Liquor Panel Formalized

The Michigan Department of Licensing and Regulatory Affairs announced Friday the names of its new 21-member Liquor Control Advisory Rules Committee. The committee was created for “identifying obsolete, unnecessary rules and regulations” according to a media advisory released by the state on Friday.

The panel is comprised of an interesting collection of stakeholders in the alcohol business, including liquor, beer and wine suppliers as well as representatives of retail sellers.

Mackinac Center analysts have written extensively on the state’s Liquor Control Commission and Michigan Liquor Control Code and will continue to do so, especially during the formal, 120-day life of this committee.

Among other items we would ask the committee:

    1. Is it necessary at all to remain a “control” state?

Only 18 states, including Michigan, act as official wholesale agent for alcohol, such as spirits, effectively buying every legal drop of liquor consumed in the state. This limits competition and appears to drive up prices and research shows it doesn’t necessarily result in greater consumer protection.

    1. Why does the state mandate a minimum shelf price for liquor?

Price controls hurt consumers by limiting competition between stores and by creating illegal markets. Indiana retailers are not prohibited from selling below a certain price and that is probably why many liquor products can be found selling for 20 percent less than just over the border in Indiana. The LCC itself has found the state loses $14 million annually due to smuggling, which is likely due to high price differentials between Michigan and sister states.

    1. How do consumers benefit from post and hold laws?

Post and hold laws mandate that wholesalers announce price changes on alcohol products they sell to retailers and hold that price for as much as 180 days (for beer). This limits competition by ensuring that every wholesaler knows exactly what his “competition” is doing on price.

    1. How do consumers benefit from a state law that grants wholesalers exclusive sales territories for beer and wine?

State law allows wholesalers to enjoy territorial monopolies on beer and wine in Michigan. Research shows that this can raise the cost to consumers of alcohol by as much as 25 percent (depending on the product) without necessarily improving public safety.

    1. Why does the state need to grant some 27 different licenses to regulate alcohol sales?

It is both expensive and time consuming to process and oversee a system that micromanages business with a wide array of different licenses. Do we really need 27 different types of them? Other states require far fewer of business without suffering any alcohol anarchy.

The new advisory committee has its work cut out for them as they will likely face opposition from entrenched special interests. By boldly reworking Michigan’s system of alcohol control, however, this team may contribute to improving the economy and lowering consumer costs without negatively impacting public safety.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.