BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1303


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          Date of Hearing:  April 8, 2015


                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION


                                  Adam Gray, Chair


          AB 1303  
          (Gray) - As Introduced February 27, 2015


          SUBJECT:  Alcoholic beverages:  tied-house restrictions


          SUMMARY:    Adds clarity to an existing tied-house exception in  
          the Alcoholic Beverage Control Act (ABC Act) pertaining to  
          market research by certain licensees and the purchase of  
          off-sale retail data by also including a "distilled spirits  
          wholesaler" in the provision prohibiting a licensed retailer  
          from being obligated to purchase or sell the alcoholic beverages  
          of the licensee conducting the market research.


          EXISTING LAW:  


          1)  Establishes the Department of Alcoholic Beverage Control  
          (ABC) and grants it exclusive authority to administer the  
          provisions of the ABC Act in accordance with laws enacted by the  
          Legislature.  This involves licensing individuals and businesses  
          associated with the manufacture, importation and sale of  
          alcoholic beverages in this state and the collection of license  
          fees or occupation taxes for this purpose. 












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          2)  Prohibits specified holders of alcoholic beverage licenses  
          from having specified relationships with an on-sale alcoholic  
          beverage licensee, with limited exceptions. 





          3)  Permits a manufacturer, winegrower, rectifier, distiller,  
          distilled spirits wholesaler, or any agent of those licenses, to  
          conduct market research and, in connection with that research,  
          to purchase from licensed off-sale retailers data, regarding  
          purchases and sales of alcoholic beverage products, at the  
          customary rates that those retailers sell similar data for  
          non-alcoholic beverage products, provided that no licensed  
          retailer shall be obligated to purchase or sell the alcoholic  
          beverages of the manufacturer, winegrower, rectifier, or  
          distiller. 





          4)  Existing law, known as the "Tied-house law," separates the  
          alcoholic beverage industry into three component parts, or  
          tiers, of manufacturer (including breweries, wineries and  
          distilleries), wholesaler, and retailer (both on-sale and  
          off-sale).  


          FISCAL EFFECT:  Unknown


          COMMENTS:  


           Background  :  Tied house refers to a practice in this country  
          prior to Prohibition and still occurring in England today where  








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          a bar or public house, from whence comes the "house" of tied  
          house, is tied to the products of a particular manufacturer,  
          either because the manufacturer owns the house, or the house is  
          contractually obligated to carry only a particular  
          manufacturer's products.   





          The original policy rationale for this body of law was to:  (a)  
          promote the state's interest in an orderly market; (b) prohibit  
          the vertical integration and dominance by a single producer in  
          the marketplace; (c) prohibit commercial bribery and protect the  
          public from predatory marketing practices; and, (d) discourage  
          and/or prevent the intemperate use of alcoholic beverages.   
          Generally, other than exceptions granted by the Legislature, the  
          holder of one type of license is not permitted to do business as  
          another type of licensee within the "three-tier" system.  





          Existing law provides for numerous tied-house exceptions to the  
          general prohibition including one which allows certain licensees  
          to conduct market research and, in connection with that  
          research, to purchase marketing data from off-sale licensed  
          retailers provided that no licensed retailer is obligated to  
          purchase or sell the alcoholic beverages of the purchasing  
          licensee.





           Purpose of the bill  :  As noted above, existing law generally  
          prohibits the giving of something of value from certain  
          licensees to another group of licensees.  An exception has been  








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          made to the general prohibition to allow certain licensees  
          (manufacturers, winegrowers, rectifiers, distillers, and  
          distilled spirits wholesalers) to conduct market research and,  
          in connection with that research, to purchase marketing data  
          from off-sale licensed retailers provided that no licensed  
          retailer is obligated to purchase or sell the alcoholic  
          beverages of the purchasing licensee.  A licensed retailer is  
          also prohibited from requiring the exempted group of licensed  
          purchasers of marketing data to conduct market research as a  
          condition for selling alcoholic beverages to that licensed  
          retailer.





          Currently, a distilled spirits wholesaler is one of the  
          licensees exempt from the general prohibition, but is not one of  
          the entities prohibited from obligating the licensed retailer to  
          purchase or sell the alcoholic beverages of the licensee  
          conducting the market research.  This bill would correct this  
          oversight by including a "distilled spirits wholesaler" in the  
          provision prohibiting a licensed retailer from being obligated  
          to purchase or sell alcoholic beverages of the licensee  
          conducting the research.





           Prior legislation  : AB 1429 (Assembly Governmental Organization  
          Committee), Chapter 567, Statutes of 2001.  Among other things,  
          authorized various licensed entities to conduct market research  
          and, in connection with that research, to purchase from licensed  
          on-sale retailers data, regarding purchases and sales of  
          alcoholic beverage products, at the customary rates that those  
          retailers sell similar data for nonalcoholic beverage products










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          REGISTERED SUPPORT / OPPOSITION:




          Support


          None on file




          Opposition


          None on file




          Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531