Tied-House Restriction Exception Bills in California

California has a “tied-house restriction” law that is contained in the Alcoholic Beverage Control Act (ABCA).  The ABCA is found in the Business and Professions Code, Division 9 (“Alcoholic Beverages”). Chapter 1, Section 23000 specifies that Division 9 is known and may be cited as the “Alcoholic Beverage Control Act.” California’s Tied-House Restrictions are contained in Chapter 15 of Division 9, in Sections 25500 – 25512.

The ABCA, which is administered by the Department of Alcoholic Beverage Control, regulates the application, issuance, and suspension of alcoholic beverage licenses. This existing law contains what are known as tied-house restrictions, which generally prohibit a manufacturer, winegrower, manufacturer’s agent, rectifier, California winegrower’s agent, distiller, bottler, importer, and wholesaler, and any officer, director, or agent of any of those licensees, from giving or lending money or a thing of value to a person operating, owning, or maintaining premises where alcoholic beverages are sold.

In addition, existing law creates various exceptions to these tied-house restrictions, including permitting a licensee to perform services for off-sale licensees by rotating the brand or brands that are owned or sold by the licensee performing the service on shelves and in refrigerated boxes. Existing law also creates numerous tied-house restriction exceptions, such as for specified places and activities.

Unlike federal law, there is no need at the state level for there to be an actual exclusion for a violation to arise. Moreover, the supplier’s intent does not play any role in evaluating if a tied house violation has occurred. Although an advertisement placed by a supplier for a retailer is a “thing of value,” there are certain exceptions to California’s tied house laws.

For purposes of drafting these types of exception bills, new sections (i.e., the bill would add a new section in the Business and Professions Code) are generally added to Chapter 15 and amend existing sections of Chapter 15. A reader will likely find bill language similar to the following example, before the conditions to be met are specified in the bill:

Notwithstanding any other provision of this chapter, a beer manufacturer, the holder of a winegrower’s license, a rectifier, a craft distiller, 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 subject to all of the following conditions:

In addition, special statute findings are required in the bill. For example, an exception from the tied-house restrictions might be desired for a new hotel in a particular city to allow one of the specified parties to purchase advertising space under specified conditions. The bill language would also contain those conditions that must be met in order for the exception to apply.

As a reminder to readers, the special statute language will be contained in a “plus section” at the end of the bill and contain similar language to the following example:

The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the conditions unique to  ___.

Finally, these exception bills often do not provide reimbursement to local governments despite these bills being state-mandated local programs. As a result, readers will likely see in a “plus section” at the end of the bill similar language to the following example:

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.

Like other specialized types of bills, exceptions to the tied-house regulations generally require certain provisions in almost all instances. The major provisions are set forth above.