BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    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.  
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           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  

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             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.


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           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  

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          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  

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          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

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