BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 12| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 12 Author: Corbett (D) Amended: As introduced Vote: 21 SENATE BUSINESS, PROF. & ECON. DEVEL. COMMITTEE : 9-0, 4/1/13 AYES: Price, Block, Corbett, Galgiani, Hernandez, Hill, Padilla, Wyland, Yee NO VOTE RECORDED: Emmerson SENATE JUDICIARY COMMITTEE : 5-2, 4/16/13 AYES: Evans, Corbett, Jackson, Leno, Monning NOES: Walters, Anderson SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/13 AYES: De León, Hill, Lara, Padilla, Steinberg NOES: Walters, Gaines SUBJECT : Consumer affairs: Made in California SOURCE : Small Business California DIGEST : This bill creates the Made in California Program within the Governors 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; and 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. CONTINUED SB 12 Page 2 ANALYSIS : 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. Enumerates several methods of unfair competition, acts or practices. 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. 3. Provides for California to enter into marketing agreements and to create the "Buy California Program." 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. 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. 6. Establishes processes and accountability measures for GO-Biz to accept private monies to fund, establish and operate international trade offices. This bill: 1. Creates a "Made in California Program" within GO-Biz as a CONTINUED SB 12 Page 3 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, and 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 will be an unfair or deceptive act or practice under the CLRA; and clarifies that provisions relating to the CLRA will 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; and outlines the standards adopted by GO-Biz which allow a company to represent that a product is made in California. 4. Authorizes GO-Biz to issue and make effective marketing agreements, including, but not limited to, issuance of a Made in California label; and 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; and 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. CONTINUED SB 12 Page 4 Background CLRA . In order to keep business competition fair and to protect consumers from deceptive practices, the CLRA was created in 1970 "to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection." The CLRA also authorizes a consumer to bring a civil action for damages resulting from violations of the CLRA. Buy California Program . 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 created $15.9 billion in economic output annually. The study also found that more than 137,435 jobs were created as a result of the program. Further, the study found that nearly $567.7 million in indirect business taxes, not including income taxes, was 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. GO-Biz . In February 2010, the Little Hoover Commission 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 (GOED), 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 promotes 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 CONTINUED SB 12 Page 5 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 GOED. In October 2011, the Governor signed AB 29 (John A. Perez, Chapter 475, Statutes of 2011) 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. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee, costs depend on the size of the program and number of participants. GO-Biz estimates ongoing costs to be roughly $500,000 (General Fund), consisting of three people to administer the program and an annual marketing budget of $200,000. Once the program is fully established, contributions from participating businesses and donations may help offset the General Fund costs of the program. SUPPORT : (Verified 5/23/13) Small Business California (source) AFSCME California Small Business Association dB Control Plastikon Industries Primus Power Tesla Motors, Inc. OPPOSITION : (Verified 5/23/13) Department of Finance ARGUMENTS IN SUPPORT : 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 CONTINUED SB 12 Page 6 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 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." The California Small Business Association notes that they believe this bill will help small businesses be competitive by promoting the production of goods in California. They state, "We are proud to be Californians and should promote products made in California. The more production that takes place in California[,] the more jobs will be available." ARGUMENTS IN OPPOSITION : The Department of Finance is opposed to this bill because it creates a new program with no guarantee of funding and is inconsistent with the current budget. MW:d 5/23/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED