Wednesday, 12 December 2012

Economic Freedom helps Consumers

Ontario Progressive Conservative leader Tim Hudak’s plan to privatize retail liquor sales in Ontario—ending the near total monopolies of the LCBO and The Beer Store—is an ambitious step towards prioritizing consumer and retailer interests. And even if his plan relinquishes only part of the Ontario government’s control over liquor, it will result in greater economic freedom.

On this issue, Ontario could learn a lesson from Alberta. In 1993, Alberta privatized the retail portion of liquor distribution within the province. By all accounts, it has been successful. Since then, liquor sales have increased, resulting in higher government revenues while consumers enjoy greater product selection and lower prices. This has been the direct result of a more competitive and freer market—i.e. greater economic freedom. And there is no evidence that crime or alcohol related offences have increased as a result. 

Saskatchewan and Manitoba are both currently experimenting with the same idea. And who can blame them? What province doesn’t want to increase its revenues and cut costs all without causing any of the social ills that modern-day prohibitionists expect?

But, as Gerry Nichols points out in his Toronto Star article on Dec 4, it will be difficult for Hudak to relinquish government control over liquor sales because “well-funded special interest groups have a keen desire to keep the monopoly alive.” 


Nichols’s point is borne out in Saskatchewan. On its website, the Saskatchewan Government Employees’ Union issued a press release decrying the opening of two private liquor stores in the province. SGEU president, Bob Bymoen says, "Alcohol is not just another consumer product. It is a drug that can and does cause serious problems for families and communities. Because of that, Saskatchewan citizens should have a say in how alcohol is sold in this province."

Chanting the same mantra, Manitoba’s government employees’ union opposes liquor sale privatization because it is dangerous. An MGEU press release says, "Alcohol is an intoxicant and it can be extremely harmful if misused or abused. The fact is that regulating alcohol sales is the responsible choice for Manitoba families and communities.”

As expected, these union outcries are shrill, at odds with the interests of the consuming public and small retailers, unsubstantiated by the empirical evidence collected over 20 years in Alberta, and contrary to economic freedom. But each does substantiate Nichols’s claim—the Ontario Public Service Employees’ Union (OPSEU) will likely oppose Hudak’s plan.

VESTED INTERESTS: Labatts, Molson, and Sleeman

But it’s not only the OPSEU that will resist a freer market and greater competition. Hudak will also have to stand up to Labatts, Molson, and Sleeman.

The LCBO is government owned and operated, but The Beer Store is a private organization owned by three major breweries: Labatt Brewing Company Ltd., Molson Coors Brewing Company Ltd., and Sleeman Brewery Ltd. Even though The Beer Store is meant to be a non-profit, the owner breweries are able to restrict competition to the detriment of both the non-owner breweries and the consuming public.

There are two obvious means by which The Beer Store can restrict competition: through fees and product placement.

Non-owner breweries are charged two fees to have their products sold in The Beer Store. The first is a listing fee of $2,650.14, plus $212.02 per retail location where the product will be available. And the second is a handling fee between $3.65 and $4.15 for every case of 24 beers. As ludicrous as it seems, under the current system, non-owner breweries must pay substantial fees to their competitors if they want their product to be available at Ontario’s biggest retail outlet for beer.

The Beer Store can also restrict competition by giving product placement priority to the owner-breweries’ products. And because of the Ontario government’s control over the liquor market, these other producers do not have the option to open their own retail outlets to compete with The Beer Store and its owner breweries.

This government mandated arrangement results in higher prices and a more limited selection for Ontarians while it inhibits the development of a retail industry that would be more responsive to market demands.


Hudak will need to take on both the OPSEU and the private owners of The Beer Store if he wants to give Ontarians the benefits of an Alberta-styled liquor retail industry. In the end, consumers, small producers, and small retailers will thank him because it will be a boon for economic freedom.

This piece was published by Troy Media on December 9, 2012

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