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Gray market under attack in California
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Gray market under attack in California

A wine-related controversy is simmering in California, as the state legislature ponders a proposal - apparently backed by the state's larger wine and liquor distributors - that would criminalize the "gray market" or "parallel market" import of wines.

A broad coalition of wine retailers, smaller importers and consumers has formed to oppose the measure, which is titled Assembly Bill 1922 and was sponsored by Assemblyman Marco Antonio Firebaugh, a Democrat from Cudahy (50th District) in Southeastern Los Angeles County. The measure is currently before the Assembly's Committee on Governmental Organization and is scheduled for a hearing on April 15.

Today's report is obviously of the most direct concern to our 1,500 Wine Advisor readers in California, whose wine availability and costs are at direct stake, and who may want to contact their state representatives and senators directly to express opinions about this issue.

But I thought the rest of you might find a brief report of interest, too, as an object lesson into the roles that politics, business interests and money may play in the glass of wine we enjoy for dinner.

The bill appears deceptively simple, proposing simply to extend to wine imports a law that already restricts the importation of liquor: It would make it illegal for an importer to purchase or accept any brand of wine unless it is designated the authorized importer of that brand by the brand owner. In short, it would eliminate the current state of competition in California in which no single importer may claim a monopoly on the representation of a specific wine, thus ending the legal "gray market" or "parallel market" in which more than one importer may represent the same wine.

The effect on consumers appears obvious, pointed out Marco Pecile of Los Angeles, an old online friend and frequent correspondent: "If AB 1922 were to be approved," he said, "it would restrict supplies of imported wines to the official importer only; thereby limiting competition and driving up the price of wine."

"This bill would allow consumers such as me only the tightly allocated supplies that official importers distribute," Pecile added in a proposed letter to California legislators that he circulated among online friends. "The large importer/distributors ... charge excessive price markups. ... These large influential companies ... routinely engage in lobbying efforts to benefit themselves at the expense of the consumer and the market in general. ...

"The only reason a modicum of freedom has endured in the retail market is that there are courageous and enterprising parallel importers that charge a fair profit. If the market is to operate freely and consumers are to remain somewhat empowered, it is imperative that ALL California-licensed importers and distributors be allowed to prosper and provide a needed service."

Others in California agree. Hi-Time Wine Cellars, an excellent retail wine shop in Costa Mesa in Southern California, has set up a special Web page containing details of the bill and a form letter that constituents can send to their representatives.

"This bill would create higher prices, possible shortages, less selection in the marketplace and problems with existing orders of 'prearrival' or 'futures' items," argues the Hi-Times Website. "This bill would protect the profits of some of the larger importers."

Mike Opdahl, a wine importer based in Pasadena, agreed, observing that the legislation "is solely designed to eliminate competition for a few large companies and ensure them a monopoly." In reality, Opdahl said, "the loss of jobs and economic cost to California businesses and consumers will more than offset any increases. This bill is yet another example of big money politics winning out over the lowly consumer and small business."

What's more, Opdahl said, the proposal would adversely affect not only small importers and wine consumers but hundreds of small California wineries, which rely on smaller importers and distributors to represent their products.

"The wine business is so competitive, and margins are so thin, that small businesses like ourselves cannot survive by simply wholesaling California wines from small producers, or importing foreign wines; both product lines are required to ensure a viable operation. Should this legislation pass, hundreds of small California wineries will [likely] lose market presence and suffer economically, creating additional job loss."

To get involved, or for more information, here are some useful Web links:

Hi-Time Wine Cellars' "Stop AB 1922" Page:
http://www.hitimewine.com/stop_ab_1922.htm
Suggested letter to legislators (Hi-Time Wine Cellars):
http://www.hitimewine.com/STOP_AB_1922_LETTER.htm
Full text of AB 1922:
http://www.leginfo.ca.gov/pub/bill/asm/ab_1901-1950/ab_1922_bill_20020208_introduced.html
Current Bill Status:
http://www.assembly.ca.gov/acs/acsframeset2text.htm
(Enter "1922" under "Bill Number," then click "Search;" click "Status" on the resulting page.)
Find your California representative:
http://www.assembly.ca.gov/acs/acsframeset9text.htm
Assemblyman Firebaugh's E-mail address:
Assemblymember.Firebaugh@assembly.ca.gov
Comment on an Assembly Bill:
http://www.assembly.ca.gov/acs/acsframeset2text.htm

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Wednesday, April 3, 2002
Copyright 2002 by Robin Garr. All rights reserved.

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