AB 527
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 527 (Dodd)
As Amended September 4, 2015
Majority vote
ASSEMBLY:
76-0
(May 26, 2015)
SENATE:
40-0
(September 10, 2015)
Original Committee Reference: G.O.
SUMMARY: Creates, until January 1, 2019, 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,
food, beverage, culinary, or other cultural entertainment events at venues located solely in the
County of Napa, under specified conditions.
The Senate amendments:
1) Add clarity relative to the type of alcohol licensees that can sponsor events promoted by, and
may purchase advertising space and time from, or on behalf of, a live entertainment
marketing company in the County of Napa, as specified.
2) Add language requiring the live entertainment company promoting the event to affirmatively
represent and warrant in writing to any retail licensee operating as the retail licensee for such
an event that it has fulfilled the requirements and restrictions proscribed by law.
3) Add a January 1, 2019, sunset date to the bill.
4) Make technical and clarifying amendments.
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 or occupation taxes for this purpose.
2) Existing law, known as the "tied-house" law or "three-tier" system, separates the alcoholic
beverage industry into three component parts of manufacturer (the first tier), wholesaler (the
second tier), and retailer (the third tier). The original policy rationale for this body of law
was to prohibit the vertical integration of the alcohol industry and to protect the public from
predatory marketing practices.
3) Tied-house laws generally prohibit suppliers and retailers from sharing common owners and
legally restrict alcohol beverage suppliers' ability to gain control over retailers through
indirect means. Generally, other than exemptions 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.
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4) The Act prohibits an alcoholic beverage supplier from paying money, or giving or furnishing
anything of value, for the privilege of placing or painting a sign or advertisement, or window
display, on or in premises selling alcoholic beverages at retail.
5) 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 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 and other venues).
6) Provides a tied-house exception allowing certain alcohol manufacturers and distributors to
sponsor events or purchase advertising space from a live entertainment company that has its
principal place of business in the County of Los Angeles, as defined.
7) Defines an "On-sale" license as authorizing the sale of all types of alcoholic beverages
namely, beer, wine and distilled spirits, for consumption on the premises (such as at a
restaurant or bar).
FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate
Rule 28.8, negligible state costs.
COMMENTS: This bill, as amended in the Senate is consistent with Assembly actions.
Purpose of this bill: 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 Act encompassing various
venues throughout the state.
According to the author's office, Latitude 38 Entertainment, headquartered in Napa County,
produces the annual BottleRock festival and budgets approximately $2 million for costs
associated with renting the Napa County fairgrounds, hiring Napa County based employees and
contractors, City of Napa fees, security, parking rentals and other added expenses. More than
95,000 festival attendees spend an estimated $14 million on tourism, including hotel
accommodations, food, and beverage and retail purchases. In addition, the festival generates
approximately $35 million of economic activity in the City and County of Napa.
This bill creates a stand-alone tied-house exception applicable to Latitude 38 Entertainment
Company (or any other such live entertainment marketing company based in Napa County)
which promotes and produces the BottleRock Napa Valley Festival – a three-day event held in
late May that features a diverse mix of live music, culinary offerings, libations and other
amenities. This bill is necessary due to the fact that Latitude 38 Entertainment's ownership
group includes a wine producer. This bill will enable alcoholic beverage suppliers to purchase
advertising space and time at the festival from Latitude 38 Entertainment, as well as other live
entertainment marketing companies in Napa County who fall under the same circumstances.
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This bill subjects Latitude 38 Entertainment to certain requirements, as specified, and also
requires that other brands of beer, wine, or distilled spirits distributed by a competing wholesaler
be served at the venue in addition to any brand manufactured or distributed by the sponsoring or
advertising alcoholic beverage supplier. Furthermore, this bill makes it explicit that no more
than three such events may be held in Napa County each year.
Proponents contend that this bill will provide Napa County based companies the ability to
receive advertising and sponsorship monies directly from alcoholic beverage manufacturers to
the benefit of the region and the State of California. Additionally, proponents claim this bill will
help facilitate sponsorship agreements between vintners and sponsors of certain community
events, which in turn will help promote travel and tourism throughout the Napa region.
Related Legislation: SB 462 (Wolk) of the current legislative session. Extends an existing tiedhouse 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 Act that allows
alcoholic beverage licensees, as specified, to make monetary or alcoholic beverage contributions
to the Green Music Center under certain conditions. (Enrolled and presented to the Governor on
9/3/15)
AB 1320 (Maienschein) of the current legislative session. Creates a new tied-house exception in
the 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 Del Mar, under specified conditions. (Pending on
the Senate Floor)
Prior legislation: SB 600 (Bonta), Chapter 139, Statutes of 2014. Extended a 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 (Levi's
Stadium) with a fixed seating capacity of at least 68,000 seats located in the City of Santa Clara.
SB 324 (Wright), Chapter 164, Statutes of 2013. Provided a tied-house exception to the ABC
Act pertaining to the general prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees and the Los Angeles Forum in the City of Inglewood.
AB 813 (John A. Pérez), Chapter 647, Statutes of 2009. Created a tied-house exception by
allowing 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 onsale licensee's premises.
SB 520 (Governmental Organization Committee), Chapter 349, Statutes of 2007. Provided a
tied-house exception allowing certain alcohol manufacturers and distributors to sponsor events or
purchase advertising space from a live entertainment company that has its principal place of
business in the County of Los Angeles.
AB 776 (Aghazarian) Chapter 221, Statutes of 2007. Created a 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
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(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 a 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) located in San Joaquin County.
AB 3046 (Chavez) Chapter 587, Statutes of 2006. Extended a tied-house exception pertaining to
the general prohibition against advertising arrangements between retail, wholesale and
manufacturer licensees to the HP Pavilion in Santa Clara County.
AB 1442 (Horton) Chapter 617, Statutes of 2005. Extended a tied-house exception pertaining to
the general prohibition against advertising arrangements between retail, wholesale and
manufacturer licensees to the Home Depot Center, a sports and athletic complex within the City
of Carson in Los Angeles and the Nokia Theater, located within the Los Angeles Sports and
Entertainment District, adjacent to Staples Center.
AB 3085 (Governmental Organization Committee), Chapter 437, Statutes of 2004. Provided the
Los Angeles County Fair with an exemption from tied-house laws so that so that alcohol
manufacturers may purchase advertising from, or on behalf of, the on-sale licensees at this
venue.
SB 1647 (Perata) Chapter 275, Statutes of 2004. Extended a tied-house exception pertaining to
the general prohibition against advertising arrangements between retail, wholesale and
manufacturer licenses to the Oakland Coliseum in Alameda County.
SB 1189 (Costa) Chapter 47, Statutes of 2002. Extended a tied-house exception pertaining to the
general prohibition against advertising arrangements between retail, wholesale and manufacturer
licenses to the Visalia Oaks Stadium in Visalia and the California Speedway in Fontana.
Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531
FN: 0002349