Should the State of Vermont be in the Liquor Business?

Lost all last week in the chaos surrounding massive appliance mutiny at our house, I am finally able to take up the questions raised by State Auditor Doug Hoffer’s audit of the Department of Liquor Control’s purchasing, warehousing, distribution and sales functions.

To briefly summarize the conclusions of this review: the Auditor’s office found that while there would be no distinct economic advantage to privatizing or partially privatizing the P, W, D and S functions of Liquor Control’s monopoly, it might make for better governance.

We have a habit of allowing  creeping conflicts of interest to contaminate our governmental regulatory bodies. This may not be entirely avoidable, as intelligent regulation requires expertise, and that expertise is represented primarily in talent recruited from the industries being regulated.

In a number of service sectors, we live with the consequences of this intimacy, and the public often finds its interests of secondary concern to those of the industry being regulated.  

Vermont’s Liquor Control monopoly goes a good deal further.  Essentially, it IS the industry that it regulates.

Hoffer observes that this represents a conflict of interest that may undermine the regulatory function that is VDLC’s core purpose.

“The estimated fiscal impact of privatization does not argue for a change to the State’s current system, but there are other factors to consider,” Auditor Hoffer said. “It may be timely for legislators and other policymakers to reflect on whether liquor sales are a core function of State government and whether the sale of liquor could be licensed to the private sector, as it is for beer and wine. There is an inherent conflict of interest associated with one department being responsible for promoting and regulating the use of the same product.”

Perhaps narrowing VDLC’s responsibilities would also free resources so that more can be devoted to the training component of their mission.

It seems that every time I happen upon a Liquor Board hearing by the St. Albans City Council, local proprietors of stores selling alcohol complain about how difficult it is to get their staff adequately trained in upholding the rules.  Apparently, the training sessions are not held locally, so employees must travel in order to receive instruction and be certified.  I believe there are issues even with an online alternative.

If VDLC must concern itself with inventory control, marketing and warehouse management, how much focus is lost from actual regulation?

While the DLC asserts that state control of liquor sales is essential to ensure responsible consumption and fewer negative social impacts, this is not supported by the evidence. Studies consistently show that enforcement measures more effectively reduce alcohol-related injuries and mitigate driving under the influence of alcohol, regardless of whether sales are controlled by the states.

According to a Weekend Messenger article by Michelle Monroe, local proprietors appreciate the ability the current arrangement gives them to carry a full range of product on a consignment basis.  They are spared the need to hone their inventory to the demands of clients, and to sacrifice profit when items fail to move without steep discounts.

But isn’t that what most retailers of other products are obliged to do?

Not all local stores like the current arrangement.  One proprietor spoke to Monroe anonymously, for “fear of retaliation.”  His view?

“Monopolies are not good for consumers.”

The state getting out of the liquor business could mean more individual retailers in competition, so the seventy-eight retailers current statewide might understandably be reluctant to see change.

Ross Arsenault, who owns the Beverage Mart in St. Albans City thinks consumers might have less choice at individual retailers if they must satisfy the prepay expectation of non-government suppliers.

However, as he told the Messenger he thinks the state should also be happy to leave things the way they are.

“They’ve got the best of both worlds right now.” he said.  “They’ve got control, they’ve got no liability.”

But control is more than just the ability to collect fines for violations when they are discovered.  If a state agency begins to sees itself as a merchant first,  can it really be trusted to lay down the law when doing so might undermine the revenue stream upon which it is structured to depend?

The best interests of a merchant are served when consumers consume more, not less of a product.  In the case of the VDLC, their product is alcohol.

How is that consistent in any way with the state’s healthcare initiatives?

About Sue Prent

Artist/Writer/Activist living in St. Albans, Vermont with my husband since 1983. I was born in Chicago; moved to Montreal in 1969; lived there and in Berlin, W. Germany until we finally settled in St. Albans.

11 thoughts on “Should the State of Vermont be in the Liquor Business?

  1. to see how this one plays out. I am glad Doug Hoffer took a good look at it.

    I remember a plan or trial balloon from a couple years back in 2011 when a private company proposed leasing the VT liquor biz. The representative of a private equity firm suggested a plan that included a large one- time payment for the privilege(tempting when the budgets are tight) .

    The representative had a quiet meeting arranged by a lobbyist with Lt. Gov. Phil Scott, Senate President Pro Tem John Campbell and Sen. Richard Mazza. None of them sounded overly impressed with the deal but the door seemed to be left ajar if not open.

    http://www.reformer.com/neweng

    http://www.greenmountaindaily….

  2. This is an interesting subject right now, especially considering that the legislature may be addressing the legalization of marijuana over the next couple of years. The connection matters because there are several way to regulate marijuana, with one being a state run monopoly as we do with alcohol. That option would give the state direct control over potency, prices, availability, and distribution, as well as vendor profits. Another alternative is to let the market control distribution. A problem with market control is that the industry would more directly control all elements of distribution, and there is a greater risk of captivation by large corporate vendors driven by a profit motive and no social interest. There are pluses and minus to both options, and a few mid-point options also worth considering.

    This is probably a good time to review how the state regulates alcohol, and to figure out what model we want to use if/when the state legalizes marijuana.

  3. It’s not surprising that “local proprietors appreciate the ability the current arrangement gives them to carry a full range of product on a consignment basis.”

    Among other things, it means the agent store owners don’t have to tie up capital in inventory so there’s no risk.

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