FTC Staff Comment to the Honorable Wesley Chesbro Concerning the Proposed California Franchise Act to Govern Contractual Relationships Between Beer Manufacturers and Wholesalers

UNITED STATES OF AMERlCA
FEDERAL TRADE COMMISSION
WASHINGTON , D. C. 20580
Offce of Policy Planning
Bureau of Economics
Bureau of Competition
August 24, 2005
The Honorable Wesley Chesbro
California State Senate
State Capital, Room 5035
Sacramento, CA 90514
Re: Comment on Proposed Beer Franchise Act
Dear Senator Chesbro:
The staffs of the Federal Trade Commission s ("FTC" or "Commission ) Offce of
Policy Planing, Bureau of Economics, and Bureau of Competition are pleased to respond to
your invitation for comments on a proposal to put into place a beer franchise act in California.
The Proposed Franchise Act would govern the contractual relationships between beer
manufacturers and beer wholesalers.' In your letter , you asked the FTC to analyze the
competitive impact" of the proposed franchise act.
The Proposed Franchise Act would reduce wholesalers ' incentives to lower wholesale
prices and to undertake efforts to increase the demand for brewers ' brands , and therefore is
likely to increase the costs of beer distribution and to reduce competition among wholesalers.
Further, the Proposal may reduce competition among certain brands of beer. Consequently, we
believe that, if enacted, the Proposed Franchise Act is likely to lead to higher beer prices for
California consumers, and may reduce the variety of beers from which California consumers can
choose.
Hereinafter referred to as "the Proposed Franchise Act" or "the Proposal." We understand that this bill is
likely to be offered as an amendment to California Assembly Bi11417.
This letter expresses the views of the Federal Trade Commission s Office of Policy Plannng, Bureau of
Competition, and Bureau of Economics. The letter does not necessarily represent the views of the Federal Trade
Commssion (Commission) or of any individual Commssioner. The Commission has, however, voted to authorize
us to submit these comments.

Interest and Experience of the FTC
Congress charged the FTC with enforcing laws prohibiting unfair methods of
competition and unfair or deceptive acts or practices in or affecting commerce.) Pursuant to this
statutory mandate, the Commission seeks to identify business practices and regulations that
impede competition without offering countervailing benefits to consumers.' The Commission
and its staff have considerable experience in analyzing thc competitive impact of regulations
affecting the alcoholic beverage industry. For example, the FTC staff has commented in the past
on proposed restrictions on the vertical relationships between alcoholic beverage producers and
wholesalers Further, in 2003 , the Commission staff released a report on the competitive effects
of bans on direct shipments of wine: and in 2004, the FTC staff commented on a proposed New
York bill involving direct shipment ofwine.
The Proposed Legislation
The Proposed Franchise Act would prohibit a brewer from terminating, refusing to
renew, or refusing to enter into an agreement with a beer wholesaler "except for good cause and
in good faith.'" The Proposal defines "good cause" as "failure of a beer wholesaler to comply
with the good faith requirements imposed upon (itJ by an agreement between the beer
manufacturer and the beer wholcsaler.'" Further, the Proposed Franchise Act expressly states
that "good cause shall not include. . . a beer wholesaler s failure to meet a sales goal or quota
that is not commercially reasonable under prevailing marketing conditions"lO or a brewer
national or regional policy of consolidation."" The Proposed Franchise Act defines "good
faith" in the following terms:
Fcdcral Trade Commission Act, 15 U. C. 45.
Specific statutory authority for the competition advocacy program is found in sections 6(a) and (f) of the
FTC Act, under which Congress authorized the FTC "to gather and compile infonntion concerning, and to
investigate from time to time the organization, business , conduct, practices, and management of any person
partnership, or corporation engaged in or whose business affects commerce " and "to make public from time to time
such portions of the information obtained by it hereunder as are in the public interest." 15 U. c. 46(a), (I).
See, e. Letter from Chicago Regional Offce to Ill. State Sen. Dan Cronin (Mar. 31 , 1999),
http://ww.ftc. govlbe/v990005. htm ; Letter from Atlanta Regional Offce to North Carolina State Sen. Hamilton C.
Horton, Jr. (Mar. 22 , 1999), at http://ww. ftc. govlbe/v990003. htm; Statement of Phoebe Morse, Dir. , Boston
Regional Offce to tbe Massachusetts Alcoholic Beverages Control Commssion (Jun. 26, 1996),
htm://www.fkgovlbc/v9600 12. btm
POSSlBLE ANT1COMPETITVE BARRlERS TO E-COMMERCE: W1NE, FTC STAFF REPORT (2003),
http://www. ftc. gov/os/2003/07 /winereport2. pdf.
Letter from FTC Staff to New York State Representativc William Magee et at. (Mar. 29, 2004),
http://ww.ftc. govlbe/v0400 12. pdf.
Proposed Franchise Act 3(c)(I). The Proposed Franchise Act does allow for imediate temlnation of.
wholesaler in certain circumstances: (1) insolvency; (2) felony conviction; (3) fraudulent conduct; (4) revocation or
suspension of required pennts or licenses; (5) selling outside of assigned territories; and (6) transfer of wholesaler
ownership without brcwer consent. Id at 2(d)(I)-(6).
Id at 2(a)(3).
Id. at 2(a)(3)(c).
Id. at 2(a)(3)(E).

honesty in fact and the observance and enforcement of, or conformity with, reasonab1e
commcrcia1 standards of fair dealing in the trade. Good faith shaH include the fair and
equitab1e treatment, in a non-arbitrary manncr, of beer wh01csa1crs who, based on
objective mcasures, are similarly situated.
Further, undcr the Proposal a brewer cannot "(tJerminate, refuse to renew, or refuse to
enter into an agreement" with a beer wholesaler "without first giving thc beer wholesaler
detai1ed written notice of any al1cged deficiency" and "a reasonable opportunity of sixty to one
hundred twenty days to cure the al1eged deficiency. "I3 The Proposed Franchise Act also
expressly prohibits exclusive deahng 14 and requires that brewcrs award wholesalers exclusive
terrtories.
One of the Proposed Franchise Act' s purported goa1s is to "foster vigorous and hea1thy
inter-brand competition in the beer industry."16 As explained below, however, the Proposal is
likely to have the opposite effect.
Competitive Effects ofthe Proposed Legislation
Existing Cahfornia law creates a so-cal1ed "three-tier" beer distribution system.
Cahfomia 1aw prohibits brewers (thc first tier) from sel1ing their product directly to retailers (the
third tier). 17 Instead, brewers must sel1 their beer to hcensed wh01esa1ers (the second tier), that in
turn supply retai1ers. We understand that California law currently al10ws brewers to hold
ownership interest in distributors, but as a practical matter, integration between brewers and
wholesa1ers is not common. 18 Wholesalers are responsib1e for storing and dehvering a brewer
beer in a manner that maintains the beer s quality. Additional1y, wholesalers establish retail
networks to sel1 the brands of beer that they carr. Although brewers typical1y are rcsponsible
for providing national and regional advertising, wholesalers often provide point-of-sale
promotion like enhanced product placement, setting up displays, conducting in-store events, and
supp1ying retai1ers with information on their brands.
Id. at * 2(a)(4).
Id at * 3(c)(2).
Id at 9 3(c)(5).
Id at 9 3(c)(l3).
Jd. at 9 1. It is also the intent of the Act to "prohibit improper business practices;
. . .
provide an orderly
three-tier system for the distribution and sale of quality beer in the State; promote the public health, safety, and
welfare of the people of California; provide a distribution system that wil facilitate the collection of state and local
taxes; and provide a distrbution system that wil remain accountable to state and local law enforcement in promoting
the rules and regulations applicable to the beer industr.
Retailers include all outlets that sell directly to consumers, including bars, restaurants, and grocery stores.
As discussed infra the Proposed Franchise Act is likely to reduce wholesalers' incentives to provide
demand-enhancing services called for in their contract with brewers. Consequently, the Proposed Franchise Act may
cause some brewers to vertically integrate in an effort to exercise more control over the distribution of their product.
To the extent that the Proposed Franchise Act were to cause firms that would prefer to turn to the market for
distribution services to instead provide such services internally, it win induce inefficiency and may wen increase the
price that California consumers pay for beer.

The Proposed Franchise Act would make it more diffcult for a brewer to enforce
contractual arrangements designed to rcduce wholesale prices and to increase wholesaler
incentives to provide demand-enhancing services, and therefore is likely to raise brewers ' costs
of distribution and to injure competition among both wholesalers and brewers. Accordingly, if
enacted, the Proposed Franchise Act would likely lead to higher beer prices for California
consumers and may lead to less varety.
Reduction in Wholesaler Incentives to Take Actions that Increase Sales
The Proposed Franchise Act is likely to make it more diffcult for brewers to ensure that
wholesalers take actions to increase demand for their product, and therefore is likely to deprive
California consumers of more intense compctition among brewers.
Brewers ' and Wholesalers ' Incentives to Increase Sales are Likely to
Differ
Suppliers (such as brewers) typically treat distribution as one of many inputs involved in
getting a final product to consumers. And as is the case with other inputs, suppliers want to
receive the best distribution services at the lowest possible price to allow them to compete more
effectively against their rivals for consumers ' business. Wholesalers , however, typically care
less about stimulating sales than suppliers do. 19 Suppliers tend to benefit more than wholesalers
when wholesalers increase demand for the supplier s product. A consumer who discovers a
brewer s brand due to wholesaler effort (pcrhaps by providing point-of-sale information or
negotiating better product placement), for example, will continue to purchase the brand
regardless of which wholesaler supplies it; although the brewer has gained a new customer, that
new customer has no allegiance to the wholesaler. Consequently, competing wholesalers that do
not provide demand-enhancing services could benefit when another wholesaler creates demand
for a particular brand: the so-called "free-rider" wholesaler could charge retailers lower
wholesale prices for the brand since they do not have to cover thc costs of demand-enhancing
efforts - and capture the increased demand.'o Of course , knowing that other wholesalers may
free-ride on its effort, a distributor is not likely to engage in high levels of sales-generating
activities in the first place. This is likely to reduce product information available to consumers
in the marketplace and ultimately consumer purchases.
Additionally, because a wholesaler does not reap the full benefit of a supplier
reputation, it is likely to have less incentive than the supplier to maintain a level of quality
associated with a particular brand. When this happens, consumers pay for more quality than
See Benjanrn Klein & Kevin M. Murphy, Vertical Restraints as Contract Enforcement Mechanisms , 31
J.L & ECON. 265 (J 988).
See Lester G. Telser Why Should Manufacturers Want Fair Trade 3 J.L & ECON. 86 (1960). Suppliers
also may have an incentive to act opportnistically when wholesalers have made large investments to increase the
demand of a particular brand, for instance, by threatening to termnate its relationship with the incumbent wholesaler
and turn over the business to a competing wholesaler (who could free-ride on the incumbent wholesaler s efforts)
uness it receives price concessions. Of course, private contractual solutions often are employed by parties to
eliminate or mitigate such opportunistic behavior. See, e. Benjamin Klein Exclusive Dealing as Competition for
Distribution "on the Merits 12 GEO. MASON L REV. 119 (2003).

they actually receive, and are thus unlike1y to purchase the supplier s product again." For
example, when a consumer does not enjoy a beer becausc it has not been stored at the correct
temperature and consequently decides not to purchase that particular brand again, the brewer
loses all of that customer s potentia1 futurc purchases , rcgardless of where they are made. The
wholesaler, on the other hand, loses only the future sales to that customer that would have been
made by retailers that the wholesaler supplies.
Further, when a supplier s profit margin for an additional sale is large in re1ation to the
wholesa1er , the wholesaler rationally wil not provide as much effort in securing an additional
sale as the manufacturer wou1d desire, meaning that undecided consumers are less like1y to
receive product information that they may find valuab1e in making purchase decisions.
Wholesa1e pricing also affects the demand for a suppEer s product. As discussed above
from the supplier s point of view, the cost of the services that a who1esa1er provides are but one
part of the final price that consumers pay. As with other costs, suppEers wou1d like the costs of
distribution to be as low as possible to make their product more competitive. Typically, the
price that wholesa1ers charge retailers - which includes both the price of the supplier s product
plus thc cost of distrbution - will be higher than the price that a supplier would set if it
distributed the product itself. This is because the wholesale price is likely to include a mark-up
over the cost of distribution, which the suppEer would not charge retailers if it distributed its
own product.2J When a supp1ier s product is marked-up twice, this ultimately 1eads to higher
retail prices and concomitantly lower levels of outpUt.
Vertical Arrangements Can Mitigate Misaligned Incentives
To aEgn their incentives better, manufacturers and wholesalers typically enter into
agreements that require wholesalers to take certain actions. For example, contracts may include
quality standards and maximum resale prices or sales quotas to limit wholesaler markups. They
also may include exclusive terrtory provisions designed to provide wholesalers with additional
For example, a brewer may insist that its beer be stored and transported in a certain way to preserve the
beer s quality. Without proper storage , total demand for the beer (ie. not merely demand at the one retail location)
would be lower because consumers would likely associate the poor quality not with the retailer s inadequate storage
but with the manufacturer s product. See, e.g, Adolph Coors Co. v. FTC 497 F. 2d 1178 (lOth Cir. 1974).
Similarly, a fast food franchisee that uses inferior products at his restaurant does not internalize the full costs of his
actions, because consumers will associate the bad experience with the franchisor s brandname , not a particular
franchisee. See Benjamin Klein The Economies of Franchise Contracts 2 J. CORP. FIN. 9 (1995); Paul H. Rubin
The Theory of the Firm the Structure of the Franchise Contract 21 J.L & ECON. 223 (1978).
Margins in the apparel business may serve to ilustrate the gap between wholesale and supplier margins in
the beer industr. One study reports that apparel manufactuers ' average gross profit margin is 46 percent compared
with only 9 percent for "multiple apparel retailers. " The authors note that this disparity in compensation for
marginal sales wil limit the incentive of retailers to invest in developing and promoting their Web sites unless there
is some form of co-op funding or restructured pricing." Robert H. Gertner & Robert S. Stilman Vertiealintegration
and Internet Strategies in the Apparel Industry, 49 J. INDUS. ECON. 417 , 427 (2001).
Wholesaler markups are likely to be greater than they otherwise would when they are given exclusive
terrtories , as the Proposed Franchise Act would mandate. Of course, as discussed infra exclusive territories also
can be useful in aligning supplier and wholesaler incentives , thus leading to higher levels of output.
Not only are consumers better off (due to lower prices and higher output) when the distributors price at
cost, but the joint profits eamed by the supplier and the distributor are higher as well.

incentives to provide sales-generating effort" or exclusive dealing requirements to focus dealer
efforts on the supplier s - rather than a rival' s - product. 26 As many economic studics have
found, such provisions tend to benefit consumers in the form of higher output, lower prices, and
improved services27 Further, the U. S. Supreme Court has noted on numerous occasions how
vcrtical contracts can intensify interbrand competition " which benefits consumers with lower
prices and improved quality.
Increasing the Cost of Terminating a Wholesaler is Likely to Reduce
Wholesalers ' Incentives to Provide Demand- Enhancing Services
Typical1y, the threat of termination provides wholesalers an incentive to abide by their
contractual commitments. By prohibiting a brewer from terminating (or failing to renew) a
contract with a wholesaler except for "good cause ,,30 and by requiring a brewcr to give a
wholesaler 60 to 120 days to "cure any al1eged deficiency, " the Proposed Franchise Act would
place severe limits on a brewer s ability to ensure that wholesalers take actions to increase the
See Tim R. Sass & David S. Saurmn Mandated Exclusive Territories and Economic FJficiency: An
Empirical Analysis oJthe Malt-Beverage Industry, 36 J.L & ECON. 153 (1993) (finding that in states where.
exclusive terrtories are mandated for beer wholesalers, prices tend to be higher and demand tends to be higher
consistent with exclusive territories leading beer wholesalers to provide more sales-generating effort).
Exclusive dealing agreements can be used to prevent distrbutors from using direct investments made by a
supplier to promote rivals ' products. See Howard P. Marvel Exclusive Dealing, 25 J. L. & ECON. 1 (1982).
Additionally, exclusive dealing can be used to assure that suppliers receive the sales-generating effort that they have
bargained for from distributors (e. , through direct payment or through increased revenue that comes with exclusive
territories), rather than distributors focusing their efforts on competing brands. See Klein supra note 20.
See, e. Tasneem Chipty, Vertical Integration, Market Foreclosure, and Consumer Welfare in the Cable
Television Industry, 91 AM. ECON. REv. 428 (2001); Michael G. Vita Regulatory Restrictions on Vertical
Integration and Control: The Competitive Impact oJGasoline Divorcement Policies 18 J. REG. ECON. 217 (2000);
Margaret E. Slade Beer and the Tie: Did Divestiture of Brewer- Owned Public Houses Lead to Higher Beer Prices?
108 ECON. J. 565 (1998); Jau B. Heide, Shantanu Dutta & Mark Bergen Exclusive Dealing and Business Effciency:
EvidenceJrom Industry Practice 41 J.L & ECON. 387 (1998); Michael G. Vita Must Carry RegulationsJor Cable
Television Systems: An Empirical Analysis 12 J. REG. ECON. 159 (1997). Two recent papers tbat bave reviewed the
empirical literature on vertical restraints fmd that the most studies ' results are consistent with vertical restraints
being procompetitive. See James C. Cooper, Luke M. Froeb , Daniel P. O' Brien, & Michael G. Vita. Vertical
Antitrust Policy as a Problem oj InJerence INT L J. OF INDUS. ORG. (forthcoming 2005); Francine Lafontaine &
Margaret Slade Exclusive Contracts and Vertical Restraints: Empirical Evidence and Public Policy, in Paola
Buccirossi ed. HANDBOOK OF ANTITRUST ECONOMICS (forthcomiug 2005),
http://www2 . warwick ac. ukfac/facultv/s1ade/wP/soc/ economics/staW ecfeb2005 .pdf.
See Cant 'I T. V Inc. v. GTE Sylvania Inc. 433 U. S. 36 (1977); Monsanto Co. v. Spray-Rite Service Co. 465
S. 752 (1984); Business Elec. Corp. v. Sharp Elec. Corp. 485 U. S. 717 (1988); State Oil Co. v. Khan 522 U. S. 3
(1997). Vertical agreements cha1lenged under Sherman 9 1 are subject to rule of reason treatment and can violate
the antitrst laws when they, on net, reduce interbrand competition.
See Not'! Socy oj Profl Eng rs v. United States 435 U. S. 679, 695 (1978) ("ultimately competition wi1l
produce not only lower prices, but also better goods and services. ) (citation omitted).
Current California law does not impose a "good cause" requirement on a brewer s termnation of a
wholesaler. See Bert G. Gianell Dist. Co. v. Beck Co. 172 Cat App. 3d 1020, 1036 (1" Dist. 1985) (the implied
covenant of good faith and fair dealing does not require cause for termnation of a beer distributor by a brewer). The
Proposed Franchise Act s prohibition against termnating a wholesaler "solely for.
. .
failure to meet a sales goal or
quota that is not commercial1y reasonable under the prevailing market conditions " however, already exists under
current California law. See CAL Bus. & PROF. CODE 925000.

demand for their products. JI Indced, even in circumstances whcrc a wholcsaler brcached the
terms of its contract, the Proposed Franchise Act would likely cause a brewer to incur substantial
legal costs to switch wholesalers. J2 For example, a brewer that was displeased with a
wholesaler s performance and wanted to terminate (or not renew) its contract would have to
show that the wholesaler has violated some provision ofthcir agreement and that this provision
was "a good faith requirement." This, in turn, would require the brewer to show that the
provision conformed with "reasonablc commercial standards " and that by enforcing this
provision the brewer was engaged in "the fair and equitable" and "non-arbitrary" treatment of
beer wholesalers "who , based on objective measures, are similarly situated.
In this maner, the Proposed Franchise Act would increase the cost - and thus reduce the
threat - of terminating (or not renewing) a wholesaler. Absent a credible threat of termination
(or nonrenewal), wholesalers have less incentive to stimulate demand as their contracts require.
As discussed above, a reduction in the ability of brewers to control wholesalers ' activities is
likely to deprive California consumers ofthe lower prices, increased output, and better quality
that result from more intense competition among beer brands.
Mandating Exclusive Territories and Prohibiting Exclusive Dealing
Likely to Increase Brewers ' Distribution Costs
The Proposed Franchise Act's mandated exclusive terrtories coupled with its termination
provisions also are likely to increase a brewer s cost of distribution. For thc reasons discussed
above, the Proposed Franchise Act wil1 make it diffcult to terminate a wholesaler that fails to
exert suffcient effort to promote a brewer s brand. At the same time, the Proposed Franchise
Act's exclusive terrtory requirement prevents a brewer from simply hiring another wholesaler in
the same terrtory to distribute its brand in competition with the non-performing incumbent
wholesaler. Further, exclusive terrtory requirements limit brewers ' freedom to respond to
changes in market conditions. For example, combining terrtories to achieve scale effciencies
would not qualify as "good cause" under the Proposal.34 A brewer s effort to divide an existing
terrtory where demand is growing between two wholesalers, moreover, may trigger a claim
from an existing wholesaler that it is being terminated without cause. More general1y, although
exclusive terrtory provisions can have procompetitive effects by better aligning brewer and
See James A. Brickley et 01. , The Economic Effects oj Franchise Termination Laws 34 1.1. & ECON. 101
113 (1991) (analysis of case law supports tbe premise that termination laws increase tbe cost of termation and
nonrenewal); see also Tracey A. Nicastro How the Cookie Crumbles: The Good Cause Requirementfor
Terminating a Franchise Agreement 28 VAl.. U. 1. REV. 785 , 796-98 (1994) (cataloging several courts
interpretations of "good cause" that limit a franchisor s ability to termnate franchisees).
Further, by preventing a brewer from including contractual terms that require arbitration of claims or
preclude a wholesaler from litigating a dispute in California state or federal courts, the Proposed Franchise Act is
likely to raise the cost of settling contractual disputes. See Proposed Franchise Act 3(c)(8)-(9).
In an extreme example of wholesaler non-performance , a wholesaler may refuse to supply retailers with the
brewer s product at all (i. park" the brand). In these situations , consumers in the wholesaler s territory are
deprived of the product altogether.
The Proposed Franchise Act states that a brewer call0t termnate (or refuse to renew) a distribution
contract based on "a national or regional policy of consolidation." Proposed Franchise Act 2(a)(2)(E). Similarly,
the Proposed Franchise Act requires that compensation be paid to wholesalers that are termated as a result of a
merger between brewers. Jd at 3(b). This also is likely to make it more diffcult for merging brewers to realize
effciencies from consolidating distribution networks.

wholesaler incentives JS it is better to let private parties determine whether it is in their interests
to enter into contracts that contain exclusive territory provisions than to mandate such terms.
Because brewers have an incentive to minimize the cost and maximize the effectiveness of
distribution, they are likely to grant wholesalers exclusive territories only if such contracts are
likely to increase output.
The Proposed Franchise Act also prohibits exclusive dealing arangements, which, as
discussed above , supplicrs may use to promote wholesaler effort. This prohibition also is likely
to reduce demand-enhancing activities to the detriment of consumers.
Reduction in Competition Among Wholesalers
The Proposed Franchise Act is likely to reduce competition among wholcsalers for
brewers ' business. As discussed above , the Proposal would make it difficult - ifnot impossible
- for a brewer to terminate its current wholesale contract in order to switch to a competing
wholesalcr offering more attractive terms. Knowing this, new and existing wholesalers have
little incentive to compete to distribute a brewer s brands. Absent a threat of competition
incumbent wholesalers ' incentives to improve performance or to lower costs arc diminished
likely leading to higher wholesale beer prices, and ultimately higher retail beer prices in
California.
Reduction in Competition Among Brewers
The Proposed Franchise Act also may lessen competition among brewers. Its provisions
may affect smaller brewers to a greater extent than larger brewers, because larger brewers may
be in a better position to incur the legal costs of termination and thus have a greater ability to
exercise control over wholesalers. Established brands that advertise heavily, moreover, may not
rely as much on wholesaler effort. Consequently, the Proposed Franchise Act may lead to less
variety as smaller brewers find it more diffcult to market their product than larger brewers.
Further, to the extent that larger brewers have brands that compete with small brewers ' brands , if
the Proposcd Franchise Act raises small brewers ' distribution costs relatively more than it raises
large brewers ' distribution costs , it may have the effect of reducing the aggrcssiveness oflarge
brewers ' pricing for those brands that compete with small brewers ' brands , thus raising the price
that California consumers pay for those brands of beer.
Conclusion
The Proposed Franchise Act is likely to reduce wholesalers ' incentives to provide
important demand-enhancing services and is likely to reduce competition among wholesalers to
carr brewers ' brands. Further, the Proposal may disproportionately increase the distribution
costs of smaller brewers, potentially reducing competition among certain beer brands.
Consequently, if the Proposed Franchise Act were enacted, California consumers would likely
pay higher priccs for beer and may enjoy less varcty. W c urge the California legislature to takc
into account these likely adverse effects on consumers when considering the Proposed Franchise
Act.
See notes 25 & 27 supra.

Respectfully submitted
'I It,
Maureen K. Ohlhauscn, Director
Offce of Policy Planning
Bureau of Economics
SA
cfLSusan A. Crcight , Director
Bureau of Competition