Two months ago, I dispatched 15 major Mackinac
Center policy recommendations to members of Gov. Rick Snyder’s 21-member Liquor
Control Advisory Rules Committee. This committee first met in August, and it
may suggest reform as early as this month. Its task is to recommend
improvements to Michigan’s system of alcohol control, a strange and distorted
vestige of the end of Prohibition.
Appearing below are eight Mackinac Center
recommendations that affect the sale of beer and wine in Michigan. Currently,
beer and wine wholesalers constitute a small group of lucky monopolists with
regulatory privileges that likely hike costs dramatically for consumers. Real
reforms must start by ending every unfair legal advantage protecting these
Do so many florists have questionable backgrounds that none should be licensed? We’re talking about mums, not mobsters.
Eliminate the beer and wine distributor
monopoly on territory. Strip from the Michigan Liquor Control Code
the requirement that suppliers of beer and wine grant exclusive sales
territories to a select group of wholesalers. This mandate prevents
competition, shackles suppliers and raises costs for consumers.
Eliminate the “post and hold” rule from
the state administrative code. “Post and hold” is tantamount to
state-mandated price collusion.
It orders manufacturers and wholesalers to post beer and wine prices and then
maintain those prices for a prescribed period of time. One study suggests that
such rules keep prices 8 percent to 30 percent higher than they would be
Allow suppliers to distribute their own
products as they wish. Currently, Michigan law prohibits owners of,
say, microbreweries from having an ownership interest in a wholesale
distributor or another alcohol retailer. This archaic prohibition discourages
business expansion. Some
32 other states explicitly allow some degree of self-distribution.
Remove Michigan government from liquor
wholesaling. Currently, Michigan buys almost every legal drop of
spirituous liquor before it’s resold to consumers. Mackinac Center research
indicates that liquor prices are higher on average in states where the
government acts as the middleman. These higher prices likely drive people who
would otherwise buy liquor to consume beer and wine instead. This “substitution
effect” simply reinforces the advantages enjoyed by beer and wine monopolists.
Repeal the population-based quota on
liquor retail stores. Ideally, the state should eliminate all
alcohol retail quotas, but this specific quota is particularly hard to justify.
It artificially limits the number of liquor retail stores, driving up liquor
prices. These higher prices likely lead consumers to substitute more beer and
wine for liquor, since beer and wine retail stores face no population-based
quota and therefore compete more freely. The liquor quota once again benefits
beer and wine wholesalers at consumers’ expense.
Allow all businesses to apply for
licenses for spirits and for beer and wine. Florists, as one
example, may be able to improve business by selling champagne with their
flowers, if only they were legally permitted to. Do so many florists have
questionable backgrounds that none should be licensed? We’re talking about
mums, not mobsters.
Repeal the limit on the amount of alcohol
that bars, restaurants and other alcohol retailers can purchase from other
retailers. Currently, each month, an on-premise alcohol retailer can
purchase only nine liters of spirits and no beer and wine — again to the
benefit of monopoly wholesalers — from another retail store. The state should
take no interest in prohibiting purchases by one licensed entity from another.
All licensees are investigated in the licensing process anyway.
Delegate “entertainment” permitting to
local government. A hearing was once held by the Michigan Liquor
Control Commission over a fine involving Polka dancing at a bar that served
beer. State commissioners actually took testimony from a police officer on what
he thought constituted a dance move. Surely state regulators’ time can be
Michigan’s byzantine alcohol control system has
long been in need of reform. As recently as 2005, a special state “customer
advisory committee” convened, and submitted 10 reform recommendations, but
these were essentially ignored. If Gov. Snyder and Legislature want to see
state policy discriminate less between businesses and encourage entrepreneurial
dynamism, adopting the ideas presented above is a good start.
Michael D. LaFaive is
director of the Morey Fiscal Policy Initiative at the Mackinac Center for
Public Policy, a research and educational institute headquartered in Midland,
Mich. Permission to reprint in
whole or in part is hereby granted, provided that the author and the Center are
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