Governor Vetoes Bill on Beer-Distribution Monopoly Territories

SACRAMENTO — While conceding that he is not a beer drinker himself, Gov. George Deukmejian on Saturday vetoed a controversial measure that consumer groups had warned would cut competition in the industry and lead to higher prices for the frothy alcoholic beverage.

The bill, by Assemblyman Jim Costa (D-Fresno), would have required monopoly territories for beer distributors in California, giving wholesalers the sole right to sell their brands of beer in each region while prohibiting retail stores from buying from anyone else.

Such exclusive agreements between breweries and wholesalers, now voluntary, already account for 90% of beer sales in the state. Costa’s bill would have placed these agreements into law and required that the remaining 10% of beer sales also be handled through the contracts.

‘Special Interest’ Charged

The bill was attacked by consumers groups as “special-interest” legislation intended only to increase profits for wholesalers at the expense of consumers. California Common Cause made the measure the centerpiece of its drive for changes in the state’s campaign contribution laws because beer wholesalers have contributed about $500,000 to legislative campaigns since January, 1985.

Deukmejian, who has generally resisted government intrusion into the free market, said in a written veto message that he believed the current voluntary beer distribution system was not in need of change.

“The beer wholesalers are an economic and efficient network that supplies retailers, bars and restaurants, regardless of their location and size, with fresh merchandise at low prices,” Deukmejian said. “I do not believe . . . that it is appropriate for the government to intervene in a process that has proven so successful.”

Doesn’t Drink It

Deukmejian would not elaborate on his decision at a news conference Saturday, though he did note, in response to a question, that he does not drink beer.

Deukmejian took the full 12 days allowed by law to veto the bill, which was sent to his desk on a 51-22 vote of the Assembly. Had he not acted by Saturday, the measure would have taken effect without his signature.

Costa, in a prepared statement issued by his office, said the veto was a “disappointing blow” to small grocery stores who, he argued, needed the law to protect them from efforts by powerful store chains to constrict the supply of beer going to such “mom-and-pop” outlets.

“This bill would have permanently kept in place our state’s current beer distribution system, which has provided California consumers with some of the lowest prices in the nation,” Costa said. “It’s a fair system for wholesalers, retailers and consumers. That’s why governors in 27 other states have approved similar laws. I wish our governor would have also done so.”