Cal Council Leg Update – Long DRAFT SB639 Calderon 05.25.09 Edward Kikumoto This summary is the result of conversations with ABC, Fred Jones, Michele Simon and Michael Sparks, and reading of the Leg Counsel Analysis dated 04.27.09. Any misstatement or misinterpretation is my own. ISSUE SB639 would allow ANY off-sale licensee (Type 20 or 21) to purchase a $750.00 onsale public premise alcohol-tasting license, which would allow the consumption of alcohol (tasting) on off-sale premises. (In the vernacular this means any store that sells alcohol can have a permanent bar inside the store in order to give away free drinks.) CURRENT RULE FOR FREE TASTING ON OFF-SALE PREMISES In order for an off-sale licensee to be allowed to have free tasting on the off-sale premises the owner of the business must purchase a Type 42 Beer and Wine Public Premises License or a Type 48 General (beer, wine & distilled) Public Premises License. In the vernacular, a “Public Premise” is a bar. The business owner then must carve out a space within the off-sale premises that is permanently dedicated to the “bar” activity where the tasting occurs and where minors are never allowed. The best example of this type of activity is BevMo (Beverages and More), which typically acquires a Type 42 license to allow sampling of beer and wine. The cost of a “bar” license is prohibitive to an off-sale licensee who will only be allowed to use the license for tasting purposes. Therefore, the only off-sale businesses that can make the price of a Type 42 or 48 license profitable are large retailers such as Beverages and More. A Type 48 license to sell distilled spirits is even more expensive that a Type 42 beer and wine, which is DISCUS’s argument about wanting to level the playing field – by making a cheap tasting-license available to any off-sale licensee. (DISCUS is the Distilled Spirits Council of the United States, and represents the interest of the distilled spirits manufacturers – who will profit the most if this bill becomes law.) BRIEF HISTORY OF SB639 • SB639 is authored by Senator Ronald Calderon, D-Montebello. • It is sponsored by DISCUS (Distilled Spirits Council of the United States) on behalf of the distilled spirits manufacturers. • The bill as introduced on 02.27.09 was a spot bill. • One week prior to its hearing in Senate GO Committee on April 28, 2009, the spot bill was gutted and amended into a bill allowing off-sale GENERAL licensees to purchase a permit to allow free alcohol tasting – the alcohol and advertising of the event to be furnished by the MANUFACTURER at no cost to the licensee. • One day prior to the hearing in the Senate GO Committee on April 28, 2009 the bill was gutted and amended a second time into a bill allowing ANY off-sale
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licensee to purchase a Public Premises Tasting License for $750. Tasting is limited to those products allowed to be sold by the licensee. The Senate GO Committee voted 9 to 1 to approve the amended (one-day) bill and moved it to Senate Appropriations to be heard on May 18.
SB639, AMENDED 04.30.09 (current version) • Any off-sale licensee can purchase a Public Premise Tasting License. • License fee is $750, annual renewal is $750. • A Public Premise Tasting License is exempt from over concentration rules. • Tasting is limited to those products allowed-to-be-sold by the off-sale license type (i.e. distilled spirits cannot be offered for tasting by a beer and wine licensee). • The current rules applicable to free product tasting for on-sale licensees are applicable – as to who may furnish, who may serve, the volume allowed-to-beserved, and how often this activity can occur. • The alcohol for the tasting and advertising of the event is free to the off-sale licensee. WHAT DOES IT MEAN? • A Public Premises Tasting License is considered a “substantial change of mode or character” by the ABC - the “new” license will trigger a review of the off-sale licensee’s original application (i.e. the intent of the applicant to establish a “bar” within the off-sale premises). • The “new” license application will trigger public notifications. • Local municipalities that have a CUP process can require a CUP for the “new” license. • For grandfathered businesses (e.g. Deemed-Approved or legal non-conforming) the new license can trigger a rescission of the grandfathered use and require a CUP. • Public Convenience or Necessity is NOT applicable to this license because of the exemption to over concentration written into the legislation. • Under current law the amount allowed to be sampled of distilled spirits is onefourth of an ounce per tasting; and one ounce of wine per tasting – no more than three tastings a day per individual (BPC23386). An individual may sample 8 ounces of beer per day (BPC25503.55). A store owner will have to carve out a permanent space dedicated to the tasting activity where minors will not be allowed whether a tasting is occurring or not. This requirement should keep most small markets and convenience stores out of this activity just because they can’t afford to allocate the space. However, you may expect to see this activity at big boxes and larger grocery retailers that are willing to create a “restricted access” area for tasting activity. Because of the cheap price of the license we can expect to see more distilled spirits tasting at Type 21 licensed businesses.
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Other than the $750 license fee and $750 annual renewal fee there are no additional revenue sources to pay for ABC enforcement or local law enforcement expenses. The slippery slope – As of June 30, 2008 there were 27,844 off-sale licensees in the State of which 13,209 are licensed to sell distilled spirits. The vast majority of all off-sale businesses are small convenience markets. The current license restriction that requires permanent space (that does not allow minors) will keep the small businesses from this activity because they can’t afford the space. However, if SB639 is enacted into law, we can expect to see an industry bill, in the near future, that amends the Public Premises Tasting License to allow minors on the premises. Then the small convenience stores, no longer constrained by space requirements will jump on to the proverbial bandwagon, which will result in a geometric increase in regulatory and enforcement problems, and harm to at-risk communities. WHERE IS ABC ON SB639? ABC provided assistance to the author on this bill, however, it has not taken an official position. WHY IS THIS STATEMENT IN THE PROPOSED LAW WHEN IT IS ALREADY THE LAW THAT MINORS CANNOT BE ON A PUBLIC PREMISE? (Section 23996.6(e) The department may impose reasonable conditions upon the on-sale tasting license including, without limitation, conditions necessary to insure segregation of the on-sale tasting premise from the off-sale retail premise to insure exclusion of persons under the 21 years of age from the on-sale tasting premise.) Is this the CAMEL’S NOSE UNDER THE TENT that will allow the industry to ask for an exemption in the future for this license so that minors would be allowed on the “public premise”, which is within the off-sale business? or Something the industry can give up to make it appear they are being responsible? or BOTH? TWO MAJOR TALKING POINTS • This license is EXEMPT from over-concentration rules (SB639 Amended 04.30.09, 2nd page line 8). Any off-sale licensee in an area that is already over saturated will be able to get a public-premise tasting license. • This is a QUALITATIVE change in the way we distinguish between off-sale and on-sale activities. We separate the two activities as much as possible for very good health and safety reasons. The furnishing of alcohol for the tasting and free event advertising increases the direct interaction between the manufacturer and retailer and eliminates the distributor, which further erodes the three-tier system of control. 3
OTHER TALKING POINTS • Section 23996.6(e) does not categorically require segregation or minor restrictions and will allow for further change. (Is this just an industry give-a-way or the wedge they’ll use next year to remove the minor restriction?) • If the space is not enclosed, then the tasting can occur in plain site of minors. • Young people will see more alcohol advertising. • Very few cities and counties have adequate local regulations to respond to the ABC’s “substantial change in mode or character” ruling. • It will be difficult to monitor the “minor-restricted” space within the off-sale premise and will require more law enforcement monitoring. WHAT ARE THE NEXT STEPS IN THE LEGISLATIVE PROCESS?
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