we have had to spend money to promote. So without a surrogate they are going to have to put up their money.

I suggest to Mr. Silverman that after they have promoted in Europe for a decade as we have, then come back.

Chairman GIBBONS. Is Paul Masson an independent

Mr. LUNDQUIST. It is owned by Joseph Seagram.

Chairman GIBBONS. All right. I understand the promotion business. Frankly, nobody would drink orange juice if we didn't promote it like we do, a few health fad people would, but it is the way you sell oranges. We promote the heck out of it.

Mr. LUNDQUIST. I would think if they checked with Florida Citrus Mutual, they would find out a dandy way to promote California wines.

Chairman GIBBONS. Mr. Frenzel?

Mr. FRENZEL. I wanted to ask about that referendum or whatever it is. Who participates and what kind of a vote does it take to pass it?

Chairman GIBBONS. You are operating under the Agricultural Act of 1930-something or other.

Mr. SILVERMAN. Are you talking about the marketing order in California?

Chairman GIBBONS. The marketing order for California grapes? Mr. SILVERMAN. California wine and grapes. I haven't been a participant in that.

Chairman GIBBONS. It is an old act of Congress.

Mr. VON CONRAD. Mr. Chairman, the action being taken by the California Department of Food and Agriculture——

Chairman GIBBONS. It goes even further than that?

Mr. VON CONRAD. I don't think it is a referendum in the sense of the word that you have referendums under Federal marketing orders. It is a little bit of a different animal out there. It has now gone, it is a proposal that was, I suppose, supported by the Wine Institute and others and some of the growers, and it has been endorsed by the State Department of Food and Agriculture, and which is now out to a number of growers and vintners to be voted on so we don't know the results of that yet.

It won't come in until some time

Mr. FRENZEL. Theoretically if half of them vote for it, all of them will be obliged-

Mr. VON CONRAD. When you look at it carefully, they just reasonably amended the way in which the vote was going to be taken and it is interesting to note they cut out a lot of the guys who are in the small end. We have testimony here that talks about the small vintner and on the other hand they are being cut out from the vote.

Mr. FRENZEL. Why? Because they are too small to be considered? Mr. VON CONRAD. They say we won't assess them because they only crush 100 tons or whatever the criterion.

Mr. FRENZEL. But at least if they are not given the franchise they are also not-they don't have to pay for it?

Mr. VON CONRAD. That is true enough. I would like to make one comment because it came up earlier about there having been court hearings. Sure, colleagues of ours have gone and taken the matter into court and a preliminary injunction, temporary restraining

order kind of requests, but those were not related really to what I should call the merits of these votes to be taken on the plans.

One of the problems is we can't identify the plans. It is about seven to $12 million in net program. We don't know exactly what it is going to be used for. But what they were taken in on were procedural questions like notice requirements, did everybody get a proper notice.

There are still vintners that don't have notice. So there are problems with this, but it will all be resolved eventually.

We have said in our opinion it violates Federal law, intrudes directly on this committee's jurisdiction and it takes away the powers the President has under the Constitution given him by acts of Congress which are being exercised and that will be an issue coming down the road if this is passed.

Mr. LUNDQUIST. You should know that this is not an isolation. We are presently litigating the California beef tax. California is getting

Chairman GIBBONS. Yes, I know.

Mr. LUNDQUIST. We are now in the court of appeals with that on the commerce clause question. This will go to the same thing. In fairness to these gentlemen, it is a new approach that has been nurtured by many industries, agri-business industries, and the commerce clauses question on the charge for promoting beef generically will go up on the commerce clause as interfering with international and interstate commerce.

Chairman GIBBONS. I want to encourage you all to do that. I am going to make a speech to the National Governors Association on this subject about the necessity for preserving the American common market and not go off-we have got them doing all kinds of unusual things.

Mr. FRENZEL. Is it your unitary tax speech?

Chairman GIBBONS. No, I will give them that, too, but I want to encourage the governors to look at the whole U.S. common market rather than trying to develop the way that some of them appear to be going.

So if you have got anything you want me to say that is constructive to those governors, I will be happy to plagiarize it from you. Mr. LUNDQUIST. I am sure you will be able to handle your own

case.

Mr. WEIDERT. May I observe on the California order specific to the question? It is, as I understand it, under a California act that this is occurring.

Chairman GIBBONS. Not under the old-

Mr. WEIDERT. No. We would be happy to provide a report on that if there is sufficient interest.

Chairman GIBBONS. I would like to see that.

Mr. WEIDERT. The way the thing is set up as a layman, the way I read it, is it is a joint order but the vintners can decide they don't want it but if the growers decide they want it, then it can be a growers' order and vice versa. It is hoped it will be a joint order and they went into it as a joint proposal.

In fact, when the vote is counted, as I understand it, 50 percent of the growers voting, representing 65 percent of the production,

must favor it in order for it to pass or vice versa, 65 percent of the growers representing 50 percent of the production.

So it will take a healthy vote to put it into place and it will certainly signal approval on the part of growers if that occurs. On the part of wineries, I think the vote is a little different.

Mr. FRENZEL. Vinyards are people or

Mr. WEIDERT. People and tonnage of production, as I understand it. Tonnage of production on the grower's side. I don't know how the vintners are set up. So it takes a healthy vote to get the thing in place.

ny.

Mr. LUNDQUIST. Mr. Chairman, that concludes our joint testimo

Chairman GIBBONS. I thought you all did real well. You weren't as nasty as I thought you would be.

Mr. LUNDQUIST. I would like to submit this brief with some of the points I referred to for the record.

Chairman GIBBONS. Happy to put it in. Thank you all. [The post-hearing brief follows:]

POST-HEARING BRIEF
OF

JOSEPH E. SEAGRAM & SONS, INC.
HEUBLEIN WINES, AND

NATIONAL DISTILLERS PRODUCTS co.

Introduction

This brief is submitted by counsel on behalf of Joseph E. Seagram & Sons, Inc., Heublein Wines, and the National Distillers Products Co., to supplement testimony delivered at the hearing convened on June 13, 1984, and to respond to questions which were posed by members of the panel.

Joseph E. Seagram & Sons, Inc., Heuble in Wines, and National Distillers Products Co. are, individually and collectively, engaged in the production of table wine in the United States for both domestic consumption and export, and are importers of table wines produced outside the United States. Each is also engaged in the production of distilled alcoholic beverages, as well as in the importation and exportation of those products.

Statement of Issue

The California Department of Food and Agriculture, pursuant to the Marketing Act of 1937, has promulgated a "Proposed California Wine and Winegrape Improvement Program" to facilitate the development of California's wine industry. Under the terms of the Proposal, 1 marketing board consisting of growers, vintners, or both, will be established to promote the consumption of California wines and winegrape products, through a wide range of promotional activities including, among others, the elimination of international trade barriers through negotiation with foreign nations, the conducting of exclusive testings, and the development of state sanctioned educational programs promoting solely the wines of California. By the terms of the Proposal, all processors and growers will be subject to a mandatory (involuntary) assessment, the purpose of which is to raise capital to fund the activities of the board in furtherance of its objectives. The Board established by the Proposal will act as a state agency representing, in theory, the interests of the California wine industry.

:

The issue presented by this Proposal is whether the State of California, in its governmental capacity, can levy an involuntary assessment to pursue actions which affect, directly or indirectly, international trade in wine through programs which may unnecessarily discriminate against the wines of foreign nations within the California market.

1/This brief deals solely with the Proposal prepared by the Department of Food and Agriculture.

Summary of Position

As was developed at the hearing convened on June 13, 1984, to consider the Department's proposed winegrape improvement program, the contemplated marketing order is fatally flawed in several respects regarding its scope, potential application, and phraseology.

In particular, both the proposed program and the statute under which it has been promulgated improperly infringe upon exclusively reserved domains of federal authority and are thereby unsupportable under principles of Constitutional law and are preempted by federal law and policy which is controlling in the field of international commercial relations, especially as they relate to trade and tariff negotiations with foreign governments and their agencies.

In addition, neither the proposed plan nor the Marketing Act under which it has been promulgated is sheltered by the protective reach of the Twenty-First Amendment's conferral of plenary regulatory authority upon the states with regard to matters affecting alcoholic beverages, for neither of these represents an exercise of TwentyFirst Amendment authority. Moreover, even if the California Marketing Act of 1937 is viewed as an enactment adopted by the legislature to effectuate the purposes of the Twenty-First Amendment, its application will affect only a minor portion of the federal prerogative contained in the Commerce Clause and will be without affect in regard to all other Constitutional bases of federal power.