Assembly Votes to Cork Bargain Wine Market

In an action likely to pave the way for higher prices on imported wine and champagne, the Assembly on Wednesday approved legislation to grant a few authorized importers monopoly control over wines brought into California.

The controversial measure, aimed at stamping out a flourishing “gray market” that has made high-priced wines available at bargain prices, was approved 42 to 28. The bill, already approved by the Senate, was returned to the upper house, which is expected to swiftly approve amendments added in the Assembly.

The heavily lobbied legislation, opposed by consumer groups and the attorney general, was drafted to benefit authorized importers whose profits have been undercut by maverick competitors operating through legal but unconventional channels.

Gov. George Deukmejian has not indicated whether he supports the measure. However, its backers have already met with the governor on several occasions.

Supporters argued Wednesday that the bargain imports are hurting the California wine industry, which has been in a sales slump for several years. However, opponents pointed out that only a handful of California wineries compete with the prestige wines and champagnes that are being brought into the state via the gray market.

“This bill makes competition a crime,” said Assemblyman Don Sebastiani (R-Sonoma), whose family owns a major California winery. “The input from my district has been virtually nil, because it only really affects those who have a big stake in the import field.”

The recent bargains, which have made some of the world’s best wines available at half their normal prices, have been made possible, in part, by the dollar’s strength overseas. Just as important is a traditional practice of French wineries in maintaining lower prices for European consumers and higher prices for the U.S. market.

The combination of the factors has enabled gray marketeers to buy from retailers in Europe, pay for shipping to the United States and still undercut the prices of authorized importers by as much as 50%.

The legislation, introduced by Sen. Ralph Dills (D-Gardena), would allow only those firms that are officially designated by brand owners to import wines. That would effectively end the gray market by making imports by non-authorized firms a misdemeanor.

Similar bills have been enacted in 24 states, although California, because of its large population and major wine industry, is considered a key test.

The same kinds of protections were granted to hard liquor importers in California several years ago. In some cases, the importers that would benefit most from this bill are the same companies that deal in hard liquor and successfully lobbied for the earlier measure. Chief among them are Seagrams & Co., which imports Mumm’s Cordon Rouge and Schieffelin, which imports Dom Perignon. Both firms are foreign-owned.

Beer Distribution

A companion measure that would have more closely controlled beer distribution was recently shelved for this session under intense opposition from consumer groups and retailers. However, its sponsors are likely to bring the bill back next year.