If the Monopoly Title Fits, Wear It

A Saginaw News article posted this afternoon asks in its story headline, “Is Fabiano Bros. a Monopoly?” The story covers a verifiable assertion I laid out in a commentary titled “Eight Ideas for Reforming Alcohol Control in Michigan.”

Unfortunately, the article is comprised largely of a collection of redirections on the part of the Michigan Beer and Wine Wholesalers Association, the Lansing-based trade group that represents state wholesalers. Fabiano Bros. is a beer and wine wholesaler headquartered in mid-Michigan.

First, and with respect to the reporter, she omits useful explanatory language. The full paragraph from my commentary reads:

Eliminate the beer and wine distributor monopoly on territory. Strip from the Michigan Liquor Control Code the requirement that suppliers of beer and wine grant exclusive sales territories to a select group of wholesalers [Emphasis added.] This mandate prevents competition, shackles suppliers and raises costs for consumers.

Then she writes that Michael Lashbrook, president of the Michigan Beer and Wine Wholesalers Association thinks the Mackinac Center is “off-base calling any distributor in the state a monopoly.”

As is plain from the text, we did not claim that any distributor was itself a monopoly. We argued that state law mandates that suppliers grant exclusive (the very definition of a monopoly) sales territories to wholesalers (plural). These are different concepts, though it is easy to forgive the reporter for any confusion.

What is troubling, however, is that Lashbrook was allowed to respond unchallenged with a redirection about manufacturers, not wholesalers:

We always tell people who question if there is a monopoly to go to a major grocery store and walk down the cereal or laundry detergent aisle and see how many manufacturers are represented on the shelves," Lashbrook said. "You'll see those product lines dominated by just a few manufacturers but if you go down the beer aisle or the wine aisle, you will see dozens, if not hundreds of manufacturers represented and that's true competition.

It’s true that there are numerous products in the average beer aisle, but that has nothing to do with the fact that the beer makers were required by an outdated state law to have their product distributed by one particular supplier in a particular territory, a practice that drastically limits competition and probably drives up costs to consumers.

Lashbrook also claims that these protectionist laws give “stability” to wholesalers and allow companies like Fabiano Bros. to grow and add employment. But this only tells one side of the story. That stability comes at the expense of consumers and other businesses who pay more for every drop of alcohol purchased than they would in a competitive marketplace. It also discounts the impact of others who would like to get in the distribution business but can’t because the supply is largely buttoned up.

Lastly, Lashbrook makes the odd charge that "the Mackinac Center believes you should treat it (alcohol) like a box of corn flakes." This claim is simply not true as a simple review of our published work would clearly indicate. Visit www.mackinac.org/1933 to see for yourself.

The Michigan Beer and Wine Wholesalers are arguably the greatest beneficiaries of an archaic liquor control code. It reads as if it were written for these lucky few members of a hereditary and elite millionaire’s club.

State-mandated territorial monopolies on the sale of beer and wine are worse than inefficient. They are an abuse of power over consumers of every stripe. This commercial cronyism — the cozy relationship between business and Lansing government — must end and soon.

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.