BILL ANALYSIS                                                                                                                                                                                                    Ó







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        |Hearing Date:April 1, 2013         |Bill No:SB                         |
        |                                   |12                                 |
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                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                          Senator Curren D. Price, Jr., Chair
                                           

                         Bill No:        SB 12 Author:Corbett
                  As Introduced:     December 3, 2012     Fiscal:Yes

        
        SUBJECT:   Consumer affairs.
        
        SUMMARY:  Creates the "Made in California Program" within the  
        Governor's Office of Business and Economic Development (GO-Biz) for  
        the purpose of encouraging consumer product awareness and to foster  
        the purchases of products manufactured in California.  Provides that  
        it is an unfair method of competition or unfair business practice to  
        use the designated "Made in California" label without participating in  
        the Made in California Program.  

        Existing law:
        
        1)Prohibits unfair methods of competition, acts or practices by any  
          person which either results in or is intended to result in the sale  
          or lease of goods or services to any consumer.  Existing law  
          enumerates several methods of unfair competition, acts or practices.  
          (Civil Code § 1770)

        2)Provides that any consumer who suffers damage as a result of a  
          practice declared to be unlawful under the Consumer Legal Remedies  
          Act (CLRA) may bring an action against that person to recover  
          damages, as specified.  Allows for a class action suit to be filed  
          on behalf of a class of consumers adversely affected by an unfair  
          method of competition, act or practice. (Civil Code §§ 1780 and  
          1781)

        3)Provides for California to enter into marketing agreements and to  
          create the "Buy California Program." (Food & Agriculture Code §  
          58750)






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        4)States that it is unlawful for any person, firm, corporation or  
          association to sell or offer any merchandise in California that uses  
          the words "Made in U.S.A." "Made in America," "U.S.A.," or similar  
          words when the merchandise or any article, unit, or part thereof,  
          has been entirely or substantially made, manufactured, or produced  
          outside of the United States.  (Business and Professions Code §  
          17533.7)

        5)Establishes GO-Biz within the Governor's Office for the purpose of  
          serving as the lead state entity for economic strategy and marketing  
          of California on issues relating to business development, private  
          sector investment and economic growth.  GO-Biz also serves as the  
          administrative oversight for the California Business Investment  
          Service and the Office of the Small Business Advocate.  (Government  
          Code (GC) §§ 12096 - 12098.5)

        6)Establishes processes and accountability measures for GO-Biz to  
          accept private monies to fund, establish and operate international  
          trade offices.  (GC § 13997)

        This bill:

        1)Creates a "Made in California Program" within GO-Biz as a public and  
          private collaboration.  States that the purpose of the program is to  
          encourage consumer product awareness and to foster purchases of  
          high-quality products manufactured in this state.  Allows GO-Biz to  
          develop and adopt standards that permit a company to represent that  
          a product is made in California.

        2)Specifies that representing that a product is made in California  
          when it does not comply with the standards adopted by GO-Biz would  
          be an unfair or deceptive act or practice under the CLRA.  Clarifies  
          that provisions relating to the CLRA would only be operative after  
          GO-Biz has adopted standards for the Made in California Program.  

        3)Defines "manufacture" as the process of taking raw materials or  
          components and adding value to those materials and components in  
          order to create a final, recognizable product.  Specifies that  
          manufacture does not include the process completing a final assembly  
          from subassemblies made elsewhere, or the act of packaging a  
          product.  Outlines that the standards adopted by GO-Biz allowing a  
          company to represent that a product is made in California may  
          include:

           a)   A requirement that the company primarily designs and  
             manufactures a physical product, rather than a digital product or  





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             a service.

           b)   A requirement that the company manufactures one or more  
             products in California.

           c)   A requirement that the company has a California-based  
             workforce and has the desire to grow that workforce over time.  

        4)Authorizes GO-Biz to issue and make effective marketing agreements,  
          including, but not limited to, issuance of a Made in California  
          label.  Allows California companies to participate in the program on  
          a voluntary basis. 

        5)Requires companies to apply to GO-Biz for use of the Made in  
          California label and authorizes GO-Biz to charge an application fee,  
          the proceeds from which will support the Made in California program.  
           Creates the Made in California Fund in the State Treasury.  Allows  
          GO-Biz to begin accepting applications prior to fully developing and  
          implementing the program.

        6)Authorizes GO-Biz to accept private donations for the purpose of  
          implementing the Made in California Program.  

        7)Requires GO-Biz to provide a report to the Legislature by January 1,  
          2015 and each 
        January 1, thereafter, outlining expenditures, progress and ongoing  
          priorities for the Made in California Program.

        FISCAL EFFECT:  Unknown.  Legislative Counsel has keyed this bill  
        "fiscal."
        
        1. Purpose.  This bill is sponsored by Small Business California.   
           According to the Author, California businesses need a unifying  
           brand targeted at consumers who care about California jobs, the  
           environment and quality. The Author asserts that a "Made in  
           California" label assures consumers that the product was  
           manufactured in California and carries the excellence and standards  
           that this state offers.  The Author also notes that manufacturers  
           that embrace California's high quality, safety, and environmental  
           standards as a vital component of their business strategy should  
           have this marketing advantage. The myriad of similar products on  
           the market make it difficult for consumers to differentiate between  
           products that are made in California versus elsewhere.  The Author  
           adds that California is known worldwide for its products, so the  
           "Made in California" label can help add value to products made in  
           the Golden State.  Because of the high cost of living in  





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           California, companies that choose to manufacture products in  
           California do so at a higher cost than they might pay in another  
           state, or on foreign soil, and have made a conscious decision to  
           embrace local manufacturing as a vital component of their business  
           strategy.  The Author believes that this bill would help these  
           businesses in their marketing efforts.

        2. Background.  According to Small Business California, there are  
           approximately 3.4 million small businesses in California.  This  
           number includes sole proprietors which account for approximately  
           2.3 million, leaving 1.4 million small businesses employing 100  
           employees or less in California.  Small businesses in California  
           make up 50 percent of the employment in California as well as 50  
           percent of the California economy.  On a national level, two thirds  
           of new jobs come from small businesses.  

           In 2001, the "Buy California Program" was created within the  
           Department of Food and Agriculture for the purpose of "encouraging  
           consumer nutritional and food awareness and to foster purchases of  
           high-quality California agricultural products."  The "California  
           Grown" label was created for this program, which gave farmers an  
           opportunity to participate in the marketing campaign promoting  
           California products.  In 2010, a private California-based marketing  
           and management consulting firm of the California Grown program  
           released a study.  The study found that the specialty crops in the  
           California Grown program create 
           $15.9 billion in economic output annually.  The study also found  
           that more than 137,435 jobs are created as a result of the program.  
            Further, the study found that nearly $567.7 million in indirect  
           business taxes, not including income taxes, are generated from  
           specialty agricultural products in California.  In addition to the  
           vast agricultural products grown in California, several other  
           products are made and produced in this state, many by small  
           businesses.

           In order to keep business competition fair and to protect consumers  
           from deceptive practices, the Consumer Legal Remedies Act (CLRA)  
           (Civil Code Section 1750 et seq.) was created in 1970 with "the  
           underlying purpose . . .  as proclaimed in the statutory scheme  
           itself . . . 'to protect consumers against unfair and deceptive  
           business practices and to provide efficient and economical  
           procedures to secure such protection.'"  (Kramer v. Intuit Inc.,  
           (2004) 121 Cal.App.4th 574, 579.)  The CLRA also authorizes a  
           consumer to bring a civil action for damages resulting from  
           violations of the CLRA.  






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        3. Governor's Office of Business and Economic Development (GO-Biz).   
           In February 2010, the Little Hoover Commission (LHC) undertook a  
           review of the state's economic and workforce development programs.   
           In its final report, Making up for Lost Ground:  Creating a  
           Governor's Office of Economic Development, it analyzed the status  
           and effectiveness of current programs since the 2003 demise of the  
           Technology, Trade and Commerce Agency and recommended the creation  
           of a new governmental entity to fill the void left by the  
           dismantled agency.
           The report called for a single entity that would promote greater  
           economic development, foster job creation, serve as a policy  
           advisor and deliver specific services (i.e., permitting, tax,  
           regulatory, and other information) directly to the California  
           business community.  In April 2010, Governor Schwarzenegger issued  
           Executive Order S-05-10 as a means to operationalize the report  
           recommendations including the creation of the Governor's Office of  
           Economic Development (GOED).

           In October 2011, the Governor signed AB 29 (cited and described  
           below), which effectively codified GOED and changed its name to  
           GO-Biz, effective January 1, 2012.  Since its inception, the office  
           has served over 3,000 businesses, 95% of which are small.  The most  
           frequent types of assistance include help with permit streamlining,  
           starting a businesses, relocation and expansion of businesses, and  
           regulatory challenges.  

           Among other programs, GO-Biz administers the Innovation Hub (iHUB)  
           program in partnership with the statewide network of Small Business  
           Development Centers.  There are currently 12 regional iHUBs located  
           throughout the state.  The iHUB program is designed to improve the  
           state's national and global competitiveness by stimulating  
           partnerships, economic development, and job creation around  
           specific research clusters.  Key assets and partners of the  
           initiative include technology incubators, research parks,  
           universities, federal laboratories, economic development  
           organizations, business groups, and venture capitalists.

           Another key initiative of GO-Biz is the "strike teams" which can be  
           mobilized to help attract and/or retain specific businesses.   
           Strike teams are especially well suited to engage with major  
           employers and have been successfully activated to assist Bayer  
           Healthcare, Jazz Semiconductor, and Baxter Pharmaceutical to locate  
           and/or expand in California.

           GO-Biz is also sponsoring a permit streamlining pilot project to  
           assist business owners, which will offer a One-Stop-Shop for state  





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           and local permits.  The pilot, launched in partnership with the  
           City and County of San Francisco, will allow a business owner to  
           login to a single website and apply for and pay all necessary city,  
           county and state permits on the spot.    

        4. Related Legislation.   SB 823  (Corbett) of 2011 was virtually  
           identical to this measure.  That bill was held in the Assembly  
           Committee on Appropriations. 

        5. Staff Comments:  This measure specifies that the Made in California  
           Program is a "public and private collaboration" and authorizes  
           GO-Biz to collect private monies for the purpose of implementing  
           the Made in California Program.  However, it does not establish a  
           fund in the State Treasury into which such monies could be paid,  
           nor does the bill establish any transparency or accountability  
           measures for those monies.  While the bill does require GO-Biz to  
           provide a report to the Legislature on the program's progress and  
           expenditures, it may be helpful for the office to have a process  
           established for accepting private money to fund the program.  The  
           Author may wish to amend this measure to establish a Made in  
           California account in the State Treasury and clarify that GO-Biz  
           may expend monies for the Program, to ensure that the office has  
           access to any private resources intended to fund a Made in  
           California Program.  The Author may also wish to establish a  
           reporting requirement for private donations to GO-Biz, similar to  
           the process established for the office to receive donations which  
           fund international trade and investment offices.    


         NOTE:   Double-referral to Judiciary Committee second.
        

        SUPPORT AND OPPOSITION:
        
         Support:  

        Small Business California (Sponsor)
        AFSCME
        California Small Business Association
        Plastikon
        Primus Power
        Tesla

         Opposition:  

        None on file as of March 26, 2013. 





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        Consultant:Sarah Mason