New Laws Expand Winery Off-Site Tasting Room Privileges and Manufacturer Charitable Donation Advertising
This week, Governor Gavin Newsom signed three bills that expand certain winery off-site tasting room privileges and grant alcohol beverage manufacturers the right to advertise and promote charitable donations in connection with the sale of alcohol. The laws will become effective on January 1, 2022. We have summarized the new bills and how they amend current law below.
Number of Winery Off-Site Tasting Rooms (SB 19)
Under current California law, Type 02 wineries are permitted to operate tasting rooms only at their licensed Type 02 premises (i.e., the same premises where the winery’s wine is crushed and fermented), and at an off-site Duplicate Type 02 premises (where crushing and fermentation of wine is not permitted). Current law permits a winery to operate only one off-site Duplicate Type 02 tasting room.
SB 19 amends Section 23390.5 of the California Alcoholic Beverage Control Act (“ABC Act”) to increase the number of Duplicate Type 02 locations that a winery can operate to two locations.
Duplicate Type 02 tasting rooms can be quite helpful for wineries to reach consumers, as they allow wineries to operate a tasting room in another location in California and sell wine to consumers there without having to maintain a production facility on the same premises.
Sale and Delivery of Consumer-Provided Containers at Duplicate Type 02 Tasting Rooms (AB 239)
Under current law, a winery may exercise all the same privileges at its Duplicate Type 02 tasting room as at its Type 02 winery premises (such as the sale and delivery of wine), with certain important exceptions. One of those exceptions is that a winery may not, at its Duplicate Type 02 premises, sell or deliver wine to consumers in containers that have been supplied, furnished, or sold by the consumer.
AB 239 amends Section 23390 of the ABC Act to delete that exception. Starting on January 1, 2022, consumers may provide their own bottles and containers to be filled at a Duplicate Type 02 tasting room premise. AB 239 provides an additional means by which wineries can provide wine to consumers that can be cost-effective for both the winery and the consumer.
Advertisements of Charitable Donations in Connection with the Sale of Alcohol (AB 1267)
Generally, California law prohibits an alcohol beverage licensee from giving a gift or “thing of value” in connection with the sale and distribution of alcoholic beverages, unless there is a statutory exception. The ABC Act permits licensees to donate to specified charities and nonprofit organizations (typically 501(c)(3)s). However, where such donations are tied to sales of alcohol beverage products and/or advertised as such – for example, when a licensee advertises that it will donate a portion or percentage of the proceeds from the sale of a product to a charity – the California Department of Alcohol Beverage Control (“ABC”) views these types of donations as “gifts” or “things of value” to consumers that “incentivize” or “entice” consumers to purchase and consume alcohol in violation of California law. During COVID-19, the CA ABC temporarily created an exception for the enforcement of this prohibition; however, this relief is limited to COVID-19 related charities only.
AB 1267 expands and codifies the CA ABC’s relief with respect to charitable donation advertising by amending Section 25600 of the ABC Act. Starting on January 1, 2022, specified manufacturers – winegrowers, beer manufacturers, distilled spirits manufacturers, craft distillers, brandy manufacturers, rectifiers, and wine rectifiers – may donate a portion of the purchase price of alcohol beverages to nonprofit charitable organizations (not limited to just COVID-19 related charities), subject to all of the following limitations:
- The donation is only in connection with the sale or distribution of alcoholic beverages in manufacturer-sealed containers.
- The promotion does not directly encourage or reference the consumption of alcoholic beverages.
- The donation does not benefit a retail licensee or a charity established for the specific purpose of benefiting the employees of retail licensees, and the advertisement for any donations does not promote or reference any retail licensee. (Note that a manufacturer may identify – but not otherwise promote – the name, address, and website of two or more unaffiliated retailers who sell the manufacturers’ product being offered in the charitable campaign, subject to the restrictions in Sec. 25500.1 of the ABC Act).
Note that this new statutory exception will sunset on January 1, 2025, so unless the exception is made permanent or extended, licensees may not advertise any donations related to the sale of alcoholic beverages at all after the date.
The bills’ text can be found on the California Legislative Information website at the following links: SB 19 (Winegrowers: tasting rooms); AB 239 (Winegrowers and brandy manufacturers: exercise of privileges: locations); and AB 1267 (Alcoholic beverages: advertising or promoting donation to a nonprofit charitable organization).
If you have any questions, please contact John Trinidad at [email protected] or Michael Mercurio at [email protected].
New Law on Winery Social Media Ads for Certain Retailer-Hosted Events
Governor Brown recently signed into law AB2452, a bill that grants wineries broader privileges in the use of social media to promote certain events held at retailer premises, such as winemaker dinners. The bill was introduced by Assembly member Cecilia Aguilar Curry, co-authored by State Senator Bill Dodd, and sponsored by the Napa Valley Vintners.
The new law amends three tied-house exceptions in the California ABC Act that govern the organization and promotion of certain events held at on- and off-premise retailers that involve supplier-side licensees (ABC Act Sections 25503.4, 25503.56, and 25503.57). Those laws restricted how the participating supplier could advertise and promote those events. For example, the advertisement could only list the name and address of the retailer and expressly prohibited pictures or illustrations of the retailer’s premises.
The new bill allows suppliers (including wineries) to now include the following in their advertisements of those permitted retailer-hosted events:
ADDITIONAL RETAILER INFORMATION – The supplier’s advertisement for the event can now include an expanded range of information about the host retailer (including the retailer’s website address and “other electronic media”) so long as such information is “relatively inconspicuous in relation to the advertisement as a whole.”
PICTURES & ILLUSTRATIONS – The new bill allows participating suppliers to include “pictures, illustrations, and depictions of the retailer’s premises, personnel, and customers” in the event advertisements. Videos, however, are expressly prohibited.
REPOSTING OF SOCIAL MEDIA POSTS – Participating suppliers are now allowed to repost social media posts that advertise the event, including posts by the host retailer, provided that the reposted advertisement complies with all other content restrictions in the ABC Act.
Wineries and other suppliers should note that these expanded advertising privileges only allows them to advertise in connection with specific events governed by ABC Act Sections 25503.4 (wine-related events, including winemaker dinners), 25503.56 (instructional tasting event at off-sale retailer premises under a Type 86 license), and 25503.57 (instructional events at on-sale retailer premises). It is not a blanket permission to begin photographing and posting about retailers on supplier social media accounts.
The new law goes into effect on January 1, 2019.
If you have any questions about the new law, tied-house issues, or winery use of social media, please contact John Trinidad.
DISCLOSURE: DPF represents Napa Valley Vintners on a variety of matters, and advised on the proposed legislation.
California Tied House Law Upheld by Federal Appeals Court
An en banc panel of the U.S. Court of Appeal for the Ninth Circuit (the federal appeals court with jurisdiction for the nine western states) has rejected a First Amendment challenge to California’s tied house laws. In so doing, the court overturned an earlier decision by a three-judge panel that had applied a more rigorous standard for regulations that restrict commercial speech and, thereby, raised questions about the state’s ability to enforce certain laws that restrict supplier-sponsored advertisements at alcohol beverage retail premises. The case is Retail Digital Network v. Prieto, Case No. 13-56069 (9th Cir. June 14, 2017).
The case involved a company, Retail Digital Network (“RDN”), that installed and operated digital displays in wine and spirit retail stores. RDN sold advertising space on those displays to companies, and RDN shared a portion of its advertising revenue with retail stores. Alcohol beverage manufacturers were wary of buying advertising on the RDN displays in light of California ABC Act Section 25503 which prohibits alcohol beverage manufacturers, importers, and wholesalers from “paying money” or providing “anything of value for the privilege of placing or painting a sign or advertisement…on or in any” alcohol beverage retail premises. RDN filed suit, claiming that Section 25503 impermissibly restricted commercial speech in violation of the First Amendment.
The Ninth Circuit concluded that Section 25503 did not violate the First Amendment, holding in pertinent part that the regulation directly advances the government’s interest in preventing the undue influence of manufacturers and wholesalers over alcohol beverage retailers, and that the regulation was not more extensive than necessary to serve that interest.
If you have any questions regarding tied house laws, please contact John Trinidad at [email protected].