Connecticut

Connecticut's Liquor Pricing Scheme Is a Bad Law That Just Won't Die

Connecticut is the only state which essentially allows a cartel to set minimum prices for booze.

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Fabio Venni / Flickr

Shoppers in Connecticut pay the price of paternalism every time they frequent a local liquor store. Prices are 24 percent higher than in neighboring states or up to $8 more a bottle, thanks to a law that has its roots in prohibition.

Unlike some other states that prevent liquor retailers from selling below a product's cost, Connecticut instead allows wholesalers and manufacturers to post a minimum per bottle and per case price. Once prices are posted to the Department of Consumer Protections, prices can be amended to match a competitior's before a price is finalized for the next month. Retailers then add their shipping and delivery costs to the per-bottle price and cannot sell below this cost. Wholesalers must sell at the same price to all retailers.

Despite efforts from liquor giant Total Wine and Company and the free-market Democratic Governor Dannel Malloy, the pricing cartel continues. Most recently, Total Wine's antitrust lawsuit, which accuses the state of price-fixing, was dismissed by a federal judge earlier this month. Chief United States District Judge for the District of Connecticut Janet C. Hall decided that the complex state regulations do not violate federal antitrust laws.

The archaic pricing system has made business rather cozy for the state's small liquor stores, which never have to worry about competitor's prices. For Total Wine, a chain with 138 stores in 18 states, this law prevents it from offering lower prices due to its comparative advantage. As summarized in their legal filing: "Under this anti-competitive regime, a retailer like Total Wine & More cannot use its market and business efficiencies to reduce the prices offered to consumers."

Total Wine has previously been called a "gorilla" and accused of being "diabolical" and "predatory" for trying to save consumers money. The state's 1,150 small package stores have consistently lobbied against changing the pricing scheme.

Total Wine attracted attention to their suit with full page newspaper ads, promising to sell liquor below the state minimum. Another company, BevMax, joined in on the protest and lawsuit. Total Wine paid $37,500 in fines as a result. The stores also posted signs requesting customers call their legislators when the state required prices be raised. Company spokesman Ed Cooper called it an act of "civil disobedience." The state legislature responded with two bills to increase penalties for violating minimum bottle price or false advertising.

The legislature has been notoriously defensive of the minimum pricing scheme and repeatedly blocked Gov. Malloy from tossing the law out. Here's more on Gov. Malloy's efforts by Reason's Jacob Sullum.

This is now the fifth year in a row in which the governor has proposed overturning the pricing scheme and adopting a system similar to other states in which products can be sold for the price paid. Most likely, the legislature will again strike down his proposal. According to Malloy, in any other industry, an anti-competitive law would be tossed out immediately: "If we had a law that forced stores to sell bread for a price that was determined by state government, people would be screaming about capitalism and big government. But for some reason, we allow this anti-free market mandate to continue for this one particular industry."

Proponents of the law, such as Lawrence Cafero a former House minority leader and executive director and general counsel of the Wine and Spirits Wholesalers of Connecticut, said in testimony that "this change in our decades old law will be devastating to most local family owned Connecticut package stores."

Malloy has stated that doing away with the regulation would increase state tax revenue by $5 million due to increased liquor sales, while supporters of the policy believe it would decrease tax revenue as the sales tax would be collected on a cheaper item. Since liquor stores in Massachusetts have targeted Connecticut shoppers with "drive for savings" advertisements, Malloy's estimate of increased in-state spending should be given due consideration.

Even with a boost in tax revenue, supporters of the paternalistic policy would not be satisfied. Rep. Daniel Rovero complained that "the state of Connecticut is trying to raise revenue on the wrong items. We want to sell more liquor in Connecticut. How many problem drinkers do we have now?"

In another example, a doctoral candidate at the University of Connecticut wrote a column defending mandatory minimum prices. He argued that the law saves lives "because the heaviest drinkers are the same individuals who buy the cheapest alcohol."

But despite higher prices than neighboring states, Connecticut ranks worse than neighboring Massachusetts in impaired driving fatalities, with 103 deaths compared to 96 in 2015. Massachusetts also has almost double the population. The Center of Disease Control ranks Connecticut and Massachusetts equal in prevalence of binge drinking, but higher than neighboring New York. Connecticut ranks higher than both neighbors in the intensity of binge drinking.

While Total Wine's lawsuit has failed and Connecticut is unlikely to dissolve the liquor pricing cartel, Total Wine promises not to abandon the fight against government overreach.

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  1. I would trade Connecticut’s relatively cheap, regulated prices for Washington’s totally wild-west, unregulated bonanza.

    When voters in Washington took to the polls in November of 2011 to approve Initiative 1183, which ended the government’s monopoly on liquor sales, the last thing they expected was to pay more for their alcohol. But instead of cheaper alcohol, residents of the Evergreen State kept the 20.5% spirits sales tax and $3.77 per liter excise tax, but also picked up several new fees. As we noted back in 2012, retailers now pay a liquor retailer license fee of 17 percent of gross revenues along with an annual renewal fee of $166. Distributors must pay a license fee of 10 percent of gross revenues. As a result, Washington has the highest liquor taxes in the nation, with tax bills that approach 100 percent of the sale price of some products.

    1. As a result, Washington has the highest liquor taxes in the nation, with tax bills that approach 100 percent of the sale price of some products.

      HURR, IT’S NOT A TAX, IT’S A PENALFEE, DUMASS.

      /supreme

  2. Can’t you just drive like 20 minutes in any direction and be somewhere other than Connecticut?

    1. Yeah, but then you’re in New York, Rhode Island, or Massachusetts. Which is worse!

      1. Don’t forget the sea. You could always drive into the sea.

        1. True.

        2. Life is much better, down where it’s wetter, taker it from Meeee.

          /squirrelnutzippers-not-disney

      2. Not if you want to buy alcohol.

      3. It’s not that much further to PA. Then you could just drive down to Philly and visit Fist.

        1. That’s the first time I’ve ever heard of someone encouraging travel to the People’s Republic of Pennsylvania to buy alcohol.

    2. You’ve never seen the traffic on I-95 in Connecticut.

  3. He argued that the law saves lives “because the heaviest drinkers are the same individuals who buy the cheapest alcohol.”

    A common argument from the alcohol industry and alcohol retailers against minimum alcohol pricing is that such policies are regressive in nature. They disproportionately affect those in the lowest socioeconomic classes. This argument fails to recognize that minimum alcohol pricing effectively prevents death and disease precisely because it is regressive. The greatest health gains caused by minimum alcohol pricing occur among drinkers in the lowest socioeconomic classes.

    The poors are going to drink themselves to death with their malt liquors and plastic jugs of booze, so I must save them by…forcing them to spend more money?

    Your welcome, poors!

    1. The brands advertised by Total Wine & More included the most consumed brands of bourbon (Jack Daniels), whiskey (Crown Royal), scotch (Johnny Walker) and rum (Captain Morgan). The ad also includes many other brands frequently consumed by underage drinkers, such as Grey Goose, Jameson Irish Whiskey, Canadian Club, Bombay Sapphire, Don Julio and J?germeister. If prices on these products decrease, youth alcohol use, and the related consequences of underage drinking, is likely to increase.

      Total Wine & More’s claim the government has no legitimate reason for regulating alcohol prices. They are wrong. Protecting the health and safety of Connecticut’s residents from the negative consequences of alcohol is a legitimate reason for any government to preserve sensible public health policies, and a rational, effective step toward this goal is maintaining minimum alcohol prices.

      Go away.

      1. Christ, what an asshole.

        1. No, he was cool. Gave out top shelf booze for free.

      2. NYC pulls the same crap with minimum cigarette prices. Which happen to dump a nice chunk of change into the bottomless pit of the general treasury.

        1. How much of the cig tax in NYC is to account for the lost revenue of the some 70% of cigarettes that are smuggled in from out of state? Its like they decide they will raise the tax, then need to raise it even higher so they don’t lose the money. Is there anyone in NYC who actually pays full price for a legitimate pack of smokes?

          1. Is there anyone in NYC who actually pays full price for a legitimate pack of smokes?

            Either (a) all of these smuggled cigarettes are being sold in sketchy neighborhoods that I don’t visit or (b) the retailers are charging full price anyway.

            In any event I have seen zero evidence on the ground to back up these 70% to 80% figures I keep seeing people throw around.

            1. (b) the retailers are charging full price anyway.

              The retailers can easily send a U-Haul down to Virginia where the tax is still only 30 cents/pack, drive back to NYC the same day, then place NY tax stamps on the packs and pocket the “tax” difference. Most places in Va that sell cigs have signs saying they limit cigarette sales to 5 cartons for this reason-of course, professional bootleggers aren’t going to buy smokes from a gas station or drug store.

  4. Off topic, because this is the latest thread…

    Has there been ANYTHING on reason about this? (CNN story from TheIntercept)

    https://goo.gl/HYxoHi

    Reason has followed along with the major media trend of repeating every ounce of Russia-related unsourced bullshit as fact…maybe they could get on board with the future of this story, which will mostly revolve around media outlets dissembling on the coverage to avoid admitting they were used to push a false narrative from day one.

    1. It’s like that story about NASA announcing alien life. It wasn’t an anonymous source, it was an Anonymous source.

    2. Are they reporting it as fact, or are they reporting on what anonymous sources and other media are reporting? It’s kind of an important distinction. I haven’t really been following that stuff because I’m completely bored with it.

    3. I’m afraid I can’t be bothered to click on any shortened links. I don’t trust you people. ^_-

    4. Good stuff from Greenwald. The linked piece by Lee Camp is priceless.

    5. Thank you for posting that link. I honestly had no idea how many of those establishment media stories about Russian meddling had been forcefully retracted. I was aware a couple of them had, but Jesus H. Christ. Almost every viral story I’ve heard about that didn’t just pop up in a facebook feed, but was written, produced and directed by major (and I mean major) media outlets from so-called top journalists has been retracted. Holy fuck.

  5. Malloy has stated that doing away with the regulation would increase state tax revenue by $5 million due to increased liquor sales, while supporters of the policy believe it would decrease tax revenue as the sales tax would be collected on a cheaper item.

    And now we get to the crux of the matter.

    1. It’s almost refreshing when they admit that fleecing the sheep is their primary concern. Almost.

      1. It’s helpful to know when a guy running down the street waving a knife tells you he’s going to cut your throat… 100 yards before he arrives.

  6. So this is what – the third article in a week re the evil state-level protectionism that is preventing Total Wine from creating true liquor freedom?

    Enquiring minds want to know. Is this a PR/media campaign created by a DC-based company to move this regulation up to DC where – surprise surprise – they will be able to capture it – all in the name of ‘deregulation’? And probably not coincidentally thus achieve a sustainable cronyist advantage that will attract Wall St into financing towards an IPO?

    Because you’ll forgive me if I am totally cynical about ANYONE from DC talking about ‘free markets’

  7. The state’s 1,150 small package stores have consistently lobbied against changing the pricing scheme.

    PA has about 600 state-owned liquor stores with 4 times the population. Sheesh

    1. I’m gonna guess that’s mostly a function of PA having a lot more “empty” space between population centers, the only places where it was “cost effective” to put a state-store. When I was a kid in rural PA, I recall most of the beer purchases being in keg-form from package-stores.

  8. If I had to live in CT, or NY, RI, NJ, or move back to my home state of Mass, I would probably become a raging alcoholic too.

    1. There is a lot of truth to this statement.

  9. ONLY twenty four percent higher? They should be jumping up and down and dancing a jig!!! Washington State’s voters passed a Citizen’s Initiative a few years back yanking the liquor business away from this stupid state. The alcohol control board’s response? Draconian taxes. A for instance: Costco sell a 1.75 litre bottle of house brand vodka in California, costs right at $16 out the front door. In Washington, that very same item number at any Costco in the state costs just shy of $40. The difference? The grubbermint get it all. Costco decided to employ a little “truth in advertising” strategy: for every alcohol containing item in their stores, the price tag shows several line items. Top one, the actual cost of the product.That is right at $16 for that Vodka item. Next line, the state’s “litre tax”. Hefty. Now, the alcohol tax to the state. Heftier. Last, and by then almost the cost of the product, is the state’s sales tax…… the tax upon the other two taxes, Federal tax, and price of the product. SO.. customers at Costco, WalMart, Winco, etc, see precisely where the state digs deeply into our pockets.

    I have not bought alcohol inside Washington since this scam came into play. Nor will I.

  10. This used to be called a “fair trade” arrangement, and affected various consumer goods. A few decades ago those were ruled unenforceable, so how’s this one different?

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