voluntarily.

Now it's time to codify those into law. All eyes are on California. For our sake, I hope leaders like you will take notice and take action. My generation will thank you for it. Thank you.

Thank you. We're going to pause before we go to your next witness to establish a quorum.

All right. [Roll call]

Have a quorum. Now, when you'd like to continue.

It's my honor to represent Economic Security California Action as one of the sponsors of this bill. But I am also coming to you as a founder of an AI startup that used technology to help nonprofits build better donation software. And I've seen firsthand the incredible benefits that this technology can provide as consumer applications.

I also believe this technology can go even further. AI has the power to transform our entire society, for better or for worse. And you, the California government, have the opportunity to shape that trajectory. This bill focuses on an extremely narrow category of risks.

The largest societal-scale risks coming out of AI, the ability to wipe out the electric grid of the State of California, the ability to cause another global pandemic, risks that current models do not pose but the next generation may.

A handful of companies are spending billions of dollars training technology that is pushing forward into the frontier, into uncharted territory. Opponents have said that we should wait. Wait until we have another AI disaster or wait until we have an AI Chernobyl or Three Mile Island. We believe that we cannot sit by and wait until that happens.

We need to take proactive action. Other opponents have said that this is not feasible, that we need to have a lighter touch bill, that companies cannot comply. But as the Senator said, many of these companies have already initially taken these steps and have already committed to doing similar things.

Companies like Google and Meta and OpenAI have already, in Seoul a month ago promised to take similar action to this bill. But we cannot rely on voluntary commitments alone. That would punish responsible actors who would lag behind in a race. We need to level the playing field with legislation that encourages everyone to act responsibly.

I urge you to support this legislation and have California take the lead on responsible AI innovation.

Thank you. So, if anyone else is here in support of this bill, we ask that you join us the microphone with name, organization, and position.

Hi there. Good afternoon, Madam Chair. And Members Lea-Ann Tratten with Tratten-Price representing the Center for AI Safety Action Fund, one of the co-sponsors of SB 1049. Thank you. 1047.

Thank you, Madam Chair and Members. Terry Olle, Director of Economic Security, California. Of course, one of the sponsors of the bill. Thank you.

Hello, Chair and Members. Landon Klein with Future of Life Institute in support.

And now, if the primary witnesses in opposition to the bill want to join us. Senator Wiener looks like there are none. Oh, no, there are. It's okay. Take your time.

Thank you.

That's your chair.

So we will do the same. Two minutes each when you are ready.

All right? Thank you so much for having me here, Madam Chair, Committee Members. The Department of Defense Planning, D Day was one of the first users of weather forecasting.

Today, our San Diego company processes millions of weather data, points to forecast thousands of microclimates, help farmers, wineries, the Nature Conservancy, and other landowners, water, fertilizers, pesticides, and manage their control burns. Some call that linear algebra, powers of prediction, artificial intelligence, but I call it math.

Some might ask, why does my small company support or care about these regulation or coming into policy? But the answer is simple. Because over regulating AI, at the end, it hurts everybody who builds and deploys AI. Small companies do not simply use off-the-shelf software built by big companies. We customize and improve it to our needs to tailor it.

When the government sets different rules for more powerful AI models, the effects trickle down. They reduce investment through innovation. Big companies also affect the small companies.

Today, our AI model would not be covered by this bill in all honesty, but various small AI companies need to improve speed and power so we can process more data at a lower cost.

If, however, this innovation will eventually make us deal with the skyrocketing regulatory costs, impossible compliance burdens, and huge risk, then California AI innovation will dry up. AI models builders cannot be required to predict or prevent future harms to know how models will be misused or be liable for downstream misuses.

Small AI innovators cannot build companies if there is a risk that the big AI model built on top of could be shut down if some people misuse it. Government should absolutely make, you know, harmful uses of math and science and AI illegal. But by doing so, we should not sacrifice the opportunity.

AI and math, science all represent opportunities for good, but risk for misuse. We can promote the former without ignoring the latter, and our policies need to be balanced. So that's my point. Thank you so much.

Technology failed me today. I apologize. I have to read from here.

You needed AI.

Thank you, Chair. Ronak Daylami with CalChamber in strong opposition to SB 1047. Let me start by saying that we are still reviewing the full amendments from the Committee, as they are quite substantial in volume.

But we do appreciate that the amendments represent the most substantial changes to the bill to date, reworking its structure to a more straightforward list of requirements. Unfortunately, the improvements do very little to mitigate our fundamental concerns around regulatory uncertainty, unworkable requirements, and negative impacts upon economic and technological innovation in California.

As amended, we still see arbitrary thresholds for cover models, developer liability for downstream misuse, severe penalties placed on developers despite there being only one despite them being only one point in the AI value chain, impossible pre-training requirements, including full shutdown requirements, and unworkable post-training obligations.

This is nothing to say of our concerns of the Frontier Model Division, which is now given expanded authority to change the threshold for a covered model. In terms of pre-training requirements, developers are still required to build in the capability to implement a full shutdown of the covered model.

While amendments do help clarify the scope of those requirements, fundamental flaws remain. For example, there are no other limiting principles within this requirement, meaning that shutdown could still be required for integrations of a model that are not dangerous. This is not a risk-based approach.

With respect to impact on innovation and open-source development, in particular, the amended bill still makes it significantly risky to develop AI in California, if for no other reason than the downstream liability. Such extensive and exclusive liability on developers not only impacts the development of both open source and close source models, it significantly reduces incentives to innovate large models.

Understanding of course, liability is an issue for Judiciary Committee. It's still relevant here because you cannot divorce those provisions from the discussion around the effect of these regulations. They go hand in hand.

As a result, what is presented as a simple assessment in fact operates as a roundabout regulation of the technology itself, with severe consequences for technological innovation startups in our economy. With that, I will just say thank you very much.

Thank you. And I will say I appreciate the comments on liability. We are deferring to Judiciary Committee on that for jurisdictional purposes, and I sit on that committee. So, I guess we'll have this conversation twice. With that, anyone else in opposition, please come up. Name, position, organization.

Chair and Members, Dean Grafilo with Capital Advocacy on behalf of the California Life Sciences. We are opposed unless amended and appreciate the conversations that we have with the Senator's staff specific to an exemption for the life sciences. Thank you.

Thank you.

Good afternoon. Tim Taylor with the National Federation of Independent Business in opposition. Thank you.

Thank you.

Dylan Hoffman on behalf of Technet, respectfully opposed. Thanks.

Abigail Wilson with BSA, The Software Alliance, respectfully opposed unless amended.

Good afternoon. Dani Kando-Kaiser on behalf of the Electronic Frontier Foundation. We are support if amended and appreciate the conversation with the author. Thank you.

Threw me off there, EFF.

Good afternoon, Chair and Members. Stephanie Morwell here on behalf of the Consumer Technology Association and the California Fuels and Convenience Alliance, in opposition.

Good afternoon. Peter Larolle Munoz with the Silicon Valley Leadership Group respectfully opposed.

Khara Boender with the Computer and Communications Industry Association in respectful opposition.

Robert Singleton with Chamber of Progress, also respectfully opposed.

Grace Koplin with Brownstein on behalf of the Bay Area Council. Also respectfully opposed.

Chris Nicholson, machine learning engineering leader. In my last operational role, I helped place nurses in nursing homes during COVID with AI tools and saved lives in California. Strongly opposed.

I'm support, Kimberly Rosenberger with SEIU. Just trying to be in two places at once.

I appreciate that. Never too late. Okay. Seeing no further opposition, we will bring it back to the dais. Questions or comments, Miss Irwin?

Well, this is all we've been hearing about for the last six months, so I just want to know, you know, obviously, we have a lot of opposition from people who say that this bill is premature before the risks are known. What do you think the harm is in waiting?

Yeah, I mean, if you, if you look at the history of tech regulation, we have a, we have a habit, and part of it is because industry comes forward and says, don't do anything while, you know, until after all sorts of harm has happened, because then we'll know what the harm is.

And in addition to sometimes policymakers, I think, feeling a little reticent and uncomfortable about regulating tech. And then what does that leave us with, the disaster around data privacy, complete disaster on data privacy, because nothing happened until after all the harms happened.

We've seen what's happened with social media, where we said, let's just let it go, let it ride. And we are where we are today dealing with some of the real problems. And it's always a balance. Right?

You don't want to be heavy-handed too early where you end up impacting innovation, but you also, I don't think it's right to do nothing and just, we'll figure out and see how it plays out and react later. And this bill threads that needle because, first of all, this is not heavy-handed. This is light-touch regulation.

And I keep saying this about the hyperbole. Cause it's real. There's a lot of hyperbole around this bill. This is not heavy-handed. It's asking for a safety evaluation that they already say that they are doing or planning to do. That's what it asks. And the liability in the bill is very narrow.

There's no private right of action. Only the Attorney General can file a lawsuit and only if a catastrophic harm has happened. And you didn't do the safety evaluation.

And so, we're really trying to be light touch here and just set a very, very basic standard, which I think is the right approach in terms of where we are now on the AI curve, or however you would describe it. So, this is not going to impede innovation in any way.

And I think just objecting to being asked to just looking at whether there seems to be a safety risk. I don't know. I think that that's, honestly, to me, not, not a reasonable position.

Okay. And then I am a little concerned. You. You have. You're talking about the Frontier Model Division. I think that's a good idea, but it has, it's tasked with issuing guidance and standards, receiving certifications, publishing safety incidents reports, advising the Governor.

You know, I've worked, obviously, a lot in cybersecurity, and it is very, very difficult to hire people with that type of technical expertise. Is that of concern for you?

Yeah, I mean, this is an issue in government in general in terms of building out that capacity around technology. And it's one of the reasons I referred earlier to sometimes government is hesitant to get involved in technology, even though it impacts our lives so profoundly. And so, we do have to do better.

And I think part of it is we need to be able, willing and able, to pay the salaries needed to attract the capacity in terms of staffing that we need. But I also want to point out that the FMD responsibilities here, I think, are quite doable.

And we actually, one of the amendments that we've accepted from the Committee is to, in terms of the guidance provided by the FMD, not to require the developers of AI models to comply with that guidance, but to consider it along with some of the federal guidance and so forth.

So, we've tried to be light touch with that as well. And with FMD, I'm confident that. I imagine that there will be further changes to it, and we're open to those conversations.

Yeah, it seems like maybe you could consider narrowing the list of functions or look at some of the, you know, look at like, the NIST standards. It might make it more doable. So, when you're. When you are.

When these companies, and I'm not sure who might be able to answer, when they're testing for these dangers, catastrophic events, how long does that? I mean, what does that involve?

Yeah, so it. And perhaps. Is that for Chris? Yeah, I might ask Chris Painter to come up to answer that. Who with METR. So, if the Chair.

Yeah.

Yeah.

Hi. Yes, my name is Chris Painter. I'm, like the Senator said, I'm the Policy Director at Model Evaluation Threat Research of 501 C3 that does research on model evaluations. We don't take a position on legislation, so we're not a sponsor of the bill.

In practice, my impression is that this kind of safety testing takes somewhere on the order of, it's like single-digit weeks, at least for the models that we have available today. Before you can see early evidence that for the hazardous capabilities that the bill describes, you see the absence of a capability. And the cost is.

This obviously, it could vary by firm and by the specifics of a firm's implementation of the tests, because there's still a lot of ways to do the tests that are emerging and many different approaches.

But it's on the order of hundreds of thousands of dollars to single-digit millions, which, in the context of a $100 million training run, would be a single-digit percentage, conservatively, of the model training cost.

Thank you. And then for the opposition. But, I mean, we have heard over and over again that this will stifle innovation in California. What are the ramifications if we slow development? You're claiming this is going to slow development of these advanced models. So, what are the ramifications?

Okay, thank you for the question. For example, from the perspective of my company, we do weather forecasting. Weather forecasting touches more than 72 use cases. This bill, to the best of my knowledge, it is almost punching the core technology. As a weather forecasting company, I cannot.

The same technology that I use to help farm managers save water or the Nature Conservancy to prevent catastrophic forest fires, the same forecast could be used to say, oh, this day is drier. This day I should create a forest fire. I am liable for that. And I could easily.

Now we are talking about the $100 million in limits in the training. But to forecast weather, it requires a lot of energy, resources, and capital. And I can see that in the life of my company, I could spend $100 million in trainings to make better weather forecast models.

So, I see that this can also affect the whole ecosystem in a whole, because if you limit foundation models or the bigger models, then many companies build upon that and they tweak it, they tailor it to specific use cases.

And if the main model is, let's say, banned or stopped in innovation, then it's a trickle down on the economy, on what kind of technology we will have access as a small company. So, that's my perspective.

Agree with that. I'll just add the ramifications that we see are if a business is looking where to develop AI in California or states next door that don't have these regulations, we're worried about the impact that this bill will have. That's just fundamentally a concern.

I just also want to note there that, that like other, like our privacy law, etcetera, it's not about where you develop it. It's whether you're doing business. And so, this is not a situation where only if you, you're only covered by the law, if you, if you're actually developing the model physically in California.

So, I think that's a little bit of a red herring.

Okay. And just one last question, because I've already asked enough. But one more. Our colleague in Congress is working on some AI legislation. Our previous colleague. Is there is anything that they're working on similar to this bill?

You're talking about Mister Obernalte?

Yes.

Yes. And I've actually spoken with our former colleague about the work that they're doing. I will note that the House majority leader, Steve Scalise, announced a week ago that he didn't see anything significant moving in Congress on AI. And so, they're looking at a number of different things.

I don't think that they have anything specific that they're pushing at the moment. But as I've said, and I said this when I authored California's net neutrality law in 2018, that if Congress were to pass a reasonable law and occupy the field, that's a decision that they can make. And preemption sometimes happens.

And I've always been of the view that whether it's AI regulations, social media regulation, data privacy, having a uniform federal law, I agree 100%, is the ideal approach. But we've seen that that typically has not happened with Congress. And so that's why California should lead on this.

Thank you.

Thank you, Miss Irwin. Anybody else? Yeah, Mister Hoover.

Thank you. If I may just ask the opposition, you know, you obviously raised some concerns about the balance that this bill strikes. What is a better balance that can be struck, you know, in your opinion, on the risks associated with different use cases of AI?

Thank you. So, I think that, first of all, I'm a scientist. I will, I refer to policymakers and lawyers to understand all the implications. But from my perspective, I think that this, the intent is to put everybody under the same umbrella.

And you are like, basically putting, like, some limitations on linear algebra that you teach in high school. We are like putting, like, a limitation on math, on basic science, not on the wrong use of math for applications.

So, I think that we should focus on, let's say, if we are concerned about cybersecurity, we have cybersecurity laws, we are concerned about fraud, we have laws against fraud, impersonation, all of those things, but not core science, because at the end, this is linear algebra. And are we limiting our advancements on math?

The numbers almost look like random, but at the end, that will have a trickle-down effect. If the bigger companies cannot innovate to make linear algebra optimization better, then we will all not benefit from those innovations.

Thank you. So, Senator, and I appreciate, obviously, your work on this. I think we probably would both agree that there's certainly some inherent risks with AI that we need to talk about. Also, some big benefits, I think, to AI as well, and improvements that we can see because of AI.

I'd just love to hear your response to some of the concerns raised today by the opposition and why you kind of chose this approach.

Yeah, and I'm in full agreement with the work that you're doing. There's a lot of really exciting stuff happening. There was AI model that came up with new antibiotics. The sky's the limit in terms of the benefits to society, and I support that.

And in addition to open sourcing of models so that others can use that work and build on it, I think it's really exciting. And that is exactly why we took such a light-touch approach when we were formulating this. And we're talking to a lot of different people.

There were people who wanted us to put strict liability into the law. Right? And I think that some of the comments we've heard sort of almost presuppose that there's strict liability.

And for those who don't know, strict liability means if you were to put a model out and a harm is caused as a result, you're automatically liable even if you acted reasonably. We rejected that in the bill. We rejected requiring a license from the government. We rejected, as I noted, the private rate of action.

So, I just fundamentally dispute that this will prevent anyone from innovating. I just fundamentally dispute that. The safety evaluations that are being required are already ones that they say that they're doing or will do. The liability is very, very limited to the Attorney General. And if you've done the evaluation, then you can't, you're protected.

And so, we really tried to take that light-touch approach precisely because the last thing I would want to do is undermine innovation. And I also want to, you know, yes, this is linear algebra and basic science. I agree. But I think this is on a scale.

This linear algebra is being used to build models that are unbelievably powerful. So, it's not just the algebra that someone did in their 9th-grade or 8th-grade homework. It is creating models that will change the world, frankly, hopefully, in overwhelmingly good ways. And I think that that is the case, but with risk.

And so that's why we're simply asking for a safety evaluation.

Thank you. Mister Vice Chair.

Great. Thank you. Thanks, Senator, for bringing this bill to us. And you've never been an individual to bring small subjects to the Legislature, so that kind of fits in that.

I have small ones, too.

Yeah. Okay. Yeah, I've just never heard any of those. So, yesterday, you know, I was walking outside my office in the fourth floor, and for those of us, mostly Republicans, whose offices are on the fourth floor, that seems to be the meeting space, and a lot of people were looking over the amendments, you know, and trying to figure it out what exactly was going on.

And so that is kind of one concern that I have is I'm very interested to know, have more time to discuss this with all the stakeholders because you characterize it as a small, or. What did you say? Light touch.

Light touch.

Nobody else has described it to me quite that way. But, so I want to give you the fair opportunity to really, for me to hear from the people who will be impacted and the companies that will be impacted by this.

But also, I do kind of have, when Al Gore created the Internet, I always thought if California was regulating things to the extent technologies, then to the extent that maybe we regulate now, and I know this isn't your intent per se, but maybe we wouldn't have the same technological advancements that we have on the worldwide webs or whatnot.

And artificial intelligence is obvious. I mean, we don't even know where it's going to lead, which is part of the reason for the bill, but also, we just don't know what we don't know. Right?

But I think my overall concern right now is, and I'm not saying I'm going to oppose the bill and feel free to respond to this, is that I just, I haven't had the time to really consume information from all the stakeholders, including the proponents of the bill at this time. And feel free to opine on my statement if you like. I'd love to hear it.

Yeah. And again, I know I'm probably sounding like a broken record, but if I had come in here with a bill to say, you have to get a license from the government, we're going to put strict liability in. We're going to do all these things, things that I rejected.

People were pushing me, wanted me to add, folks in the community, folks in the AI space, frontline technologists were like, no, you should require, if you're going to build something this powerful, you should need permission, a license, from the government ahead of time, and I politely said no.

And same with strict liability, same with a private right of action. And I did those things precisely because I didn't.

I wanted to strike that fine balance where we were asking the companies themselves to do the things that they already say they want to do, to certify that they've done it, and then in terms of liability, make it only the Attorney General, which you know is going to be the very extreme cases.

I want to also be clear, and I should have mentioned this earlier, because I think this is an incredibly important point. I think that the fundamental objection really boils down to the liability piece.

Even though there are some people who are claiming it's impossible to do a safety evaluation at the same time that they sign agreements in Seoul saying that they're going to do it. I think their concern is about liability. The liability in SB 1047 is dramatically narrower than existing liability today. Right now. Today, if I were to release.

If I were to release a large, or any model, large, small, any model, and then someone else takes that model and does something terrible with it, I can get sued today. The law is probably a little unsettled.

It would have to go through the courts, and we don't know where the courts under common law tort doctrine would go with it. But that lawsuit, in terms of risk of litigation, that can happen today. And existing tort law is not limited to the Attorney General. It's not limited to harms over $500 million. It is.

It is much broader, as you know. And so, you can get sued today. That risk exists today. What we're proposing is much more focused and narrow. Do the safety evaluation, and if something profoundly catastrophic happens and you didn't do that evaluation, then one person is allowed to sue you, the Attorney General.

Okay? So, your bill affirmatively stops other litigation.

No. No, it does not. That background tort law exists today, and it will continue to exist. And so there are, and I can't say this with certainty. I'm confident that there are probably a cadre of lawyers who are gearing up with that practice area of suing. I have no knowledge of this.

I'm just assuming, based on my many years as a lawyer, that that will become a thing. And what we're doing is just so much more narrow than that potential exposure. And that exposure exists even if this bill were to evaporate.

Just one comment sort of in response to, while I think the amendments are. It's a lot, and we're looking forward to discussions with stakeholders and things like that, and I think it's a really important thing for us to get right. But will say the analysis, I know this isn't new to Committee, but the analysis is quite extensive.

And I do have to say good job for the Committee at least/ It wasn't a short read. It's tough for. I almost asked ChatGPT to summarize into an image, because that's all I read is your books. But it is.

A video, video, video rendition.

It is a good analysis, but I am personally interested in hearing more discussions from the stakeholders because it is a big rewrite. I understand what you're trying to accomplish. We've had a conversation on it. I don't think what you're trying to accomplish is crazy.

I think it's I think something needs to happen in this front, and I don't know if Congress or the Federal Government's ever going to get around to it, frankly.

Yeah. And I was just one thing I want to say is we have tried to have an open door on this bill from the beginning. I actually have never done this before, but I put this into print as an outline intent bill last September, right before the Legislature recessed, just an outline of the Bill.

And I did, that was a different bill number, but I did that to try to start eliciting feedback. Not that much feedback was elicited from a, you know, outline of a bill. And then about two months ago, the heavy feedback happened, which I was really happy about.

And we've been meeting over the last few months earlier, but especially the last few months with all sorts of stakeholders, ranging from people who despise the bill to people who love it, to people who have concerns with large tech companies, with small tech companies, with venture capital firms, with academics, with advocates.

And there's a lot of good faith, constructive feedback we've received, some of which has made its way into the bill. And so, we're going to continue to do that. I'll continue to have an open door. My goal here is not simply to, like, pass a bill, because I potentially can. I want to get this right.

And I met with someone earlier today, a group that was never going to support the bill, and I told them, I still want your feedback, and we'll continue to take that approach.

Thank you. Anybody else? Okay, then it's my turn. So, I want to start, actually, by reiterating, in response to some of what the Vice Chair said, the work of this Committee, we're now in the second house.

You know, it was this Committee's perspective that we need to move a bill forward that is clear that people can actually follow.

And I know the opposition didn't necessarily think it moved in the direction they wanted it to, but I'm hopeful that everyone feels like this, at least, is a Bill now that is understandable and one could implement, which is always something that I prioritize as a former regulatory lawyer.

So, and I want to say that I know that the timeline of that was not what everyone would have desired, and I apologize for that. I will say staff was sending emails long into the night.

We do not pay them enough for the hours they were working, and yet they did an incredible job of writing an analysis of amending the bill, I think, in ways that hopefully move the ball forward. And so, I understand the short timeline, it is double referred. So, there will be additional discussion on the bill.

And I know that committee has already been in conversations with this Committee, so they will not be shocked by what they saw. And so that is an important part of this.

I also want to highlight one thing that has not, as I understand it, as the Chair of this Committee, been at issue, which is the definition of critical harm.

And I think that's a really important point to make because nobody, as far as I've been told directly, has taken issue with how the Senator has talked about chemical, biological, radiological, or nuclear weapons in a manner that results in mass casualties. The number of $500 million, even you, sir, said that's what we should be doing.

We should be punishing those who create those harms. Maybe not on the front end, but I think there seems to be consensus that these are things we don't want to happen. Right? And so, this question of, yes, it's math.

Yes, this is, you know, let's say it's not rocket science, but we got to the moon before we got to where we are in AI. So, perhaps it is as complicated as rocket science.

The, you know, there is a question, and it is a question that we need to grapple with, with artificial intelligence regulation of do we wait until the harm exists, which is the current model of law, or do we say we have the opportunity to prevent harms that can harm our community in ways that are so catastrophic that every single person in this room should want to prevent?

And the goal of the author here is to prevent those harms. And that is a goal that I hope we all share, even the opposition. And so, with that lens, I think it's really important to look at what the bill does, and again, as amended.

So, I appreciate that that's not, we're not necessarily all on the same page yet about what it does. But I think that the summary at the beginning on page two, the third to last paragraph of the summary, really lays out what the bill does.

And one of the things that I have said publicly on my bill about risk assessments, the Senator and I have talked about, is many of the folks at the chamber that are represented at the table today do risk assessments. This is not something that is novel. We are not asking of them something most do not do.

And so, the bill requiring risk assessments that, by the way, are now aligned with national and international standards, I guess I'm of the opinion that's not too much to ask when we're talking about catastrophic harms.

I think there are still questions out there about liability, and I respect you bringing it up today, but I think that's an important conversation we need to have in Judiciary and additional questions being raised. But I think fundamentally, what is being moved forward is protective of our communities. And that's really, I think, what is most critical here.

One of the main changes, I think, that we made that is really important. I'm a big believer, and I've said it before, that there are serious risks to open source models. It's also really important to the competition in the marketplace.

And so, this bill does a couple things that I think maybe one of the most amazing things this bill will do is Cal Compute. It will create competition that will create safety amongst all players. And I think that's a really important move this bill makes.

And then, in addition, we have ensured, we believe that the shutdown capability, the need to implement a shutdown capability is only over those models you control. And that was something we heard from the open source community, that how can we control it once it's out of our hands?

We expect you to test it before you leave, but we understand that once it's out of your hands, which should protect the open source community. And so, I think this bill does a lot, but I think it also asks of companies what those who are leading on safety and responsibility are already doing.

And so that is why I think it is, I don't know that I'd use the word light touch, Senator, but, you know, reasonable.

So, but I will, I guess one of the questions I want to ask is, as I read the bill, having studied the EU AI Act, I believe that these companies will have to go significantly further than you are proposing here today to comply with anything that is available in the European Union.

And so, that's one of the perplexing things to me about the major opposition on this bill is that I can't imagine, and maybe I'm wrong. I assume your company operates across international borders or desires to.

I don't know how big you are, but I guess that's what I'm trying to grapple with, is if you are going to comply with the EU AI Act, which does many of the things that the Senator has said he is not going to do right, everyone believes it's going to require licensing for models that are this risky.

You know, why is us asking for risk assessments for those sold in California not a reasonable ask? And I guess I will ask that of, I don't know if the Senator wants to win and the opposition.

Yeah, I think I would say that we still need to analyze this bill and compare it to the EU AI Act. We just haven't had that kind of time.

I will say that in various iterations, I have been told, and I, you know, can't attest to exactly what it is, but I have been told that we go further than the EU AI Act in some aspects. We may even be going further than what the Federal Government is doing.

We keep hearing today that, you know, Congress doesn't act, but the Federal Government is acting in the space. So, I'm not sure that this is less than or even in alignment with those other things. We just have to analyze it, given the amendments.

And that's fair. I started with that whole preamble. Right. I will say one thing. I mean, when you say what the Federal Government is doing, what in the Federal Government's purview is enforceable? So, there are NIST guidelines, recommendations, but I don't know of anything that is enforceable that this would be inconsistent with.

So, I guess I'm asking what you're.

Sure. I think my response to that is what we've been advocating for is to see what comes out of that and then see if we need to build upon it. If that's enforcement. I don't know. That's too early for me to say anything, certainly on behalf of my members on that.

But that's just one of the things that we are worried about, is differing standards.

Yeah. And I mean, the reality is, as I think you've implied, there is nothing enforceable coming out of the Federal Government right now. The President issued an executive order, and we actually modeled some aspects of the bill on that executive order and then promptly got criticized for doing that.

So it's like, hey, look to the Federal Government, and then you look to the Federal Government, and then you get criticized for looking at the Federal Government. So, there's an executive order. It's not. Does not have force of an act of Congress. The NIST guidelines we actually are referred to in this bill.

We want to have that level of uniformity. And, of course, if Congress acts and preempts us, then that's that. This bill does not go as far, nearly as far as what where the EU has gone.

Yeah. So, I mean, I do appreciate, again, I started with this was all very quick, so I'm honoring that. I hope you hear that. And again, definitely not throwing shade to my amazing staff, but, I mean, I will be curious to hear, going forward, where you think it's inconsistent with the EU AI Act.

I don't by any means feign to be an expert in the EU AI Act, but we have done a lot of work to try to understand it and make sure we're aligning to the extent possible. We are a separate jurisdiction, so we will do our own thing, obviously, the way it's enforced, I think independent.

That piece is independent, but just the requirements.

So, you know, I think that is an important lens for us to take with this, is that we are not the first to act internationally, and I imagine most, if not all, of the models that we're talking about, over $100 million in training, which, to the Senator's point, stayed fixed, you know, are things that would be used across jurisdictions.

So, with that, would you? Thank you. Would you like to close? No. It's the Senator's time to close. There was no question on the table.

I think we've said it all. So, I really appreciate the conversation today and appreciate you taking the time to come up here, and I respectfully ask for an aye vote.

Thank you, Senator. We have a motion. Do we have a second? Second. Call the roll.

Item number four, SB 1047 by Senator Wiener. The motion is do pass as amended, to the Judiciary Committee. [Roll call]

Bill has five votes, but we'll leave it on call for the absent Members.

Thank you so much, colleagues.

Thank you. And the Senators have graciously offered for Senator Ashby to go next. So we will take Senator Ashby's Bill, SB 1000, and take her out of file order. Thank you, Senators. Senator Ashby, when you're ready.

Yes. Thank you to my colleagues. All right. I promised them I'd be quick as can be. So I'll make this as easy for you as I can. This is SB 1000, which is a part of a package of four domestic violence prevention bills between myself and Senator Susan Rubio. She is a principal co author to this bill.

This is the Victims Digital Safety Act. This bill adds a crucial layer of protection for victims by requiring tech companies to swiftly cut off an abuser's access to internet connected devices and shared accounts. Domestic violence experts note that the misuse of modern technology significantly contributes to the rise of domestic violence cases.

Victims report escalating issues of virtual abuse. Think of all the ways that tech makes your life easier. Your siri at home, or your Ring doorbell, or perhaps your EV vehicle from your phone. Now think of all the ways that an abuser, if they had access to those apps, could monitor your comings and goings. This bill addresses that.

SB 1000 prevents abusers from controlling and remotely harassing victims when instances of abuse are reported by that victim. By ensuring that California law continues to protect victims even as technology advances. This bill is author sponsored. I do not have any witnesses with me.

It's actually the first time I presented it that it hasn't been on consent, so I'm happy to speak out loud about it. And I ask you for an aye vote.

Thank you, Senator. Do we have anyone here in support of this Bill?

My name is Faith Whitmore. I'm representing the California Family Justice Center Network, 27 centers throughout California that assist domestic violence victims, and I represent Alliance for Hope International, in support. Thank you.

Thank you.

Good afternoon. Aaron Coons with California Advisors, on behalf of San Francisco SafeHouse, in support. Thank you.

Joyce Blue. I represent the California VOICES Survivor Advocacy Network, in support. Thank you.

Good afternoon. David Cropp, on behalf of the Sacramento Regional Family Justice Center and the Family Justice Center Alliance, in support of this bill.

Thank you. Anyone here in opposition to this bill?

Hi. I'm Curt Augustine with the Alliance for Automotive Innovation. We're not opposed the bill, but we do have some concerns that we want to address and we've been working with the author and your staff and appreciate that.

As a representative of the auto industry, our concerns with the bill, one: we have great sympathy for the issue and want to get a resolution on this, but the technical challenges of complying, that's one issue, and the committee is addressing to a degree with the proposed amendments. Also the legal liability issues; I think we prefer the approach that's been offered in SB 1394 as opposed to what's being currently offered, and we would like to seek some resolution. We've got three bills, as you know, and we'd like to--yeah.

We'd like to get some closure and figure out how we're going, and on the cutoff time--there's been great debate about that among the three bills--we are not opining on that because we believe that's really best addressed by the victim organizations on what they think is best for their, for those kinds. So we're--as long as it meets the technical and legal issues, we're comfortable with whatever date is best for the victims. Thank you.

Thank you. Appreciate that. Seeing no further opposition, one clarification: you'll be accepting committee amendments, Senator?

We are accepting committee amendments, and your staff was amazing. Had some suggestions we're going to take with us to our next committee to address too. There will be some syncing up of the three bills that are similar. Large part, thankful to your staff.

Yes. Thank you so much. Any questions from committee? Thank you. And I will say I really appreciate you working with us, and I appreciate the auto manufacturers bringing up centering the voices of the survivors in this, which I know is so critically important to you, Senator, and so we have done our own phone calls with survivor organizations to make sure we understood the needs of the survivors and that is really what we are centering in all of these bills and appreciate you working with us to make sure they have the ability to protect themselves when they need it.

And I don't know, somebody in a previous--oh, Senator Wiener said, 'what if we went back in time,' and on some of these devices, I miss my old dumb devices, so I appreciate this. And with that--wait a second? Would you like to close?

Just appreciate you taking time for me today and appreciate my colleagues for allowing me to step in front of them. I'm grateful. Urge an aye vote.

Madam Secretary, let's call the roll.

Item Number Three: SB 1000 by Senator Ashby, the motion is: do pass as amended to the Judiciary Committee. [Roll Call].

That bill has four votes. We will leave it open for APPCN Members. It's a busy day. I believe Mister Padilla is next with SB 764.

When you're ready, Senator.

Thank you very much, Madam Chair and Members. I'd like to begin by accepting the Committee amendments and thanking the Committee staff for working with my staff and I on this bill.

Senate Bill 764 is the Child Content Creator Rights Act, which would require family content creators who are compensated for filming their minor children in more than 30% of their content, set aside a percentage of that earnings and a trust for the minor that they can access after they reach the age of majority.

Many of you know that in 1939, California enacted the Coogan act to protect children from financial abuse in the entertainment industry after a famous child actor, Jackie Coogan, had his earnings stolen by his guardian.

That law required 15% of the minor performers earnings be placed in a trust for them to access when they reached 18, protecting the funds while the actor was still a child. These protections have been expanded upon over the years and have even become a national standard for child performers under contract.

However, to that point, Coogan only applies to those in the film industry and social media who are, in fact, under contract. And those that are part of this emerging home content provider industry, which has now become a multibillion dollar industry, don't have any of those same protections.

Some of the regularly included content includes filming intimate details of the personal lives of minors for their audience of sometimes millions to see. This raises obvious questions about the rights of children who are drafted essentially into this emerging landscape.

Videos that focus on peak moments such as new homes, pregnancy, and new babies get more views, which then in turn incentivize families to post more videos of this type of content, which I think you might imagine will have some amount of impact on their developmental well being and present opportunities for extensive exploitation.

SB 764 updates Coogan to add financial protections to fit the modern entertainment landscape. Last year, Illinois enacted legislation to protect the financial future of youth content creators. But California is a world leader in the entertainment industry. Like to brag about is yet to do so.

As social media becomes even more integrated into our daily lives and a growing share of the entertainment landscape, we need to update our hard fought labor protections to safeguard the financial future of these performers. It would recognize that children deserve financial protection and compensation for being filmed. This Bill has bipartisan support as no opposition.

With me today, I have Kim Stone with the Children's Advocacy Institute and Nancy Wee from UC Merced.

Thank you so much. Two minutes each, when you're ready.

Good afternoon. Chair and Members Kim Stone of Stone advocacy on behalf of the Children's Advocacy Institute of the University of San Diego Law School in support.

This Bill is a critical step in extending existing and uncontroversial protections to children who are performing in traditional media to children who perform in social media as well. Family vloggers have exploded in popularity and many profit by filming the daily lives of their children.

This Bill acknowledges the obvious that children whose likeness is used by their parents for profit deserve similar kinds of financial protections and compensation as children, actors or children who perform in traditional media like film and television.

The bill requires parents or guardians who are compensated for featuring minors in at least 30% of their content to set aside a proportionate percentage of those earnings in a trust account until the children reach adulthood. We support the Bill and urge your aye vote.

Good afternoon. Thank you, chair Members. My name is Nancy Oui and I am an undergraduate student at UC Merced. My research focuses on protecting minors involved in social media content platforms. I'm here to testify in support of SB 764. Through my research, I have seen the struggle and exaltation that minors on social media endure.

California has a high population of minor vloggers which make this relevant issue that affect our society today. Other states have approved similar law and it's time for California, too. Growing up, it's hard enough without a camera in your face.

Many parents use their social media platform as a job, expecting their children to create content that brings income and fame into the family. That is a lot of pressure. SB 764 proposed that vloggers must pay minors for their work and vlogs. This is important because it helped prevent children from being taken advantage of.

Minors are object to be exploited for, are not object to be exploited for profit. Let kids be kids. We must address the issue now, and SB 764 is a step in the right direction. This is not a parasted issue. This is a matter of family, technology and human right. Law. Law should be designed to protect children.

That's why I respectfully ask for your. I vote on SB 764. As time are changing, so should our law. Thank you.

Thank you. Anyone else here in support of this Bill? Come on up. Name, organization and position.

Thank you. Madam Chair Members, Jason Schmeltzer here on behalf of Technet, in strong support of the Bill.

Madam Chair, apologies, we didn't get on the letter in time for this Committee, but we are in support of this Bill. Thank you.

I love hearing your support. Any opposition to the this Bill? I don't believe so, but I'll make sure I leave time. Okay. Seeing none, we will bring it back to the Committee. Miss Ortega.

Second the Bill, but I would also love to be added as a co author. I want to thank the author for taking this on and really putting a light on an issue that should have been dealt with a long time ago.

But as we've heard many times in this Committee, we're having to, you know, play catch up with this technology. So really excited to support this today and look forward to supporting it in the future.

Thank you so much.

Thank you. Mister Ortega. Anybody else seeing none. I want to thank you, Senator, for this work.

There was an article recently in the New York Times about children whose parents or guardians put this social media, this content on social media, and that one of the primary users of the content are in large part child predators and there is a great exploitation of these children in order to make money.

That is just gross, to be frank. And so I think this bill is great and I'm happy to support it. But I actually want to say that I think we need to do more than this. So it's a great first step.

And I'm by no means saying anything negative about your bill, but I just think that this is really a concerning area that has come to pass that we as a Legislature need to focus on to protect California's children. With that, would you like to close?

I would just thank you Madam Chair Members. And I would wholeheartedly agree with your comments. There's much to do and I hope that this is a good starting point.

Thank you.

We have a motion in a second, so let's call the roll.

Item number one, SB 764 by Senator Padilla. The motion is do pass is amended to the Judiciary Committee. [Roll Call]

That Bill has seven votes. It's out, but we'll leave the roll open for absent members.

Thank you, Madam Chair Members.

Thank you. Mister Becker, you are up with SB 942.

All right, Senator Becker, thank you.

I just want to say that my children are not social media influencers, but I do have some wonderful fashion products available on my instagram. No, I'm kidding.

I want to thank the Committee for allowing me here to present SB 942, the California Artificial Intelligence Transparency Act, a Bill that takes a first step in addressing proliferation of AI generated content. I want to thank the Chair who just stepped out, and the staff particularly for the work on this Bill.

We've had very productive conversations about how to improve this Bill, and I will be accepting the Committee amendments today.

Given that it's already been a long hearing, I won't talk at length about some of the challenges we've already seen with deepfakes, both in popular culture, already in election manipulation, how fraudsters can exploit agenda AI for scam calls, mimicking loved ones voices to deceive Californians. But I'll just say that clearly transparency is needed.

The European Union has taken steps to address these issues through the AI Act, which mandates transparency standards, including the requirement to inform users when they're interacting with AI system, and to clearly mark synthetic audio, video, text and images as artificially generated or manipulated, both for users and in a machine readable format.

Aligned with this, SB 942 serves to address the growing uncertainties surrounding AI generated content by requiring large generative AI system providers to do a few things. Number one, label AI generated content with latent disclosures.

Two, supply an AI detection tool for users to query whether content was created by AI and third, enforce third party licenses to the extent technically feasible to prevent undisclosed content publication. This Bill serves to address again the challenges posed by AI generated content, promote transparency, accountability, and trust in the digital landscape.

Great, thank you. We'll have two minutes.

We are actively collaborating with the opposition to address their concerns and ensure this Bill strikes the right balance and regulating gender of AI for the benefit of all Californians. With me, I have Jai, the co-founder of Transparency Coalition AI.

Thank you, everybody, for this opportunity. My name is Jai Jaisimha . I'm testifying in support of Senate Bill 942 as a co founder of Transparency Coalition. We're a Seattle based nonprofit which advocates for increased transparency in generative AI.

I have a PhD, which I completed in 1996 in what would be called AI from the University of Washington, and I'm currently an affiliate Professor at the University of Washington in the Electrical and Computer Engineering Department. For 30 years, I've been involved in developing AI and digital media applications at a variety of small and large organizations.

In my capacity as a scientist, technical leader, CTO, and CEO, we at transparency Coalition are firmly supportive of SB 942. Championed by Senator Becker. It will help bring much needed transparency requirements to generate AI outputs, and it will provide the public with critical insight into which content was created in whole or part by generative AI system.

Some of the key requirements that we're especially excited about are, and we think they'll really help California's safeguarded citizens are manifest disclosures. So these are human visible disclosures potentially embedded into the image or video. Latent disclosures which, you know, can be embedded into some part of the data associated with the content and without prescribing a specific approach.

Requirements to provide verification. So if you want to upload the content and check if it's generated by provider, and then there's meaningful penalties for violation. We don't believe these are heavy handed requirements and nor do we think that they'll inhibit small business innovation.

The technology behind it has proven even OpenAI is supportive of C2PA and has actually started using it for Dall-E, which is one of their models. Now is the time to act. We cannot repeat the missteps and inaction during the nascent stages of social media.

The California Legislature has been a global leader in safeguarding its citizenry while still empowering the tech industry to grow and thrive. I urge the Committee to pass SB 942 and send it to the Assembly floor with a strong recommendation. Thank you.

Thank you. Any other witnesses in support? All right, seeing none, is there any primary opposition? Thank you. You'll have two minutes, please.

Thank you, Mister Chair. Appreciate it. Dylan Hoffman. On behalf of TechNet, we are respectfully opposed to SB 942 as in print. However, in analyzing the recent amendments, I think there's a lot that moves this Bill in the right direction. We're looking forward to continuing to analyze and provide more substantive feedback.

I think there's some additional tweaks that should be made, but generally, like the approach of this Bill, that it provides a bit more of a less prescriptive standard. However, still sets that standard and sort of goal for the industry to start moving forward on providing greater transparency and certainty around synthetic content.

So appreciate the work of the author and this Committee on that in particular, just to sort of highlight a few things that have been flagged by my Members that we look forward to continuing the conversation on, or just providing a little bit more clarity on some of the definitions and sort of differentiating between sort of watermarking and content provenance.

They have very technical definitions and oftentimes sort of get conflated. And we want to make sure those are clearly delineated in the Bill. But, again, appreciate the work that's been done and look forward to continuing those conversations as this Bill moves forward.

Thank you. Great. Thank you. Any other witnesses in opposition?

Thank you. Ronak Daylami with CalChamber align our comments with TechNet. Thank you.

Thank you.

Khara Boender with the Computer and Communications Industry Association in opposition, aligned with TechNet.

Thank you. Any comments or questions from Committee.

There's a motion and a second. I have a question on the amendments. The definition of this technology is a person, is an individual now, is that what I'm reading correctly on the amendments, on what a covered provider is?

It did slightly broaden the definition of covered provider previously used the CCPA definition of business, but we do believe it covers a loop, closes a loophole. I don't think that is a great characterization, but you have any sense of.

No, I think there's a limit to the number of users above a certain limit. It would cover those organizations. Great.

Thank you. Anybody else? Nope. All right, there's a motion and a second, and we could. Oh, yeah. Closing statement.

Respectfully asked for an aye vote.

Great. Thank you.

And, you know, commit to appreciate the cooperation of industry and continue to work alongside. Yeah.

Great, thanks.

And I appreciate also the work. I will just say I know there's other Members of this Committee who are also working in this area and look forward to continuing those discussions as well as we kind of ultimately land on a bill at the end of the day.

Thank you. Would you please take a roll?

Item number two, SB 942, by Senator Becker. The motion is due pass, as amended, to the Judiciary Committee. [Roll Call]

All right, it's 4-0. Needs six, so we'll leave it open for everybody to return. Thanks. All right, and we have Senator Laird SB 1272.

I'm assuming I'm set to go here, right?

Oh, yes. Thank you very much. You're ready to go? We're ready whenever you are.

Thank you. Mister Vice Chair and Members, thank you for the opportunity to present Senate Bill 1272. I want to thank the Committee for working with my office and accept Committee amendments to add electronic gift cards to the definition of a gift certificate.

This bill will raise the redeemable dollar amount on a gift certificate from the current $9.99 maximum to $25, with an annual adjustment for inflation rounded to the nearest dollar amount. I was in the State Assembly when this was first adopted, which is essentially 16 years ago. It allowed for the consumers

To redeem the remaining balance of a gift card if it was below $10.

The buying power of $10 is much different today than it was at the time, and so allowing consumers to redeem a greater amount of money will put money back into circulation in our economy to be used on the goods and services that it was intended.

And according to the National Retail Federation, gift cards were the second most popular gift of the 2023 holiday season season. They reference a CNN article which reports an estimated $21 billion is sitting unused on gift cards. Just briefly because I know that the hearing has gone on for a while.

There were concerns that California would have the highest redeemable amount. It doesn't. Massachusetts. There was concern that businesses would have to have more cash on hand. They wouldn't. There's no prescription as to how the return is done.

There were some loose claims of fraud that have been made ever since the bill was first enacted and authored by then Senator Corbett. We've asked for any evidence. None has been provided to us. So we believe this is good progress for the consumers.

The bills, supported by the California Low Income Consumer Coalition, the Public Law center, Consumer Attorneys of California, and the consumer watchdogs, had passed off the Senate Floor 30 to six. I would respectfully ask for an aye vote.

Thank you, Senator. Any witnesses in support? I have no principal witness for support. There's a motion and a second. And are there any non primary witnesses in support?

Vice Chair Members Robert Harrell with the Consumer Federation of California we previously supported aren't on the list for this one, but we support this Bill. Common sense. Thank you.

Good afternoon, Mister Vice Chair. Jose Torres Casillas. I was asked to meet you in support of, on behalf of Brenda Bass at Cal Chamber who's in between hearings, but they're in support. Thank you.

Any primary witnesses in opposition? Great. Thank you. You'll each have two minutes.

Great. Thank you. Good afternoon, Mister chair and Members Margaret Gladstein Kepler, on behalf of the California Retailers Association, unfortunately, we've been unable to reach an agreement with the author, which leaves us strongly opposed to SB 1272. California already has a very friendly consumer gift card with the highest cashback in the country.

Massachusetts has a 10% of face value. The average face value of gift cards across the country is $26, so their average cashback is going to be $2.60, whereas ours is $9.99, less than $10. Based on the latest data available, the average gift card amount is sorry, it's 26.

We also find the CPI increase that's in the bill completely unworthy. Workable. On December 31, a customer will be eligible for one amount back, and then on January 1, a customer will be eligible for another amount back, and retailers will be responsible for training their staffs to know the difference on each day.

This will lead to confusion and problems and likely litigation. CRA is appreciative of the Legislature's strong focus on organized retail crime this year.

While doing that, it makes no sense to adopt a Bill that will require retailers to keep cash back, particularly on the days following Christmas when, as the author said, that is, gift cards are very common Christmas gift card gift, and they're used often the days after Christmas.

Further, gift cards are not given with the intention of being cash equivalents. A person giving a gift card may not want the person to have cash. Many nonprofits today and drug and alcohol treatment programs give gift cards so people have access to restaurants or to grocery stores to get food. They don't necessarily want the recipients having cash.

I would also note that there is a significant amount of gift card fraud. It's growing. We have shared some of that information with the author and happy to share more. FTC data shows that gift card scams have led to a consumer loss of $148 million.

We believe that loss will continue and the growth will continue here in California when the thieves can get cash back up to the level of $25. So for all these reasons, we ask that you oppose SB 1272,

Mister Vice Chair Members John Winger here for the California Fuels and Convenience Alliance.

So we represent the majority of gas stations and convenience stores in the state, the majority of which are family owned, minority owned, single, single store businesses. So from a small business perspective, we do have a lot of concerns with the bill. I think Miss Gladstein touched on quite a few of the concerns.

I think we do have some compliance concerns. The main feedback I've received from our members is that we do have a concern with having to carry more cash. Our stations are usually highly targeted for theft, and so the idea of having to carry more cash on hand is something that we have a significant concern with.

I think for the small station owners, they also do have an issue with the CPI and having to adjust every year with that. Most of these folks don't have back office compliance support, and so they don't exactly know how that would work.

Every year we've been facing more and more complications with running a station, and they've viewed this bill as another one that would add to the complications as it relates to gas gift cards, which are becoming more popular. And so we are currently and continue to be opposed to the bill. Thank you.

Thank you. Any other? Me too. Witnesses in opposition. Name and affiliation, please.

Hi, this is Brenda bass with Cal Chamber. There was a little bit of a mistake as I was rushing over here. We are still in an opposed position on the Bill, so just wanted to clear that up for everyone. Thank you.

Good afternoon. Apologies for going out of order. We actually are in support on behalf of the California Low Income Consumer Coalition. Thank you.

Chair and Members. Nick Roma, on behalf of the National Association of Theatre Owners of California in opposition. Thank you.

Good afternoon. Devon Anderson with Political Solutions on behalf of Target in opposition.

Good afternoon. Marlon Lara with the California Restaurant Association in opposition.

Good afternoon. Annalee Augustine on behalf of the Family Business Association of California in opposition. Thank you.

Thank you very much. Any comments or questions from Committee Members? All right, Assembly Member Irwin.

I've heard the comment on the complications of CPI. Could you comment on that? How difficult it would be for the employees to figure out the value of the card if they have to include?

We believe it would be simple because there are updates made for every year and for everything, you know, you hear in other bills that it'll be something plus the CPI. That is something that happens.

We have offered, if the CPI is so onerous, it's been a 50% increase in value or inflation since this was first enacted, it would be great to catch up.

And we offered, if the CPI is such an opposition to a small amount and go perspective and know that we wouldn't use that and we would cover this for the next 10 years, that we wouldn't have to come. We propose that as an alternative in trying to settle this in.

Okay. And you said this would not be the highest rate. How did you?

There's a dispute, but there are people in Massachusetts that would be getting more depending on the face value of the card.

All right. Thank you.

Thank you, Assembly Member Lowenthal.

First of all, I want to thank the author for coming forward. I really, truly appreciate consumer-focused legislation like this. And I know it's coming from a great place and I intend to support the bill today. I have a few questions in advance.

First is I also not just speak as Legislator, but as a restaurant owner who sells gift cards, stored value cards. It is a horrific time in the restaurant industry right now. So many are closing in my community. I can tell you I have two that are operating at a profit margin well under 10%.

Breaking even is actually a good outcome to get through where we're at these days. And I want to know, did you have any consideration or would you have any consideration from thinking about sectors that are in peril right now, like our restaurants that make up 10% of the workforce in the State of California?

Well, obviously at a very desire representing a very desirable coastal district. It's not as if I don't have my own and as a matter of fact, I'm aware that Miss Gladstein had visited it on occasion.

I think that originally you hope that restaurants are with everyone, that they keep a fund and they're not dipping into it, and they're able to use that. If this turns out to be something that really is of concern and you could do a discernible thing, we'd look at it.

Okay, thank you for that. And the next question I have, actually, when you and I had an opportunity to speak about this earlier, is of concern with me, and the opposition brought it up. So I did want to bring it up in Committee, which is my honoree for nonprofit of the year. What was that a week ago?

Two weeks ago, in the 150 degree weather we had here was.

Mine was a mental health counselor, if you still need to deal with it.

He represents an organization called Care Closet in the 69th Assembly District. And they're doing such special work, which is about beautifying the community and working with the unhoused population, which is sort of a double win. And I spent the day with him on his projects. And part of what they do is they provide gift cards for the volunteers.

And it's very intentional that they're not utilizing cash for the very reason that those gift cards go towards supporting the needs, the actual needs of that population that's volunteering, and they're vehement about that. Would you also consider working and figuring out ways to carve out something for that population?

We'll take a look at it, yeah.

Thank you.

Thank you. Anything else from others? Assemblymember Dixon.

All right, Mister Lowenthal's questions about the real life experience of gift cards. My personal experience is that gift cards, the physical gift card, is used less and less, and it is more electronic and as a QR code or a gift certificate.

And I'm thinking, I think, are we trying to fix something that I don't know how significant of an issue it is just addressing gift cards when I think it's an older technology. And also that's point number one. Point number two on the cost of living. I'm sitting here trying to compute on a $25 gift card.

The cost of living every January 1 is going to be like, what, $0.20 less than a dollar. I just think to the opposition's point, are we just making a lot of make work for to just give cash away?

And when restaurants and other small businesses aren't trying to keep large cash drawers on hand, I just wonder what's driving this.

I think what's driving it is to have the value keep up with it. But we have been offering ways, though we might be flexible.

If it is that you get to a two and a half dollar increment and that's when you trigger the inflation or something, and it takes a few years to get there, we're open to that. We don't want to make this complicated. We do not want it to lose value.

And so that's why we offered, if you want to not do the CPI, do a cash amount that takes care of the next five years if you want to do it. So it triggers in certain increments that are easier for businesses. And you were doing it every three years or something. Something were open.

I thought under state law, cannot, a gift card cannot lose value, the face value, other than you're proposing and suggesting an income.

What we're talking about is the ability that you can redeem would lose value, that that would fall further behind in inflation.

Well, all right, I would.

Which is the subject of the Bill. The subject of the Bill is the amount that you can redeem.

Yeah. Or it could be a credit for a purchase against a purchase. Instead of putting the burden on small business to have the cash on hand, just let it be a credit.

Once again, we're not putting the burden of cash on hand. They have different ways they can do this. They can do it credit, they can do it pay a check and mail it. They can do any of a number of things. It's not an automatic requirement that it be cash on hand.

All right, thanks. Thank you.

Great, thanks. Despite my youthful appearance and good looks, I was here also when that bill was presented, but as a staff person for a Member who voted on it at that time.

And I remember a lot of the discussion, I don't know why I remember this Bill, but I do remember a lot of the discussion really had to do with, if you had like $6 left on your card, then you can basically get it back because there's nothing really you can buy for $6.

And so it was really just more about redeeming the unused value rather than because $25 is not in most places, you're going to be able to buy something with it. And so the bill does change, I think sort of what I thought the intent was at the time.

But my two main concerns really have to do with, and I understand what you're trying to do, but my two concerns are what Mister Lowenthal, I think was getting at, which is the distribution of gift cards for an intentional purpose of people to make sure they're actually purchasing something that is of value to them rather than getting the cash and buying something that's not a value of them.

But the other one is.

I have actually asked some franchise owners in my district about this in terms of obviously if you're a franchise of a large corporation and there's gift cards being sold at some other place and then now they're being redeemed at your location, it's sort of unfair for that individual to have to worry about maintaining the cash.

This could be, you know, a McDonald's or a Taco Bell or something that sells franchises, that has franchises, but they're having to bear, I think, the burden of cashing out these things for something really that I think serves a benefit not necessarily to them all the way.

And if you have a response to that, I'm happy to hear it.

Oh, I'm sorry, I thought you were. Yeah, yeah.

I was just thinking that is a concern I have because a lot of this, especially the smaller franchise owners and things in my district that are going to have to be cashing these larger sums out and carry cash for those.

Well, the one thing is, I think the $25 amount is the start of negotiations. If we actually agree on some way to handle what is more prospective in CPI, which clearly is not liked, or some small amount that takes care of the next increment of inflation, it would not be $25.

We would probably be rolling it back and getting there. So we really would like to negotiate and settle this. And I think we have given lots of options with the underlying thing that it just keep value. That is it. So, and I think that might resolve some of the things that, that's you, right?

Thank you.

Thank you. Seeing nobody else, I want to reiterate what the Senator has said. This Committee tried to broker a deal and we failed. But I do think, you know, this is the Consumer Protection Committee and so if putting consumers first, I do think what the Senator is doing is really valuable.

I have to be honest, I didn't even know I had this right for $10 until this bill came before me. And so we all learned something new through your work, Senator.

And one of the just in case you try to cash for $10, it's $9.99.

$9.99. Excuse me, my kids get really upset when I round, so they'll appreciate that you made that correction. And I do think one of my concerns when this first bill was we were discussing it was many of the businesses in Oakland now don't carry cash intentionally because of retail theft.

And so to me, it was critically important that we're not demanding they have cash on hand because of that, in addition to the problems that raised here. But the Bill is explicit that they do not have to redeem it in cash. It absolutely allows for, as the Senator said, a check.

And so I think some of the concerns are addressed in the Bill. I understand the question about inflation being complicated, which I know the Senator has been open to in different ways. So I hope that you decides. We'll continue the conversation. But I think for the sake of consumers, what is being asked here is an important thing.

And so with that, would you like to close?

I just thank everyone for the robust discussion, and I will take your comments as my close.

We have a motion and a second, so let's call the roll. We've got it, but we appreciate the first. Oh, you. You are the motion twice.

All right. Item number six, SB 17. I'm sorry. 1272 by Senator Laird. The motion is do pass as amended [Roll Call]

Bill has five votes. We'll leave it on call.

Thank you. Five. Two.

Five votes. Two no votes. We'll leave it on call for the absent Members. Mister Dodd, you are up next with SB. Oh, we're gonna before. Please sit. But we're gonna do the consent calendar before we actually have you present. Do we have a motion on the consent calendar? Motion. Do we have second call?

The roll in consent calendar motion is do pass to the consent calendar. [Roll Call]

Consent calendar has seven votes. We'll leave it. It is out, but we will leave it open. Perhaps, Members, you reminded me because we just got your other Bill out on the consent calendar, so that was for you, Mister Dodd, SB 1524.

Thank you very much, Madam Chair and Members. I want to start by thanking Madam Chair and your staff for the hard work and time negotiating amendments to this bill in collaboration with Chair Kalra. I'll be accepting the amendments described in the committee analysis.

These amendments respond to concerns from consumer groups around broad applicability and strengthening transparency and disclosure requirements in advertising in the food service industry. As proposed to be amended, SB 1524 would provide the mandatory fees for food and beverage items sold directly to a customer in a restaurant, bar, food concession, cater, grocery store, or by grocery delivery service does not need to include a mandatory fee or charge in their all-in advertised price.

However, any fee with an explanation of its purpose must clearly and conspicuously disclose on every advertisement, menu, or other display that contains the price of a food or beverage item. SB 1524 is before you today to address questions and unintended consequences surrounding SB 478, legislation I authored to address the deceptive advertising practice of drip pricing or hidden fees.

SB 478 targeted bait and switch practices, where a business advertises a low upfront price, only to reveal mandatory fees late in the payment process or upon receiving the final bill. In working through implementation of SB 478 as it is set to take effect July 1st, potential problems have come to light.

For example, service charges fund a variety of worker benefits bargained through their union. They are used to supplement health care coverage, pension payments, and other employee benefits. Elimination of service charges would upend these collectively bargained contracts, hurting service workers.

SB 1524 upholds the principle of providing consumers with upfront price transparency without inadvertently harming food service workers or small business. With me to speak in support of the bill is John Ross, on behalf of the California Restaurant Association, and Shane Gusman, on behalf of Unite Here.

Thank you. Two minutes each, when you're ready.

Good afternoon. John Ross, on behalf of the California Restaurant Association. I just want to add to the Senator's remarks complimenting your staff on the hard work over the course of the last several days. This has been a sprint to get this done by July 1st and we appreciate the work of your staff and we offer our apologies to those of you on this committee who had to hear this bill this morning and are now hearing it again, but, you know, sometimes that's the luck of the draw, I guess. Why are we here?

The problem is that recent guidance issued by the Attorney General suggested that restaurant service charges are subject to SB 478. The analysis does a good job of debating that legal question. We don't need to resolve that here today because we're now cleaning up the law, but of course, if we felt last year that this was subject, 478, we would have been here then. Allowing the rules of SB 478 to apply to restaurants would significantly disrupt what have become common compensation and pricing models within restaurants across the state.

Many, many use service charges for the primary purpose of trying to smooth out income inequities within restaurants to help balance compensation between the front and back of the house, and it's been a necessary and effective tool in that regard. This bill contains provisions to codify what we believe to be the best practices in the industry today, to require a clear explanation of the purpose of any charge that's imposed, and to provide clear and conspicuous disclosure of those charges before such time as someone places an order and is then subject to the charge.

I would just note, because it came up this morning, there is a provision in the bill that provides for a cross-reference to existing Civil Code provisions that define what clear and conspicuous is. We're fine with that. Our only request had been to provide some time to migrate to that specific statutory requirement so that restaurants were not racing to try and get their menus updated quickly. The clear and conspicuous standard applies as of the effective date of this bill, and they'll have to do that, but the specific formula that's in the statute, they'd have some time to modify it to meet. And with that, thank you very much for your time.

Thank you.

Madam Chair and Members of the Committee, Shane Gusman, on behalf of Unite Here, in strong support of the bill. We would echo Mr. Ross's appreciation for the Chair and the committee staff working through this and getting this done. Two committees in one day. Very impressive, but it's necessary for our members.

Our union negotiates, as Senator Dodd indicated, a variety of employee benefits through service charges at restaurants, banquets, catering, concessions, and stadiums, you name it. Wherever we represent members in the food industry, we're negotiating those service charges to help facilitate higher wages and better benefits. Unfortunately, through, I think, unintended consequences, this bill, our previous bill, SB 478, and the reading of it by the Attorney General, has thrown the industry into, you know, chaos.

And we've been told by our employers that those charges are now going to be illegal as of July 1st, and our members will get cuts in benefits and cuts in wages. So this bill is very necessary for us, and we appreciate and thank Senator Dodd for bringing it forward and urge your aye vote.

Thank you. Anyone else here in support of this bill, come on up. Name, organization, and position.

Madam Chair. Chris Micheli, on behalf of the Los Angeles Area Chamber of Commerce, in support.

Thank you.

Madam Chair, Chris Walker, on behalf of the California Craft Brewers Association, in support.

Thank you.

Hello. Keely Morris with Edelstein, Gilbert, Robson and Smith, on behalf of San Francisco International Airport. The airport supports this bill as they believe it will preserve the restaurant workers' right to health care. Thank you.

Madam Chair and Members, Nick Romo, on behalf of the San Diego County Regional Airport Authority, in support.

Good afternoon. Sabrina Lockhart with the California Attractions and Parks Association, in support. Thank you.

Madam Chair and Members, Beverly Yu, on behalf of Open Table, in support. Thank you.

Emellia Zamani with the California Travel Association, in support.

Honorable Chair and Members, Amy Hines-Shaikh with Unite Here Local 11, and their 32,000 members in Southern California, in strong support. Thank you.

Good afternoon, Madam Chair and Members. Obed Franco, here on behalf of the California Hotel and Lodging Association, in support.

Good afternoon. Genesis Gonzalez, on behalf of Lieutenant Governor Eleni Kounalakis as a proud co-sponsor, in support. Thank you.

Thank you. Do we have any opposition to this bill? We do. Come on up.

Good afternoon, Madam Chair and Members. Robert Herrell, Executive Director of the Consumer Federation of California. We have an opposed unless amended position on the bill, and I'll get to the details of the amendments in just a second.

I would, as you just pointed out on the last bill, Madam Chair, putting consumers first, one of the things that we've seen, generally speaking, when you talk about junk and hidden fees, which was the whole point of Senator Dodd's SB 478, which CFC supported, I should note, is that consumers deserve to know upfront what something's going to cost.

That could be a rental car, a concert ticket, sporting event, new vehicle, used vehicle, motel room, whatever, and that includes, in fairness, a restaurant meal. I realized that this is an industry where it's a little bit different than some of the others, but it's nothing that, upon first blush, in our opinion, merited a broad carve out.

We thought the language of the bill in print as of this day, June 5th, was overly broad. We want to thank--though we were not involved in the negotiations, I want to be clear--we want to thank the Senator and the other stakeholders, you, Madam Chair, your counterpart at the Judiciary Committee, and your respective staffs for helping to significantly narrow that overly broad language. On that specific language--and Mr. Patterson, I've been practicing this because you asked me to--I have two specific suggestions.

One: in roman numeral two of the language where it says, 'a mandatory fee or charge under subparagraph one shall be clearly and conspicuously displayed with an explanation of its purpose on any advertisement, menu, or other display that contains the price of the food and beverage item,' we would suggest adding before the word 'explanation' the word 'accurate.'

And this ties into my second point. Mr. Ross and Mr. Gusman noted, particularly Mr. Ross, that there's a cross-reference to clear and conspicuous that's known, that's been litigated. There's plenty of case law on that. The cross-reference is fine. We have no problem with that. Usually it means font or just different ways in which the Legislature can make things clearer and more conspicuous to the consumer. However, there is a delayed implementation on the full effect of that, and it's a year. It goes to July 1st, 2025.

So Mr. Patterson, where it says 1770C, as of July 1st, 2025, any disclosure, advertisement, or notice that is required to be clearly or clearly and conspicuously made must have text that is clear and conspicuous as defined, and then there's the cross-reference to the Civil Code. We believe that January 1st, 2025 should be sufficient time, and I'll talk about two subsets within the restaurant industry. The larger restaurant chains can change menus, they have bigger resources, systems, training, you name it. Some smaller restaurants actually change their menu seasonally.

So whenever you change your menu, actually, you ought to be updating it to reflect this so that it meets the clear and conspicuous test. So we think that six months beyond the previous delay is sufficient. We would also note that we do think that it would have been helpful had the AG's office come out with their guidance earlier, but that's obviously nothing that Senator Dodd nor the Restaurant Association nor Labor nor CFC had any control over.

And our letter--which we appreciate a good chunk of it being put in the analysis--does make the note that you want to make sure that when you're dealing with the collectively bargaining situation and organized labor that you respect that. Some of these charges that are being put by restaurants on the bills are not accurate.

They create the false impression in the consumer's mind that it's going to go to the workers. Some do not, or only a tiny percentage of that. Two things happen when a consumer encounters that, one: they're more likely to reduce the optional tip, which stiffs the worker, or two: they're going to get frustrated at that restaurant and they're not going to go back, which also harms the worker in that restaurant. So we appreciate the time and the narrowing, but as of now, we have been in an opposed unless amended position. We'll reevaluate once we see what winds up in print.

You must have practiced, because that was exactly your time. Okay. Anyone else here in opposition? Nobody else. We'll bring it back to the dais. Yes, Mr. Vice Chair.

Well, I feel so honored, since we met this morning, to have my comments reflected in yours twice.

Got to up my game.

It sounds like your concerns, though, aren't a hurdle that can't be overcome, and just philosophically, we don't--I don't think there's any disagreement that the information shouldn't be accurate or clear if it goes to the employee or not.

Yeah, we--you're right, Mr. Vice Chair. I mean, compared to the previous version of the bill that is still technically in print right now, this is a significant improvement. We do think--we don't want--we want to make sure that you all don't miss the force for the trees here, which is that consumers like to know how much something's going to cost and the rental car industry got carved out of the bill last year, the auto industry got carved out of the bill last year.

I think those are two areas actually where there's a lot of add-ons that really upset consumers, and hopefully Mr. Ross won't speak on behalf of one of his other clients and counter me on that, but we think the broad point is consumers ought to know what they're getting into before they make that purchase decision.

As I've mentioned in other committees, this is sort of science. We call it five click syndrome. Get to the, almost the end of the transaction and then add the fees then because the person is committed to that product or service. A little bit different in the restaurant context. This is much better than the previous language.

I think those two changes--and if I--to prioritize them, I think adding 'accurate' is the most important of those two changes because you want to--something can be clear and conspicuous and also inaccurate and misleading consumers.

I was going to say, ask if the opposition--

Yeah, I was curious if--well, no, this is the--

Or sorry. The support. Sorry.

If the author or support want to address this question of accurate?

I would just say that I don't see how the word 'accurate' adds anything legally that isn't there already. If the law compels you to provide an explanation and you provide an inaccurate explanation, I think you violated this section, and so I don't understand how that builds on the concept that this committee already put in, which requires an explanation. One.

Okay. So that didn't answer the question of whether you're in consensus of whether the word 'accurate' being added is okay or not.

I think the word 'accurate' is unnecessary, and the standard, I think, of a clear and conspicuous explanation gets you there. I'm not sure what--

So therefore, the addition of 'accurate' shouldn't be a problem to you if it's--

If it's legal, if it's legally the same thing, it isn't, but I think he's asking for it because he thinks it's legally something different.

I think he would agree with you on that, by the way.

Can I ask the Chair what the Chair thinks as the only law professor in the audience here?

Oh my gosh. We're now asking for the legal counsel of the Chair. That's a first. But I appreciate it, Mr. Ross. Yeah. Mr. Vice Chair.

Yeah, I do think--I mean, inaccurate information, I think all of us would be kind of bothered by that. As I've said in Judiciary Committee, I've actually--the restaurant industry is one of the best in the--and just disclosing what the fees and all those extra charges and things like that are going to be upfront, they do a really good job right now.

But I'm kind of worried to add the word 'accurate.' I'm not a lawyer, but I do get a little worried about that, that I think we're all kind of good with the intent, but there might be a different legal standard there, so--because what if it's a percentage and there's all sorts of things. I don't know. I haven't really thought through that, but I think we just keep having those conversations and then seeing if there's some other word that can suffice there.

If I may, because I sought my legal counsel, on page two of the analysis, because the analysis in this committee is so good, the first section discussing existing law lays out that CLRA, in which this is is established, already prohibits deceptive acts. So I guess to your point, Mr. Ross, inaccurate information would be violative law under which it requires you to not be deceptive.

Correct.

You, the restaurants. So I guess I don't--I mean, I, given that, agree that it would be duplicative, but also if it makes everybody come together, this is how the sausage is made, so--or it's how the sausage should be made. Just so we're clear, we should be having these conversations about language and moving them forward. Did you want to add something? No? Okay. Sorry. So, I don't know if you want to weigh in. No? Okay. Yes, Ms. Dixon.

Thank you, Madam Chair. I too heard this in Judiciary, and I'll just say it again publicly for the record. I appreciate the efficiency and expeditiously how this was handled and to respond to an industry group, and then also, just since I've been here last year and a half, the awareness of the service charge.

I mean, obviously the Administration, the President is doing the same kind of talking. I think everybody's focused on service charges and what that means and I think it's training the consuming public to make sure they're looking at what the final cost of an item is going to be, whether it's a hotel room--car rentals. I've just--I rent cars frequently and I see the total gasoline.

You could deny insurance and car seats and everything else. I think maybe it's not universal, but it's getting to that point that people, that consumers are smarter because--a lot of the, probably the good work that you do to make consumers aware of what their rights are.

But I just think we are dancing on the head of a pin. I think that 'accurate,' I can't imagine why that language wouldn't be accurate, and so I commend the author for responding to the industry and getting this bill done in the second hearing of this today, and I would support moving it forward. I don't know if there's a motion, but I would support the motion.

I think you just made the motion. Thank you, Ms. Dixon. There we go. Bipartisan motion and second, Mr. Dodd. Nice work. Any other questions or comments? We have a motion and a second, but we can--okay. Well, I want to thank the author. You know, this, I am a big believer in this process. This is no surprise to anybody in the room.

And I think that, you know, these fast moving bills concern me, and so one of the concerns I had moving through this process was that we take care of the narrow issue that has been raised and not open ourselves up to unintended consequences with a broad bill that we didn't have time to fully vet and understand.

And so I think that's what we have before us, and I really appreciate the author working with this committee to get it to a place where we felt comfortable, we understood the implications of what we were doing and were able to support it. And I think, to Ms. Dixon's point, you know, restaurants are really hurting.

And as someone who dines in San Francisco often where this fee is, there is a fee that is charged to support workers, we looked it up and it actually does not have requirements around what that consists of. We were curious because in every instance where I've encountered that fee in San Francisco, it is on the front of the menu in very large letters. It is not baked into the prices, but, you know, as a consumer, you can do that math in your head because it is conspicuously displayed to you, and I think that's working.

But I think that that is a very specific circumstance that was brought to us. The other circumstance addressed in the bill was grocery store deliveries, which I learned are sometimes triggered by the price of your order. So if it's a larger order, you pay more.

And so showing that upfront was fairly impossible, but--and this is an all-in price--but that you should upfront, again, conspicuously display that: add 100 dollars, it becomes x, whatever the case may be, and so, you know, taking a consumer-protective lens here, I think we can protect businesses, but what we've also done in this bill, as noted by the addition of the clear and conspicuous cross-reference is ensure the consumers are getting that information. Maybe it's in a slightly different way, but the bill still protects consumers.

And I think Senator Dodd's bill from last year, which I enthusiastically supported in this committee and on the floor, is really important. Consumers don't like these junk fees. They don't like those hotel resort fees. They show up not knowing they're going to pay and now it's 75 dollars more a night.

Again, nothing in any of the law we've passed prohibits the practice of charging those fees. It merely says they have to be displayed to the consumer upfront, and I think that's what we're continuing to do in this bill. So with that, would you like to close?

Yeah. Thank you, Madam Chair. Once again, to thank you and your staff for the great work and the whole Assembly institution for, you know, this was a quick bill, to get it done by July 1st. That's appreciated very, very much.

And just so we can throw a bone to the opposition here at the table, I would hope that maybe CRA and the respective groups could come out with a voluntary guideline to, 'hey, when you change your menus, let's get it done as soon as is practicable,' even though that part of it doesn't go into effect until July 1st, 2025. That seems reasonable to me. I respectfully ask for your aye vote.

We have a motion and a second. Let's call the roll.

Item Number Eight: SB 1524 by Senator Dodd, the motion is: do pass as amended. [Roll Call].

That bill has nine votes. It is out, but we'll leave it open for absent members.

Thank you, Madam Chair and Members. Appreciate it.

Thank you, Senator. Senator Durazo. Waiting so patiently. Come on up. We will hear SB 1490.

Yes. Thank you, Madam Chair. Good afternoon and Members of the Committee. I'm here to present something along the lines of your previous just from a little bit different perspective. SB 1490 is going to strengthen the Fair Food Delivery Act by requiring food delivery platforms to disclose to restaurants and customers additional information in connection with their services.

When you're ready.

I want to thank your Committee and your Committee staff. Thank you and your Committee staff for your work. I will accept the Committee clarifying amendment on page six of the analysis and just also that we have made several amendments previously on the Senate side in the business professional Committee and judiciary.

Anyway, SB 1490 will allow restaurants to request removal from the delivery platform in a timely manner, subject to any, of course, preexisting contractual obligations between a platform and the food facility.

It requires platforms to provide restaurants details on the process for disputing erroneous charges, and it requires the food delivery platforms to provide timely and transparent communications between the platforms, the restaurants and the customers regarding the status of their delivery orders. Customers want to know when their food will arrive and if it doesn't, who's responsible.

This bill ensures transparency and provides additional opportunities for restaurants to have clear information about food delivery platform processes. I look forward to continuing the conversation and working with stakeholders to strike the balance where needed to protect restaurants.

And with me today speaking of restaurants, I have two witnesses, Ferdinando De Stefano, chef and owner of the Good Pizza restaurant, and Annie Miller, chef and owner of Clementine restaurant. I respectfully ask for your aye vote.

Hi, thank you to Members of the Committee for having me today. My name is Annie Miller and I'm the chef and owner of Clementine Bakery Cafe in Los Angeles, which has proudly served our community for 24 years. Informing direct relationships with our customers and neighbors has been profoundly rewarding.

Bringing joy through food and service is at the heart of why I became a chef and a restaurant owner. But third party delivery platforms have distanced us from our community and compromised the essence of hospitality while increasing costs for consumers and for restaurants.

To cover this increased cost, restaurants can raise prices on the platforms, but that makes it harder to compete. And DoorDash has said publicly that restaurants who mark up their prices will be penalized with lower visibility. So there's pressure on restaurants to raise prices across the board to charge everyone more, even customers coming through the front door.

Ideally, third party DSP's would own the fact that getting your food brought to your doorstep has a cost. Wouldn't it be great if they could have enough confidence in the value of the service they provide to be able to charge the customer in the restaurant with full transparency.

Instead, third party DSP's are continually inventing new ways to obscure the cost, to pretend that it's all free and everyone is winning. I'm here to tell you that restaurants are not winning. Consumers are not winning, workers are not winning.

More and more, it feels like service, hospitality and the independent neighborhood restaurant will soon be in the rearview mirror.

So while we wait for the big third party delivery apps to develop pride in their product like I have in mine, SB 1490 is at least a step toward protecting restaurants like mine from their unfair business practices and provide consumers with more visibility into the fees that are paid and the true cost for delivery.

Thank you so much for your consideration and I respectfully ask you to support SB 1490.

Thank you. Are you ready?

Madam Chair and Members of Committee, good evening. Thank you very much for giving us this opportunity. My name is Nando De Stefano or Ferdinando De Stefan. I am the owner and chef of The Good Pizza, an Italian family restaurant in Los Angeles.

I have dedicated 41 years to the restaurant industry, beginning as an employee first and ultimately becoming an owner and operator. Owning a restaurant has been immensely rewarding, both personally and professionally. It has allowed me to provide for my family and the vibram community of Westchester and Playa Del Rey.

While third party platforms may have started with fair intentions their excessive and often inexplicable fees have significantly, significantly impacted the business. These high commission and additional charges for marketing, listing and processing have significantly cut into the revenue over time.

Online orders from third party delivery service make up about 25% of the revenue, but I have to add anything from 25% to 30% commission to the cost of the menu in order to support survive.

This makes me look like I am making more money from online order when I am trying to do is maintain a razor thin margin. This misleads the lead the customers into thinking that I am price gouging them. For example, if the customers order my supreme pizza from our website is $26.

But on the let's say this third party platform is about $33. They think that I'm pocketing this money, but in reality the customers are paying more and what I'm doing, I'm making even less.

Additionally, if I don't use the full suite of the service from the delivery platform and charge less on the platform, then they tell me that I'll be deprioritized in their algorithm.

This is the type of power they have if delivery platform disclosed fees to restaurants and informed us of fees of product changes, especially if I don't use all the services. This will give us more visibility and transparency into making the business decisions. Additionally, I have a lot of customers with negative delivery experiences.

Deliveries are late, go to the wrong address, or the pizza is cold, or someone doesn't get the food because it's been eaten by someone. I have no way of knowing the order status right now. I knew if I knew more information like delivery method, anticipate time of delivery and confirmation of successful delivery or not.

This will help alleviate some customer services business. SB 1490 would help balance the power dynamic and protect local restaurants and consumers from harmful business practices. Therefore, I ask you to please support this critical measure.

Thank you so much. Anyone else here in support of this bill?

Hi. Chair and Members of the Committee, Joe Reinstein from the Digital Restaurant Association in support of 1490.

Good afternoon. Chair and Members Marlon Lara from the California Restaurant Association in support.

Thank you. Anyone here in opposition to the bill? We must have a platform here. When you're ready.

All right. Good afternoon. Chair and Members Jose Torres Casillas. On behalf of technet and Chamber of Commerce, we want to thank the Committee and staff for their work on this bill. While Technet and Chamber are still listed in opposition, the bill has made progress through the various amendments in the past committees and in this committee.

We are continuing to work on finalizing language with the Senator's office, but we do believe we can move to a neutral position pretty soon. That being said, we do want to thank the Senator and her staff as they have engaged with us on the bill the past few weeks.

But other than that, we're just opposed on paper. Thank you.

That's great. Good job, Senator. Any other opposition in the room? Then we'll bring it back to the dais. Questions or comments?

Yeah, Assemblymember Dixon.

I just wanted to clarify for the, I guess the Chamber of Commerce, in your letter, you talk about you were supportive and then now you're not supportive. Are there some question about language that's going to be added? I just want to clarify that point, if you may answer that question.

Of course. Thank you for the, for the question. So we have been working with the Senator. We have, originally we have been started as in opposition to the bill, but with the various amendments that have gone through the various committees, we are moving slowly towards a more neutral position.

But as of now, we're still technically opposed, just as we continue finalizing the language.

Okay, thank you. And to the Senator, I appreciate your efforts on this bill. I think many of us have been users of the system with both good and bad experiences. And I'm sorry to hear the restaurants. I have a favorite restaurant. It's also an Italian pizza place in my town, my hometown.

And I decided that it was too much trouble to use the delivery service. I just go pick it up because it was adding so much cost that it's easier for me to go pick it up, whereas here I don't get around as easily. And so I do use those services.

And I think there could be some, I just, I don't like more regulations, honestly. You'll hear that from me more and more. But I think to protect the consumer and the restaurant owner, I think that is a dual objective, and I think that that helps. So thank you, Senator.

Thank you. Yeah, Mister Vice Chair.

Well, thank you, Assemblymember Dixon, for asking that question, because I had this-the opposition letter has narrowed significantly over time, which is a good thing. I kind of came in with a lot more concerns when I order from my local restaurants.

I actually, I know, I don't know if that's the average experience, but just from the local restaurant. Actually, it's an Italian restaurant in my district, you know, might be like $20 for something. Right. If you go in, but it's $24-$25 online.

I've always just known and just assumed that that was for, I was actually just paying for the delivery service. And I know if you went into the restaurant and asked her, well, you know, why you're charging more, I would get, I have time to have a beer at the, listen to her response to that, as she explained.

So. But also she benefits from the service as well because I would order from her, you know, and I wouldn't otherwise.

So I think with the amendments and not entirely clear with the opposition, I'd be happy to, if you have a little bit more detail on the opposition, on your letter, it talks about the penalties, something about secret penalties. Do you have more elaboration on that or is it, you could help me?

I'm trying to maybe work my way to your position, but I don't really, I would like if it was more clear there.

No, no, of course, Assembly Member. So with, with our position within that letter. So I will say that that's something we are still working with the Senator currently with on language.

So that's the final piece of language that we're working with, trying to move into a neutral position just in terms of what that necessarily looks like moving forward.

But as far as our position was at the letter or what is described in the end, the letter, it's, I would say, lack of better words, more just outdated in the sense that currently the discussions that we were having with the Senator have been further along than what was submitted in the original letter.

All right. Well, I think I am. I will just say this. I think the online platforms provide very important service, the delivery platforms for the business and for the consumer alike. And to the extent that it seems like the amendments have made a lot of progress, and I hope those discussions continue, it looks like I commend you.

Actually, it's gone from a very long letter to a very short letter. Maybe it'll be no letter by the time it gets to the floor. So I think I'm going to support it today. And if there's concerns that the opposition wants to bring to my office between now and hits the floor, I could always change my vote.

But I think I want to see this move forward in the conversations discussing, because the local restaurants have expressed concern. But I am a huge user of these services. Blessed to be able to do that at the same time.

But, you know, if there's other specific concerns, I would love to know, and then we could have a conversation on those as well. But I think for now, I'm going to support that.