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SB-430 Tied-house exceptions: advertising: common parent company.(2023-2024)

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Date Published: 06/21/2023 09:00 PM
SB430:v97#DOCUMENT

Amended  IN  Assembly  June 21, 2023
Amended  IN  Senate  March 30, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 430


Introduced by Senator Dodd

February 13, 2023


An act to add Section 25503.66 to the Business and Professions Code, relating to alcoholic beverages.


LEGISLATIVE COUNSEL'S DIGEST


SB 430, as amended, Dodd. Tied-house exceptions: advertising: common parent company.
Existing law, the Alcoholic Beverage Control Act, which is administered by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of licenses for the manufacture, distribution, and sale of alcoholic beverages. Existing law, known as tied-house restrictions, generally prohibits specified licensees and their agents from paying a retailer for advertising. Existing law creates a variety of exceptions to this general prohibition.
This bill would create a new exception to the tied-house restrictions on advertising. In this regard, the bill would authorize specified licensees to purchase advertising services from an advertising subsidiary that is under common ownership with a retail licensee subsidiary, subject to specified conditions. The bill would require an advertising subsidiary from whom an authorized licensee purchases advertising services pursuant to these provisions to submit to the department semiannually a report that summarizes those services and includes other specified information. The bill would make it a misdemeanor for an authorized licensee or a retail licensee subsidiary to solicit or coerce a wholesaler the solicitation or coercion of a wholesaler or an authorized licensee, as specified, in connection with the advertising services permitted under these provisions. provisions a misdemeanor and subject to specified penalties. By creating a new crime, the bill would impose a state-mandated local program. The bill would define terms for its purposes and would set forth related findings. By creating a new crime, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 25503.66 is added to the Business and Professions Code, immediately following Section 25503.61, to read:

25503.66.
 (a) Notwithstanding For purposes of this section, the following definitions apply:
(1) “Advertising subsidiary” means any person that provides advertising services, such as the sale, placement, or dissemination of advertising.
(2) (A) Except as provided in subparagraph (B), “authorized licensee” means a winegrower, California winegrower’s agent, beer and wine importer general, wine rectifier, craft distiller, distilled spirits manufacturer, distilled spirits manufacturer’s agent, distilled spirits importer general, distilled spirits rectifier, distilled spirits general rectifier, rectifier, out-of-state distilled spirits shipper’s certificate holder, brandy manufacturer, brandy importer, beer manufacturer, or an out-of-state beer manufacturer certificate holder.
(B) “Authorized licensee” does not include a person that exclusively holds one or more of the following pairs of licenses:
(i) A distilled spirits wholesaler’s license and a distilled spirits importer license.
(ii) A distilled spirits wholesaler’s license and a distilled spirits importer general license.
(iii) A beer and wine wholesaler license and a beer and wine importer license.
(iv) A beer and wine wholesaler license and a beer and wine importer general license.
(3) “Common parent company” means a company that meets all of the following criteria:
(A) Wholly owns, directly or indirectly, both an advertising subsidiary and a retail subsidiary.
(B) Before the effective date of this section, has owned and operated at least 50 retail licensees.
(C) Has or has had a contract or agreement with a professional sports league to stream live events on its streaming media services owned by the company.
(4) “Retail licensee subsidiary” means any person that is licensed in this state as an on-sale or off-sale retailer of alcoholic beverages.
(b) Notwithstanding any other provision of this division, an authorized licensee may purchase advertising services from an advertising subsidiary that is under common ownership with a retail licensee subsidiary, if the following conditions are met:
(1) The common parent company of the advertising subsidiary and the retail licensee subsidiary is a publicly traded company whose shares of stock are sold to the general public on a stock exchange located in the United States.
(2) No individual serves A person shall not serve as an officer, director, or manager of both the advertising subsidiary and the retail licensee subsidiary at the same time. time or otherwise control or manage decisions related to both the retail licensee subsidiary’s purchase or sale of alcoholic beverages and the advertising subsidiary’s advertising of alcoholic beverages.
(3) The funds derived from the advertising services purchased by the authorized licensee under this section are not directly available to to, and do not otherwise directly benefit, the retail licensee subsidiary.
(4) The advertising subsidiary and the retail licensee subsidiary maintain separate financial records.
(5) The advertising subsidiary and the retail licensee subsidiary have separately staffed sales and operations departments.
(6) The advertising services purchased by the authorized licensee shall be limited to the sale, placement, or dissemination, or any combination thereof, of advertising, including related sponsorships, on video and streaming media services that are owned by the common parent company of the advertising subsidiary and the retail licensee subsidiary.
(7) The advertising services purchased by the authorized licensee shall not include advertising that does any of the following:
(A) Appears on the premises of the retail licensee subsidiary.
(B) Appears on the internet website website, mobile application, or social media operated by or for the retail licensee subsidiary.
(C) References the retail licensee subsidiary. subsidiary, including, but not limited to, an address, telephone number, email address, internet website, or social media address of the retail licensee subsidiary or an image of the retail licensee subsidiary’s premises.
(D) Includes any internet website or social media address, QR code, or any electronic means by which a consumer may directly purchase the authorized licensee’s products or directs a consumer to another internet website or social media address where the consumer may directly purchase the authorized licensee’s products.
(8) The advertising subsidiary shall not place advertisements purchased by the authorized licensee immediately before or after advertisements of the retail licensee subsidiary.

(8)

(9) The retail licensee subsidiary shall sell other brands of alcoholic beverages in addition to the brands distributed by competing authorized licensees or wholesalers other than a brand produced or marketed by the authorized licensee. licensee that purchased the advertising services.

(9)An

(10) The agreement for the purchase of advertising services shall be based on advertising rates that are commercially reasonable under the prevailing market conditions and not, directly or indirectly, based in any manner on a percentage of the authorized licensee’s sales, revenues, or profits. The agreement shall not be conditioned directly or indirectly, explicitly or implicitly, or in any other way, on the purchase, sale, or distribution of any alcoholic beverage manufactured or distributed by the authorized licensee. All decisions regarding the purchase and sale purchase, sale, or promotion of alcoholic beverages by the retail licensee subsidiary shall be made at the independent and exclusive discretion of the retail licensee subsidiary.
(11) A wholesaler shall not, directly or indirectly, underwrite, share in, or contribute to the cost of the purchased advertising services, unless the wholesaler is the authorized licensee directly purchasing the advertising services on its own behalf pursuant to this section.

(b)

(12) Any purchase of advertising services pursuant to subdivision (a) shall be conducted pursuant to a written contract agreement entered into by the authorized licensee and the advertising subsidiary. The advertising subsidiary shall provide the department a copy of the agreement upon a written request.
(c) An advertising subsidiary from whom an authorized licensee purchases advertising services pursuant to this section shall submit to the department semiannually a report that summarizes those services and includes, at a minimum, the following information:
(1) The product or products being advertised or promoted.
(2) The authorized licensee purchasing the advertising services.
(3) The time period during which the advertising services will be provided.
(4) Any specific event or activity to which the advertising or promotion is connected.

(c)

(d) Any authorized licensee who, through coercion or other illegal means, induces, directly or indirectly, a holder of a wholesaler’s license to fulfill those contractual obligations entered into pursuant to subdivision (a) (b) shall be guilty of a misdemeanor and shall be punished by imprisonment in the county jail not exceeding six months, or by a fine in an amount equal to the entire value of the advertising services involved in the contract plus ten thousand dollars ($10,000), or by both imprisonment and fine. The person shall also be subject to license revocation pursuant to Section 24200.

(d)

(e) (1) Any retail licensee subsidiary who solicits does either of the following shall be subject to penalties specified in paragraph (2):
(A) Solicits or coerces, directly or indirectly, an authorized licensee to purchase advertising services pursuant to subdivision (b).
(B) Solicits or coerces, directly or indirectly, a holder of a wholesaler’s license to solicit an authorized licensee to purchase advertising services pursuant to subdivision (a) (b).
(2) A retail licensee subsidiary who violates paragraph (1) shall be guilty of a misdemeanor and shall be punished by imprisonment in the county jail not exceeding six months, or by a fine in an amount equal to the entire value of the advertising services involved in the contract plus ten thousand dollars ($10,000), or by both imprisonment and fine. The person retail subsidiary shall also be subject to license revocation pursuant to Section 24200.

(e)For purposes of this section, the following definitions apply:

(1)“Advertising subsidiary” means any person that provides advertising services, such as the sale, placement, or dissemination of advertising.

(2)“Authorized licensee” means a winegrower, California winegrower’s agent, beer and wine importer general, wine rectifier, craft distiller, distilled spirits manufacturer, distilled spirits manufacturer’s agent, distilled spirits importer general, distilled spirits rectifier, distilled spirits general rectifier, rectifier, out-of-state distilled spirits shipper’s certificate holder, brandy manufacturer, brandy importer, beer manufacturer, or an out-of-state beer manufacturer certificate holder.

(3)“Common parent company” means a company that wholly owns, directly or indirectly, both an advertising subsidiary and a retail licensee subsidiary.

(4)“Retail licensee subsidiary” means any person that is licensed in this state as an on-sale or off-sale retailer of alcoholic beverages.

(f) The Legislature finds that it is necessary and proper to require a separation between manufacturing interests, wholesale interests, and retail interests in the production and distribution of alcoholic beverages in order to prevent suppliers from dominating local markets through vertical integration and to prevent excessive sales of alcoholic beverages produced by overly aggressive marketing techniques. Notwithstanding the foregoing, having considered the public welfare, the economic impact on the state, and the entirety of the circumstances involved, the Legislature further finds that the purpose and intent of the general prohibition against tied interests is not violated by granting the exception established by this section.

SEC. 2.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.