Beer Monopoly Bill Wins Easy Assembly Nod

Bitterly fought legislation to grant monopoly territories to beer distributors in California won easy passage in the Assembly Wednesday after Republicans and Democrats alike lauded the measure as “good for competition.”

The bill was sent to the Senate on a vote of 46 to 19 after a spirited debate in which supporters argued that the monopoly it proposes to create would not result in higher beer prices.

“I think this is very up front and a good measure for consumers,” said Assemblyman Jim Costa (D-Fresno), the bill’s author. Contending that monopoly control is the only way to ensure that distributors stay in business, Costa charged that consumer groups that oppose the bill “have another agenda separate and aside from this issue.”

Major consumer groups in California have fought Costa’s bill every step of the way and remain staunchly opposed.

The bill, however, appears to have a good chance of winning approval in the Senate, which passed a similar measure several years ago. Gov. George Deukmejian has not taken a position on the bill, but he vetoed legislation last year that would have established monopolies for wine distributors.

California Common Cause issued a terse statement Wednesday immediately after passage of Costa’s bill saying that “the Assembly should be embarrassed” by its vote.

Common Cause Director Walter Zelman predicted that if enacted, the legislation “will force millions of consumers to pay higher prices so a handful of beer wholesalers can earn higher profits.”

The bill, similar to measures adopted by 28 other states, would carve California into territories and give individual distributors monopoly control over each of those regions. Stores would be prohibited from shopping around for the best price.

Beer brands that account for about 90% of the sales in California already are sold by distributors under exclusive contracts with breweries. The other beers are open to competition among distributors.

Costa’s bill basically would put the force of law behind existing distribution contracts. It also would require monopoly territories for the remaining 10% of the market in which distributors compete.

In arguing for his bill, Costa acknowledged that a major reason for introducing the measure was to protect beer distributors from the threat of an antitrust suit. Legislation is pending in Congress to exempt beer distributors from federal antitrust regulations.

Political Contributors

The distributors, who are among the largest contributors to political campaigns in California, have made Costa’s bill their top priority. Retailers who would be hurt by the bill also contribute heavily to campaigns. That prompted Costa to characterize the battle surrounding the bill as merely “an industry turf fight” that has little influence on consumers.

Many legislators who otherwise would oppose the bill agreed to support it after Costa added an amendment that would repeal the measure in five years if an industry-paid study showed that it resulted in higher prices. Opponents have labeled the amendment a fraud, saying that once monopoly territories are in place, repealing the law would not bring back competition.

Assemblyman Frank Hill (R-Whittier), a staunch opponent of the bill, argued that the legislation is “anti-free enterprise” and said it is ludicrous for supporters to contend that “the way we create competition and keep prices down is to create monopolies. It simply makes no sense.”

Hill noted that every news organization in the state that has taken a position on the bill is opposed to it. But Assemblyman Steve Peace (D-Chula Vista) said media outlets have a built-in conflict of interest because they sell ads to retailers who are working to defeat the legislation.

“The big, bad special interest supermarkets are among the two top income sources to newspapers and media,” said Peace.