Beer Distribution Bill Clears Toughest Hurdle

An intensely lobbied bill that would grant beer distributors monopoly territories survived its toughest test Tuesday when the Assembly Ways and Means Committee narrowly passed the measure and sent it to the Assembly floor.

The committee voted 13 to 9 to approve the bill, which was backed by moderate Democrats who insisted that distributors need legal protections to stay in business.

By contrast, consumer groups and other opponents view the bill as a concession to powerful special interests and have predicted higher beer prices should the measure pass.

They had pulled out all the stops to lobby against the bill but acknowledged that the Ways and Means Committee hearing represented their best chance of derailing the effort in the Legislature.

“If we are going to create a monopoly for beer, we ought to do the same thing for more perishable products. Milk will be next, then eggs and butter,” complained GOP Assemblyman Frank Hill of Whittier.

Hill joined with other conservative Republicans and a handful of liberal Democrats in an unusual alliance that sidetracked a similar bill in the Ways and Means Committee last year. The group, however, was unable to close ranks and muster the votes it needed on Tuesday.

Beer distributors already control about 90% of the beer sales in California under contractual arrangements that do not have the force of law. Their concern is with the remaining 10% of the market, in which independent wholesalers still compete in the sale of a few brands of beer.

In essence, the bill would carve the state into a series of territories and give individual distributors monopoly control over each of those regions. Stores would be prohibited by law from shopping around for the best price.

Until Tuesday, the bill appeared to be in serious trouble. But its prospects improved considerably when its author, Assemblyman Jim Costa (D-Fresno), agreed to an amendment that in essence would repeal the measure in five years should a study show that the bill had indeed led to higher beer prices. The study would be paid for by the beer distributors and done by the state auditor general and the Department of Alcoholic Beverage Control.

“I’ve always said that if this legislation increased the cost of beer to the consumer that I would carry legislation to repeal it,” Costa said. “I don’t believe it will do that.”

Costa said his real aim is to protect existing contractual arrangements between distributors and breweries.

But opponents, who also include influential retailers, said the amendment would do little to protect consumers because the exclusive distributorships would become entrenched during the five-year period, permanently shutting out all competition.

“At the end of the five years, they will have a completely exclusive market,” said Harry Snyder, West Coast director of Consumers Union. “Then there’s no going back.”

The beer distributors, who are among the top contributors to legislative and statewide campaigns, have been pushing similar measures in Congress and in many other states. Twenty-eight states have already enacted exclusive territory laws.

Costa said that studies in Michigan and Alabama show that even with exclusive territories, beer prices will not rise. However, a study conducted last year by the state’s legislative analyst concluded that passage of the Costa measure would push prices up in California, where beer prices are among the lowest in the nation.

Atty. Gen. John K. Van de Kamp added his own name to the list of opponents with a letter declaring that the Costa bill is “inimical to the state’s expressed interest in a competitive marketplace.”

With beer distributors on one side and big retail and consumer groups on the other, the measure has been one of the heaviest-lobbied of the legislative session.

Distributors all over the state reportedly have been pressuring their legislators to support the bill, while Consumers Union and Common Cause have held press conferences in individual legislators’ districts in the hope of scaring some lawmakers away from supporting the bill.

Don Beaver, lobbyist for the California Grocers Assn., charged Tuesday that some of the lobbying had gotten out of hand and that distributors were threatening to stop serving small retailers unless they agreed to support the bill.

On the other side, Assemblyman Steve Peace (D-Chula Vista) accused Common Cause lobbyist Walter Zelman of engaging in “blackmail” by holding a press conference in his district. “He literally recruited beer drinkers in San Diego to rise in outrage,” said Peace, who voted against the bill.