For too long Michigan government has interfered to an unnecessary degree in the choices of grown adults and the legal products many choose to consume.
Gov. Rick Snyder recently appointed two
new members to the five-person Michigan Liquor Control Commission, and the Department of Licensing and Regulatory Affairs announced the creation of a new
committee to review
existing wine, beer and liquor market rules. Both bodies should place consumer interests
ahead of state government interests and those of the 60-plus beer and wine
wholesalers and distributors who dot the state with their territorial
For the uninitiated, Michigan is one of
18 so-called “control” states in which the government is the initial buyer of all
of the hard liquor consumed in the state. This state then tacks on a 65 percent
markup, plus several taxes. The markup becomes a mandated minimum price, below
which stores are prohibited from selling their wares.
In contrast, the state does not
initially purchase all the beer and wine consumed here. Instead, it forces brewers,
vintners or their national distributors to enter into exclusive contracts with
a particular wholesaler/distributor, who then has a regional monopoly on that
producer’s product. This almost certainly forces the state’s beer and wine
drinkers to pay more.
How much more? An April New York Times
guest editorial by wine writer David White suggested that consumers may pay 18
percent to 25 percent more as a result of wholesaler activities.
Given what may be an opportunity to
reform alcohol-related regulations in the Great Lake State, the Mackinac Center
has some questions for the new advisory committee and LCC commissioners:
- Why did the
Liquor Control Commission (and to a degree the Michigan Legislature) largely ignore
reform recommendations made by its own “Customer Advisory Committee” report on
liquor licensing in 2005?
This committee recommended 10
substantial reforms designed to reduce the time it took for the LCC to decide
licensing matters, but the ideas were not fully embraced. The committee had
hoped to see the licensing process reduced to 90 days and to “strive to further
reduce that licensing time to 60 days or less.” This was at least the third
such streamlining attempt since 1979, according to the report. LARA’s new
commission should start their investigation by reading the 2005 advisory
- Why does the
state feel compelled to retain its role as primary state liquor wholesaler
almost eight decades after the end of Prohibition?
Only 18 states today act as liquor
wholesaler. The old “health and safety” rationales are belied by growing
evidence that at worst there is no
statistically significant safety difference between liquor control states and
free or “license” states.
- Why is the state in the price control business?
Michigan imposes a minimum shelf price for hard
liquor that limits potential savings for consumers and the state economy as a
whole. If the goal is to discourage consumption by jacking up prices, then the
state should apply a straightforward excise tax and otherwise let competition
reward sellers who provide better value. If the goal is just to inhibit
competition, then it should end the practice.
- Why does the state limit price changes that can
be made to beer and wine?
law, monopoly beer wholesalers who want to cut prices in their territory must jump
through regulatory hoops and then wait 180 days. Wholesalers must also seek
permission to change wine prices outside of a system of regular quarterly price
updates submitted to the LCC. These examples of regulatory overkill impose
additional costs on consumers.
does the state limit wine shipments directly to consumers?
2005, the U.S. Supreme Court ruled as unconstitutional state laws that allowed
in-state delivery of wine directly from wineries to consumers but prohibited
the same commercial activities from out-of-state suppliers. Michigan ultimately
amended its Liquor Control Code in 2009 to permit out-of-state shipments, but
only through state-approved suppliers, thus limiting purchase options for adult
the state set for what could be its fourth major review of Liquor Control
Commission policies and procedures since 1979, it is high time someone looked
at this system from the perspective of the individual
consumer. For too long
Michigan government has interfered to an unnecessary degree in the choices of
grown adults and the legal products many choose to consume. This could be an
unprecedented opportunity to normalize relations between the state — and those
who benefit from its regulatory privileges — and Michigan consumers.
Michael LaFaive is
director of the Morey Fiscal Policy Initiative at the Mackinac Center for
Public Policy, a research and educational institute headquartered in Midland,
Permission to reprint in whole or in part is hereby granted, provided that the
author and the Center are properly cited.