Should Oregon Alcohol Sales be Privatized?

With Washington state residents now able to purchase alcohol at privately owned liquor stores and grocery outlets, Oregon is now the only state on the west coast that controls the wholesaling and retailing of alcoholic spirits.

We can buy beer and wine in any old grocery store, but when it comes to purchasing a bottle of booze we’re forced to schlep to a state-regulated liquor store.

It’s weird: you’d be hard-pressed to find an Oregon politician who doesn’t pay at least a modicum of lip service to “competitive market forces,” but all the while Oregon maintains a government created, operated, and protected monopoly on liquor distribution.

So, now that Washington has recently opened the floodgates to private retail of alcohol, is Oregon posed to do the same?

The answer, for now, is no, not really.

Open the floodgates!

There are a number of reasons one may want to open the market to private vendors.

Maybe you’d like to buy a bottle of booze on a convenient Sunday trip to Safeway. Maybe you figure your preferred peach schnapps will go on sale more often if it is dictated by market competition and not state whim.  Perhaps you think that the overt morality lessons that some “alcohol control states” (Utah being the most egregious example) use to limit alcohol sales and consumption should be kept to themselves, thank you very much. Or, switching that around, perhaps you think that our governments shouldn’t profit from “vice,” even if that profit goes towards feeding local impoverished children.

Or perhaps you think that Oregon’s rigid regulatory policies made sense when they were crafted—1933, the year Prohibition ended—but might not make the most sense for 2012 and beyond. This is certainly the opinion of Brian Boe, the executive director of Oregonians for Sound Economic Policy, who blasted OLCC’s “reliance on an outdated, highly flawed model” filled with “clearly misguided and erroneous” assumptions and requirements.

Maintain the status quo!

On the other hand are the valid points of those supporting the status quo that is the Oregon  Liquor Control Commission (OLCC).

For one, thanks to no competition, business is good. Between 2010 and 2011, liquor sales in Oregon rose 4.5 percent, netting the state about $184 million in profits. 4 percent of these profits went directly to mental health and alcohol and drug programs; about $108 million went to the state’s general fund; another $53 million was distributed to cities and/or their revenue sharing accounts.

As OLCC spokeswoman Christie Scott put it: “these dollars help fund vital services like schools, police and health care on multiple levels.”

There’s also the possibility that liberalization of alcohol regulation in Oregon will lead to increased alcohol-related problems. As claimed by the U.S. National Council on Alcoholism, “a general trend of relaxation of controls on availability and price of alcoholic beverages has been followed by steady and frightening increases in alcohol-related problems.”

While there are a number of other logistical and practical concerns with privatization, the other biggest issue is one of cost.

Cost to Consumers

True to free-market form, advocates of privatization claim that market competition would lower prices for consumers. But, as reported in The Oregonian last year, alcohol “regulators in Alberta, Canada, drew back to unleash competition only to watch liquor prices rise, chain stores dominate and government revenues decline.”

Unfortunately, as the Washington experiment has been in place for less than a month, it’s too soon to glean what any difference in costs to consumers may finally look like. However, as they faced millions of dollars in lost revenue, Washington lawmakers were forced to saddle both consumer and retailer with a number of taxes and fees, including a $3.77 liter tax, a 20.5 percent spirits tax, a 10 percent distributor fee, and a 17 percent retail fee.  In an “informal, unscientific survey conducted online,” The Seattle Times found that liquor prices on the whole increased for 13 of the 20 most-popular brands in the state. But perhaps this is simply because “market forces” have not yet had enough time to smooth things out.

Oregon at a crossroads

So what does this mean for Oregon?

Costco, which spent $22 million to get Washington’s initiative passed, hasn’t announced any plans for a similar drive in Oregon.

Yet.

But the political climate is right for privatization; there is strong public pressure to reduce government bureaucracies and control over individual’s daily lives.

Realizing this, and desperate to stave off a statewide ballot initiative, the OLCC is considering different proposals and pilot programs that will loosen their chokehold on the market.

The boldest proposal before the OLCC is to place small state-owned liquor stores within selected other grocery stores, thus alleviating the inconvenience of separate trips to the liquor store.

Another program would allow liquor stores to offer wine and beer, thus increasing revenue for the private owners of state-regulated stores and lessening what is often a drab, alcohol-dispensary feel to the stores.

Still, these “liberalization” proposals are largely just half-measures. They do nothing to fundamentally alter the monopoly.

And they won’t, unless we want it altered.

 

 By Nathaniel Brodie

 

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1 thought on “Should Oregon Alcohol Sales be Privatized?

  1. You seem to fail to mention many important factors when deciding whether or not to privatize. Do you think Costco will carry all the wonderful local spirits from the growing micro distilling trend in Oregon? Do you enjoy products that do not have the big brand names? These products will likely be unavailable or the price will go up. All the money we spend stays in Oregon, it either goes to employees and owners of liquor stores or goes to help pay our taxes or goes to the local distributors and their employees. The money stays here. If you privatize, the money will go out of state to corporate offices not helping the local economy or tax revenue. How do you replace the lost tax revenue? It will become much easier for minors to purchase alcohol. If an agent is found to be selling to minors they not only face fines but also face losing their store. If you want lower prices on liquor then you will have to replace the tax revenue with other new taxes. I like the greater selection at the liquor store over Costco. I like that my money is staying in state. I like having questions answered about different liquors. I like knowing that it is a little harder for our kids to buy liquor in our state.

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