Saturday, April 8, 2017

A Radical Proposal For Alcohol

In Ontario, we have something of an antiquated alcohol distribution system. The only places to buy most forms of alcohol on a retail level are the Liquor Control Board of Ontario(LCBO), a government-controlled monopoly, and The Beer Store, a monopoly owned and operated by the three largest global beer companies. Needless to say, this has major issues - no competition, poor service, and on the beer side there's a lot of subtle ways that small brewers get screwed, because their only distribution channel is owned by their competitors. Some people are trying to change this, but there's been only very minimal movement since the time 15 years ago I was handing out pro-privatization flyers at a PC convention.

In 1927 when Prohibition ended, this wasn't a bad system to transition the province back to legal booze, but it's 90 years later, and the only real update to the system is nicer LCBO stores and a few private wine shops. We're so far behind the curve here that it's ludicrous. A beer-nut buddy of mine was on a brewery tour in the US, and asked the tour guide when they might be able to buy their beer. The guide asked where he lived, and when he heard that my buddy was Ontarian, exclaimed "Ontario? You guys are worse than Utah!". That's right - a state quite thoroughly run by a religion that prohibits alcohol is more open to brewers than Ontario is.

The interesting thing is that Ontario has a completely parallel system of alcohol sales that nobody talks about in this context, because it already works quite well. The Liquor License Board of Ontario(LLBO) controls the ability of restaurants and bars to sell booze, and it works on a perfectly sane set of rules. Servers need to be of age and trained in keeping alcohol out of the hands of the underage, the intoxicated, and so on, and there's a few basic rules on what sort of places can sell booze and a punishment process if the license-holders act badly, but that's more or less it. It's not perfect - nothing is - but it works.

So I have a radical proposal for alcohol sales:

How about we let people sell alcohol the way that we let them sell alcohol right now? 

Let the LLBO license retail stores, and let LLBO-licensed stores buy from any suppliers they want to without needing to go through the LCBO and Beer Store the way they do now. We already have a perfectly functional set of rules in place to ensure sales are done properly, and they're tested in practice literally millions of times a week. Just add retail sales of sealed product to the list of allowed things to do with an LLBO license, and then sell the LCBO for parts - I'm sure its distribution network and real estate portfolio will make the province a pretty penny. As for the Beer Store, they've fleeced the people of this province long enough, but they can keep selling if they want. They won't even need to sell their competitors' product if they don't want to. But they'll actually have competition, and I will shed not a single tear for their pain at the outcome.

There's a few objections to breaking up the LCBO system that I've heard, and some make more sense than others. People who talk about how we can't trust alcohol being sold by private retailers are living in a world I don't quite understand, and while the people who think alcohol sales should be actively restricted as a policy are folks I do understand, I don't agree with them. If we're going to have a society full of adults, we should treat therm like adults, and let them do things even if they're sometimes dumb.

The one objection that does deserve a more complete analysis is the concern about lost revenue. The LCBO earns about $1.7 billion for the province every year, and that's quite a bit of cash. Even people who aren't huge fans of the distribution model value this revenue source, because it's always good to have the provincial government funded by things other than taxes if we can - taxes are too high already, after all.

Thing is, when you're looking at a government-owned monopoly, "profit" is an odd word to use. Yes, it keeps separate books, but it's still a lot like calling car licensing fees a "profit" for the Ministry of Transportation. If you have to pay the government for something if you want to have it, then calling it a "profit" or a "tax" doesn't much change the outcome. Every buyer of alcohol has to pay a mandatory sum of money to the government, over and above the usual costs of distribution, in order to get alcohol. It's a tax already, it's just one that pretends to be a profit. So let's just spike that. Figure out what the LCBO profit per unit of alcohol is, and up the tax by that amount. Even if the LCBO isn't privatized, this will be a better representation of what's really happening - prices will stay the same, the amount of money being remitted to the government will stay the same, but we'll have an honest name for it. And once you're honest about the fact that the LCBO is a hidden tax, this argument disappears.

I know it's a crazy thing to propose that we sell alcohol the way we currently sell alcohol - after all, a beer bottle that's been opened is a totally different product than a beer bottle that hasn't been opened, so keeping two separate distribution and licensing systems is obviously a logical approach to the problem. But I think it just might work.

(Footnote: The LLBO is technically defunct, and now part of the Alcohol and Gaming Commission of Ontario. But everyone calls it the LLBO, so I used the traditional name)

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