Senate OKs Limits on ‘Gray Market’ Wines

The Senate on Monday approved and sent to Gov. George Deukmejian major legislation to curb bargain sales of prestige European wines and champagnes brought into California through a flourishing “gray market.”

The Senate voted 22 to 11 to concur in amendments added in the Assembly as Sen. Ralph C. Dills (D-Gardena), the measure’s author, fought off charges that the bill would create a legal monopoly by granting a few authorized dealers the exclusive rights to bring imported wine into the state.

Deukmejian, who has been subjected to heavy lobbying by both supporters and opponents of the bill, has not taken a public position on the bill. Late Monday, a spokesman for the governor said Deukmejian will wait until he receives more information on the bill and has had time to meet with his legislative staff.

Strong Opposition

“I am certain the governor is aware of it because the bill itself had drawn quite a bit of publicity,” said Assistant Press Secretary Kevin Brett.

The measure, which is backed by segments of the California wine industry and a few authorized foreign wine and liquor importers, has drawn strong opposition from consumer groups, Atty. Gen. John Van de Kamp and on editorial pages throughout the state.

The heavily lobbied bill would allow only those firms officially designated by brand owners to bring wines into California. As such, it would effectively stamp out maverick “gray market” importers who buy foreign wines on the open market in Europe, ship them to the United States and still undercut the often inflated American prices by as much as 50%.

Opponents hope to convince the Republican governor that the bill would interfere with free trade, a concept that he has strongly supported.

Supporters have played down the benefits to the foreign-owned wine importers, who would be granted a monoply under the bill, and are instead focusing their lobbying on economic problems of California wine makers. Although only a handful of California wineries compete with the prestige wines imported on the “gray market,” the domestic wine industry is supporting the bill because it will help pave the way for more protectionist legislation.

The Assembly amendments would automatically repeal the bill within four years if Europeans moved to reduce trade barriers against California wines.

Dills, in arguing for his bill Monday, cited President Reagan’s decision to impose limited trade sanctions against South Africa, suggesting that the wine bill is another case in which free trade should be set aside.

“Because these (European) wines are being dumped here at artificially low prices, that affects the price of California wines and wine grapes,” Dills said. “Neither of those industries is doing very well right now.”

Sen. Edward R. Royce (R-Anaheim), who opposed the measure along with most of the Legislature’s Republicans, said the bill would hurt wine buyers.

“What we are doing . . . is disallowing an open market, disallowing a free market and instead allowing a monopoly,” Royce said. “The result of that monopoly will be increased prices for the consumer in California.”