SB 557
Page 1
SENATE THIRD READING
SB 557 (Hall)
As Amended June 29, 2015
Majority vote
SENATE VOTE: 39-0
Committee
Votes
Ayes
Governmental
Organization
19-0
Gray, Linder, Achadjian, Alejo,
Bigelow, Campos, Cooley,
Cooper, Daly, Cristina Garcia,
Eduardo Garcia, Jones-Sawyer,
Levine, Mayes, Perea, Salas,
Steinorth, Waldron, Wilk
Appropriations
17-0
Gomez, Bigelow, Bloom,
Bonta, Calderon, Chang, Daly,
Eggman, Gallagher,
Eduardo Garcia, Holden, Jones,
Quirk, Rendon, Wagner,
Weber, Wood
Noes
SUMMARY: Extends an existing tied-house exception in the Alcoholic Beverage Control Act
(Act) pertaining to the general prohibition against advertising arrangements between retail,
wholesale and manufacturer licensees to include a fairgrounds with a horse racetrack and
equestrian and sports facilities (Del Mar Fairgrounds) in San Diego County. Specifically, this
bill:
1) Allows a beer manufacturer, the holder of a winegrower's license, a distilled spirits rectifier,
a distilled spirits manufacturer, or distilled spirits manufacturer's agent may purchase
advertising space and time from, or on behalf of, an on-sale retail licensee at a fairgrounds
(22nd District Agricultural Association) with a horse racetrack and equestrian and sports
facilities located in San Diego County, subject to specified conditions.
2) Make legislative findings and declarations as to the necessity of a special statute for the
County of San Diego.
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 for this purpose.
2) 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.
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3) 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].
4) 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 of Los Angeles on September 6, 2001, where the
owner of the venue is not the on-sale retail licensee. (Business and Professions Code Section
25503.42)
5) Defines a state-supported fair organization as any fair that conducts an annual fair and
submits an annual statement of operations to the CDFA. The generic term of "fairs" refers to
District Agricultural Associations (DAA's), county fairs, citrus fairs, and the California State
Fair.
FISCAL EFFECT: According to the Assembly Appropriations Committee, minor and
absorbable enforcement costs to ABC.
COMMENTS:
Purpose of the bill: The author's office notes that this measure would amend ABC tied-house
provisions to include the Del Mar Fairgrounds on the list of exemptions in the law, thereby
allowing the fairgrounds to develop certain alcoholic beverage sponsorships with various
manufacturers and distributors. The author's office points out that existing law precludes any
signage paid for by an alcoholic beverage manufacturer or distributor unless such an exception is
created. The author's office emphasizes that such an exemption would put the fairgrounds and
the racetrack on an even playing field with other arenas and stadiums in California and help
support efforts to make horse racing and other events economically viable.
This Tied-house exemption is narrowly crafted and similar to those granted to the Los Angeles
Forum in the City of Inglewood, the Los Angeles County Fair in Los Angeles County, the
National Orange Show in San Bernardino, a theme or amusement park located in Orange County
(Disneyland), the California Speedway in Fontana, the Indian Wells Tennis Club in Riverside
County, non-profit theatre organizations, and maritime museums, among others.
Background: The network of California fairs includes 77 fair organizations divided into four
categories: 52 DAA's – state government entities, 22 county fairs – County government or notfor-profit organizations, 2 citrus fruit fairs – not-for-profit organizations and the California
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Exposition and State Fair (Cal Expo) – a state agency. California's 77 fairs are located
throughout the Golden State and host fairs from early spring to the fall of each year.
The California Department of Food and Agriculture (CDFA) is responsible for the oversight of
California's agricultural industry, including the network of California fairs. The Division of
Fairs and Expositions (F&E), provides fiscal and policy oversight of the network of California
fairs and ensures the best use of available funding and services.
An annual fair is just one of many year-round activities for fair organizations in California. Fair
officials must facilitate use of the fairgrounds for interim events sponsored by community groups
and private entities as well as manage ongoing maintenance and capital improvement projects.
As a result, the fair network creates the opportunity for small-to medium-sized businesses and
nonprofit community groups to make money from these year-round activities. These interim
events further boost jobs, incomes and tax revenues in every county throughout the state. While
the California fair network makes it possible for this economic activity to occur, fair
organizations are public, not-for-profit entities that exist to promote industries of the state and
provide a community gathering place. They do not receive state general fund monies in support
of these efforts.
Tied-house law: Tied-House Law refers to the statutory scheme restricting any cross-ownership
among the three independent tiers of the alcohol industry: a) manufacturers; b)
distributors/wholesalers; and, c) retailers. The term "Tied-House" refers to a practice which was
common in this country prior to prohibition, and is still occurring in England today, where a bar
or "public house" is tied to the products of a particular manufacturer. The original rationale for
Tied-house restrictions are in place to promote the state's interest in maintaining an orderly
market, to prohibit the vertical integration of the alcohol industry, to protect the public from
predatory marketing practices, and to prevent the intemperate consumption of alcoholic
beverages. In order to further these policy goals, the Legislature has generally prohibited forms
of cross-ownership between manufacturers and retailers, and discouraged manufacturers from
providing anything of value to distributors or retailers, be it free goods, services or advertising.
Numerous exceptions to these restrictions have been enacted through the years in those specific
instances where the Legislature determined that the public's interests were protected. Generally,
the business community is interested in removing unnecessary business regulations and creating
conditions that facilitate investment and expansion opportunities for companies that have some
degree of ownership in multiple segments of the industry. However, the Legislature traditionally
does not grant exemptions that favors the products of the entity seeking the exemption, or
exemptions that unfairly compromise the role of the distributors.
Related legislation: AB 527 (Dodd) 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, food, beverage,
culinary, or other cultural entertainment events at venues located solely in the County of Napa,
under specified conditions. (Pending on Senate Floor)
Prior legislation: SB 600 (Bonta), Chapter 139, Statutes of 2014. 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 an outdoor
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stadium with a fixed seating capacity of at least 68,000 seats located in the City of Santa Clara
(Levi's Stadium – San Francisco 49ers new stadium).
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 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) located in San Joaquin County.
AB 1442 (Horton), Chapter 617, Statutes of 2005. Extended an existing '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.
Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531
FN: 0001586