Alcohol Reform on Tap

But lawmakers must be bolder to eliminate monopolies, price fixing

Lawmakers have finally taken an important step in moving alcohol reform ideas forward with Senate Bill 216, introduced by Sen. Howard Walker, R-Traverse City.

Mackinac Center analysts have long studied the issue of alcohol control and reform and have published a summary and critique of the Office of Regulatory Reinvention’s list of 74 recommendations for reform. They have also examined statistically the state’s existing regulations and their impact on the price of hard liquor and beer while calling for far bolder recommendations than those laid out by the Office of Regulatory Reinvention’s reform committee.

Parts of the Michigan Liquor Control Code read as if it had been written by private, special interests to protect them from competition and generate monopoly profits. This needs to change.

The Mackinac Center recommends — as a first bold stroke to alcohol reform — pulling down Michigan’s “three-tier system” of alcohol control which prohibits, among other items, retailers from buying alcohol directly from suppliers. Wholesalers can and do provide value in a distribution chain, but it need not be done by state mandate

There is no reason why a Costco or Sam’s Club — businesses with models that eliminate middlemen — couldn’t buy all their alcohol directly from suppliers and sell directly to appreciative customers. Unfortunately, state law prevents this and in doing so unjustly enriches a handful of wholesalers and helps them make monopoly profits.

This is not the only item not being addressed by Gov. Snyder’s administration. There is also a rule that amounts to mandating tacit price collusion between manufacturers and wholesalers. This is known as the post and hold rule and it may be responsible for raising beer and wine prices between 6.4 percent and 30 percent, depending on the product.

Remarkably, a lot of anti-consumer regulation is frequently sold as a way to protect the public. There are plenty of reasons to be skeptical of such claims, which the Center has spelled out in detail in its Policy Brief titled, “Alcohol Control Reform and Public Health and Safety.”

Adjunct Scholar Antony Davies and I have created an interactive web feature that allows the user to choose between 13 social outcomes, such as alcohol-related deaths per-capita, for instance, time frames and states based on degrees of alcohol “control” each applies.

If heavy regulation of alcohol by state worked, you could see such states distinguish themselves on any number of social outcome metrics, but that is not the case.

It is time for alcohol control reform but lawmakers need to take bolder steps.

All of the Mackinac Center’s work on this issue can be found at www.mackinac.org/1933.