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California Regulatory Roundup – Fall 2018

Several new provisions of the California ABC Act were signed into law recently; below is an overview of the ones we find most relevant to our clients’ businesses. All statutory references are to the California Business & Professions Code. All of the laws described below take effect January 1, 2019.

Changes Affecting Craft Distillers (License Type 74)

Production Cap Increase – Craft distillers currently can produce no more than 100,000 gallons of distilled spirits per year (excluding brandy), and no owner, officer, director, etc., of a craft distiller can be affiliated with a producer of more than 100,000 gallons per year. Section 23502. Those limits will be increased to 150,000 gallons. (SB 1164)

Sales at the Distillery – Section 23504 is amended to eliminate the requirement that a person must attend a tasting before being able to purchase prepackaged containers of the craft distiller’s spirits at the licensed premises. The 2.25 liters per day restriction remains in place. (AB 1164)

Consumer Tastings – Current California law allows for tastings of spirits at on- and off-sale licensed premises, subject to various restrictions. Sections 25503.56, 25503.57. Those tastings can only be conducted by “authorized licensees,” which did not include craft distiller licensees. The definition of that term was expanded in the two cited statutes to include craft distiller licensees. (AB 1891)

Trade Tastings – Existing Section 25503.5(b) allows distilled spirits manufacturers, rectifiers, importers, and distilled spirits manufacturer’s agent licensees to conduct instructional tastings for licensees and their employees; it has now been amended to include craft distillers. (SB 1164) In addition, Section 25503.51 was added, which essentially does the same thing as the revision to 25503.5(b), except that the new section adds distilled spirits wholesalers, which can now also provide the instructional tastings. (AB 3264)

Changes Affecting Advertising by Suppliers

Advertising Consumer Tastings - Existing Section 25503.4 allows wineries and wine importers to conduct consumer tasting events at on-sale retailers’ premises. Existing Section 25503.56 allows consumer tastings of beer, wine or spirits at off-sale licensed premises, and 25503.57 allows consumer tastings of wine and spirits at on-sale licensed premises. All three statutes allow the supplier licensee conducting the tasting to advertise the event in advance, but restrict them from providing any information about the retailer beyond its name and address. Revisions to the three laws will allow the ads to also include still photos (no video) of the retailer’s “premises, personnel and customers,” and expanded contact info for the retailer, including its email and website addresses, and social media accounts. Suppliers also can re-post social media posts about the events, including posts by the retailer, as long as they comply with the content restrictions in the statutes. The references to the retailer still must be “relatively inconspicuous” in relation to the ad as a whole, and the supplier still cannot make laudatory references to the retailer. Note that the expanded ad content relates only to advertisements for the events allowed under the three statutes referenced above – it does not apply to supplier advertising in other contexts. (AB 2452, SB 1164)

Venue Advertising – The ABC Act prohibits supplier licensees from paying retailers for advertising rights at retail licensed premises. There are a number of exceptions to the prohibition, carving out allowances for supplier advertising at specific stadiums, parks, arenas, and other on-sale licensed venues. Section 25503.6 was revised to add three San Jose venues (San Jose Giants stadium, San Jose
Earthquakes stadium, SAP Center) and the San Diego Padres stadium (Petco Park). (AB 2000, AB 2146) Wine Institute and others have been working to pass an “Entertainment Venue Sponsorship” exception that would more broadly allow venue advertising, but it remains in legislative limbo.

Cannabis & Alcohol: You Gotta Keep ‘Em Separated New Sections 25621.5 and 26070.2 prohibit licensees from selling cannabis at their licensed premises, including alcoholic beverages that contain cannabis. The laws further clarify that no alcoholic beverage can be produced or sold that contains cannabis, tetrahydrocannabinol (THC), or cannabinoids (CBD). (AB 2914)

Miscellaneous

Free Rides – Existing law allows beer manufacturers to provide free or discounted rides to consumers “for the purpose of furthering public safety.” Section 25600(d). The law was amended to also allow certain distilled spirits supplier licensees, including craft distillers, to provide free or discounted rides. (AB 3264, SB 973)

Cemetery Cocktails
– For-profit cemeteries in Los Angeles that are at least 100 years old and on the National Register of Historic Places can now get on-sale general licenses. Good news for visitors to the Hollywood Forever Cemetery, which seems to be the sole beneficiary of the new Section 24045.76. (AB 1217)

Notable Unsuccessful Bills

Free Glassware – AB 2573 would have allowed beer manufacturers to provide up to five cases of free, branded glassware annually to on-sale retailer licensees, had Governor Brown not vetoed the bill. Consistent with this anti-free-glassware sentiment, Bus & Prof code § 25600 was amended to clarify that glassware is not an allowable retailer advertising specialty item that could be given to retailers by wine and spirits suppliers. (AB 3264)

4 a.m. Last Call – SB 905 would have extended the hours of sale for alcohol from 2 a.m. to 4 a.m. in several California cities, including Los Angeles, San Francisco, Sacramento, and Coachella. Governor Brown vetoed the bill, noting that he believes “we have enough mischief from midnight to 2 without adding two more hours of mayhem.” We expect to see this bill resurrected in future legislative sessions. (SB 905)

Duplicate Winery Tasting Rooms – Existing law allows wineries to sell wine to consumers and to conduct tastings at their licensed premises and at one additional premises under a duplicate license. The proposed amendment to 23390.5 would allow consumer sales and tastings at two additional premises licensed with duplicate licenses. The bill did not make it to the governor’s desk but we don’t expect this to be the end of it.

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