BILL ANALYSIS Ó AB 1320 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1320 (Maienschein) As Amended September 4, 2015 2/3 vote. Urgency -------------------------------------------------------------------- |ASSEMBLY: |76-0 |(May 26, 2015) |SENATE: | 40-0 |(September 9, | | | | | | |2015) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: G.O. SUMMARY: Creates a new tied-house exception in the Alcoholic Beverage Control Act (Act) that authorizes certain alcoholic beverage licensees to sponsor a limited number of events promoted by or to purchase advertising space and time from, or on behalf of, a live entertainment marketing company that conducts live artistic, musical, sports, or cultural entertainment events solely at the San Diego County Fairgrounds in the City of Del Mar, under specified conditions. Specifically, this bill: 1)Provides an authorized licensee may sponsor events promoted by, and may purchase advertising space and time from, or on behalf of, a live entertainment marketing company in connection with events organized and conducted by the live entertainment marketing company on the premises of a permanent retail licensee located at the San Diego County Fairgrounds, located in the City of Del Mar in the County of San Diego, AB 1320 Page 2 subject to all of the following conditions: a) The live entertainment marketing company operates and promotes live artistic, musical, sports, or cultural entertainment events only. b) The events will take place over a period of no more than four consecutive days during which approximately 100 acts will perform before approximately 20,000 or more patrons. c) The live entertainment marketing company is a Delaware limited liability company that is under common ownership, management, or control by a private equity firm that may also have common ownership, management, or control of a licensed California winery, provided the winery represents not more than 25% of the assets under common ownership, management, or control by the private equity firm or its subsidiaries, and the live entertainment marketing company exercises no control over the operations of the winery. d) Any authorized licensee sponsoring an event or purchasing advertising space or time, pursuant to this section, shall obtain written verification of compliance with this subdivision prior to such sponsorship or the purchase of advertising space or time. e) Any on-sale licensee operating at the San Diego County Fairgrounds shall serve other brands of beer, distilled spirits, and wine distributed by a competing wholesaler or manufacturer in addition to any brand manufactured, distributed, or owned by the authorized licensee sponsoring an event or purchasing advertising space or time, as defined. f) An agreement shall not be conditioned directly or indirectly, on the purchase, sale, or distribution of any alcoholic beverage manufactured or distributed by any authorized licensee sponsoring or purchasing advertising AB 1320 Page 3 space or time, as defined. 2)Provides any sponsorship of events or purchase of advertising space or time shall be conducted pursuant to a written contract entered into by the authorized licensee and the live entertainment marketing company. 3)Defines "authorized licensee" to mean the following licensees: beer manufacturer, out-of-state beer manufacturer's certificate, winegrower, winegrower's agent, importer, rectifier, distilled spirits manufacturer, distilled spirits rectifier general, distilled spirits manufacturer's agent. 4)States that except for a licensee that holds only a beer and wine importer general license or a distilled spirits importer general license, "importer" does not include the holder of any importer license that does not also hold at least one other license specified as an authorized licensee. 5)States that an authorized licensee who, through coercion or other illegal means, induces the holder of a wholesaler's license to fulfill contractual obligations entered into pursuant to this bill guilty of a misdemeanor. The Senate amendments: 1)Clarify where a live entertainment marketing company can hold an event in San Diego County while taking place over a period of no more than four consecutive days. 2)State that any authorized licensee sponsoring an event or purchasing advertising space or time, shall obtain written verification of compliance with this subdivision prior to such sponsorship or the purchase of advertising space or time. 3)Add definitions pertaining to the implementation of the bill. AB 1320 Page 4 4)Add clarifying and technical amendments. 5)Add an urgency clause, to take effect immediately. EXISTING LAW: 1)Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the 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 for this purpose. 2)Separates the alcoholic beverage industry into three component parts, or tiers (referred to as the "tied-house" law or "three-tier" system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). 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 market place; c) prohibit commercial bribery and to 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. 3)Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising. AB 1320 Page 5 4)Prohibits paid advertising by winegrowers, beer manufacturers and distilled spirits producers in cases where a retail licensee also owns a sports or entertainment venue. Over the years numerous exceptions to this prohibition have been added to the ABC Act [e.g., Sleep Train Arena (formerly known as ARCO Arena) in Sacramento, Oakland Coliseum in Oakland, Arrowhead Pond Arena in Anaheim, Kern County Arena in Bakersfield, the National Orange Show Event Center in San Bernardino, California Speedway in Fontana, Grizzly Stadium in downtown Fresno, Raley Field in West Sacramento, HP Pavilion in San Jose, the Home Depot Center in the City of Carson, Levi's Stadium in the City of Santa Clara, and other venues]. 5)Provides a narrow tied-house exception that expressly authorizes, under specified conditions, a beer manufacturer, holder of a winegrower's license, California winegrower's agent, distilled spirits manufacturer, holder of a distilled spirits rectifiers general license, or a distilled spirits manufacturer's agent to purchase advertising space or time from a fully enclosed venue (ClubNokia) with box office sales and attendance by the public on a ticket basis only, with a patronage capacity in excess of 2,000, but not more than 3,000, located in Los Angeles County within the area subject to the Los Angeles Sports and Entertainment District Specific Plan adopted by the City on September 6, 2001, where the owner of the venue is not the on-sale retail licensee. (Business and Professions Code Section 25503.42) AS PASSED BY THE ASSEMBLY, this bill created a specific tied-house exception to allow specific alcohol licensees to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company for live artistic, musical, sports, or cultural entertainment events conducted at the San Diego County Fairgrounds in Del Mar. FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. AB 1320 Page 6 COMMENTS: This bill as amended in the Senate is consistent with Assembly actions. Purpose of the bill: As noted above, existing tied-house laws prohibit an alcoholic beverage supplier, or any officer, director or agent of an alcoholic beverage supplier, from providing anything of value to an on-sale retailer licensee, be it free goods, money, services or advertising. Over the years, numerous exceptions to this prohibition have been added to the ABC Act encompassing various venues throughout the state. This bill creates a stand-alone tied-house exception applicable to Horsepower Entertainment Company, which is holding the KAABOO festival - a three-day event to be held in September 2015 at the San Diego Fairgrounds in Del Mar that will combine a diverse mix of music, culinary offerings, libations, art exhibitions, comedy, dancing and other amenities. Due to the fact that Horsepower Entertainment's ownership includes an interest in a Napa winery (Jamieson Ranch Vineyards) it cannot sponsor the festival on the grounds of the San Diego County Fair which has an on-sale licensee (caterer) on its premises. This bill will enable Horsepower Entertainment to enter into a contractual agreement with an alcoholic beverage supplier interested in purchasing advertising at the festival. This bill subjects Horsepower Entertainment to certain requirements, as specified, and also requires the on-sale licensee operating at the venue where the live events are performed to serve other brands of beer, wine, or distilled spirits distributed by a competing wholesaler in addition to any brand manufactured or distributed by the owning, sponsoring, or advertising alcoholic beverage supplier. According to the author's office, "the KAABOO festival is an entertainment experience with world-class music, dancing, incredible cuisine, craft libations, inspiring contemporary art, AB 1320 Page 7 and more. In contrast to typical festivals, KAABOO will offer local and regional delicacies, a contemporary art fair, salon and golf simulator in addition to the more than 100 music acts. KAABOO has committed to donate $1 for every ticket sold to San Diego area charitable partners." Additionally, the author's office indicates that the festival is expected to have a significant economic impact on the Del Mar region - local restaurants, lodging and other businesses are expected to benefit from the increased tourism that will be generated. Related/Prior Legislation: SB 462 (Wolk) of the current legislative session extends an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a specified entertainment complex, known as the Green Music Center, located on the campus of Sonoma State University. Additionally, this bill adds a new section of law to the ABC Act that allows alcoholic beverage licensees, as specified, to make monetary or alcoholic beverage contributions to the Green Music Center under certain conditions. AB 527 (Dodd) of the current legislative session, creates a new tied-house exception that authorizes alcoholic beverage suppliers to sponsor events or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a non-publicly traded live entertainment company that has its principal place of business in Napa County, subject to specified restrictions. (Pending on the Senate Floor) AB 600 (Bonta), Chapter 139, Statutes of 2014, extended an existing tied-house exception in the ABC Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor stadium with a fixed seating capacity of at least 68,000 AB 1320 Page 8 seats located in the City of Santa Clara (Levi's Stadium - new home of the San Francisco 49ers). SB 324 (Wright), Chapter 164, Statutes of 2013, extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a fully enclosed arena with a fixed seating capacity in excess of 13,000 seats (the Forum) in the City of Inglewood. AB 813 (John A. Pérez), Chapter 647, Statutes of 2009, created a new tied-house exception that authorized the owner of a venue (Club Nokia) in Los Angeles to engage in a sponsorship agreement with an alcoholic beverage supplier for the privilege of placing advertising in the on-sale licensee's premises, subject to specified conditions. AB 776 (Aghazarian), Chapter 221, Statutes of 2007, created a new tied-house exception by authorizing a beer manufacturer to sponsor or purchase advertising space and time from, or on behalf of, an off-sale retail licensee that is an owner or co-owner of a professional sports team (California Cougars indoor soccer team) that plays its home games, in an arena with a fixed seating capacity of 10,000 seats (Stockton Arena) located in San Joaquin County. AB 663 (Galgiani), Chapter 745, Statutes of 2007, extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include an outdoor professional sports facility with a fixed seating capacity of at least 4,200 (Banner Island Ballpark - home of the Stockton Ports Class A baseball team) located in San Joaquin County. AB 3046 (Chávez), Chapter 587, Statutes of 2006, extended an existing tied-house exception pertaining to the general prohibition against advertising arrangements between retail, AB 1320 Page 9 wholesale and manufacturer licensees to the HP Pavilion in Santa Clara County. Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0002307