Letter in Freep is Spurious, Misleading

The Detroit Free Press published a response to my essay, “Rethink state’s liquor distribution system,” on Sunday. It reads more like a beer commercial designed to redirect attention away from unnecessarily high beer prices, rather than a scholarly rejoinder to the facts presented in my original essay. There are four major problems with the letter:

First, it doesn’t answer any of my assertions and instead advances spurious generalizations. For example, the letter encourages the reader to ask “any number of Michigan breweries” to learn that their partnerships (with wholesalers) “fuel growth and jobs in Michigan’s craft beer industry.”

These same profitable partnerships could exist in a system that does not force suppliers of beer to grant exclusive territories to wholesalers in deals that are “harder to escape than marriage.” What’s wrong with voluntary supplier-wholesaler relationships? The answer is easy.

Second, the letter makes irrelevant claims. It argued that “47 new brands of beers entered the Michigan market” in June as evidence that state law does not discourage competition.

New brands do enter the market and my essay made no claims to the contrary. I simply argued that beer and wine wholesalers enjoy very limited competition thanks to a state law that mandates exclusive territories (scroll down to second article) to them and a Michigan Liquor Control Commission rule that encourages legal price collusion.

Third, at best the authors mislead and at worst they are dishonest, writing “despite the column’s claims the state does not set distribution territories. Brewers and wineries do, and the number of distributor licenses is not restricted.”

I never wrote that the state sets the territories as if the Legislature itself drew them up. The authors are creating a straw man argument for the purpose of knocking it down. Here’s what I wrote:

Michigan's protection of regional beer and wine distribution monopolies should be dismantled. Unlike distilled spirits, state government is not the wholesaler for beer and wine, but it is complicit in artificially driving up prices by legally restricting wholesaling and distribution to a handful of families that have become rich by exploiting territorial monopolies granted by the state.

The state does grant territorial monopolies by forcing beer and wine suppliers to do so. That the state is one-step removed from deciding on the actual boundaries is entirely beside my point and I believe the authors knew that and simply chose to manipulate the reader into believing my essay was in error.

Moreover, my argument about “legally restricting wholesaling and distribution to a handful of families” remains accurate. Despite there being no explicit quota on the number of wholesalers and distributors in the law, there is an implicit restriction.

I could become a state-approved wholesaler, but because existing wholesalers have the majority of supply buttoned up in previously signed contracts, I could only act as wholesaler for new suppliers. That is a barrier to business entry that’s practically impossible to overcome should I wish to compete head-to-head with Michigan’s existing beer and wine wholesale monopolists.

Lastly, the authors assert, without any evidence, that “Michigan’s alcohol laws … balance competitiveness with the public good.” This talking point is repeated by those who directly benefit from the state’s protectionist — not protective — system of alcohol control. The reader should not be fooled.

The empirical evidence shows that many of the people the state is really protecting with its archaic system of alcohol control are the millionaire monopolists who are so eager to defend it.

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.