Do Pa’s liquor laws rip off consumers? Lawmakers hear opposing arguments

This article originally appeared on PA Post.

—

A group of state lawmakers is trying to decide whether they made a mistake three years ago when they gave Pennsylvania’s state-run liquor industry more power to negotiate prices.

The commonwealth’s Liquor Control Board argues it’s passing savings to consumers. But liquor manufacturers—and a number of lawmakers—say the board’s really imposing random taxes.

Pennsylvania’s not the only state that controls its liquor industry. But according to advocates for spirit producers and the PLCB itself, it does have the most flexibility in negotiating prices with suppliers.

The PLCB used to apply a standard markup to all its products. That changed in 2016 when the legislature passed Act 39.

Along with letting it bargain more aggressively with sellers and set its own markups, the act allowed limited wine shipping to consumers, expanded sales locations and hours, and put lottery machines in PLCB stores, among other things.

David Ozgo, with the US Distilled Spirits Council, said the increased bargaining power has let the state act like a massive, opaque monopoly, ultimately reducing the power manufacturers have in negotiations.

“Nobody else can enter the market,” he said. “On the wholesale level for spirits and wine, they are the only game in town.”

But Tim Holden, who chairs the PLCB, blames the discord on sour grapes.

“The industry had an ATM machine for 80 years, and they no longer have an ATM machine,” he said. “They have to negotiate prices here like they have to do at Walmart and Costco and so forth, and they don’t like it.”

Both sides say the key question is whether consumers are paying more—though they cite different metrics.

Ozgo says mark-ups have increased since 2016. Holden maintains changes are in line with other states.

In a hearing Tuesday, lawmakers on the House’s Liquor Control Committee appeared similarly spit.

Bedford County Republican Jesse Topper, who is sponsoring a bill that would get rid of the PLCB’s flexible pricing power, said he’s not sure he buys that the PLCB has been able to simultaneously increase its profits and pass savings to consumers.

“Ultimately, the revenue we get is from the consumer,” he said. “I’m trying to reconcile those two statements.”

Holden said the board brought in a net of $103.9 million in the 2015-16 fiscal year. He reported, that grew to $158.2 million by the 2017-18 year, and was up to $191 million last fiscal year.

The drive to increase profits has been prompted, in large part, by growing legislative demands for cash to shore up the commonwealth’s general fund. The PLCB has said it plans to contribute $185 million in next year’s budget.

Several of Topper’s Democratic colleagues weren’t as worried about potential costs to consumers.

Maria Donatucci, a Philadelphia Democrat, said when she shops for liquor in New Jersey, she doesn’t see a meaningful difference from Pennsylvania prices.

“I’m just not buying this whole thing, I’m sorry,” she told a panel of liquor industry representatives.

Topper’s bill to repeal the PLCB’s flexible pricing authority is still in its early stages, and it’s unclear whether it has broad support.

A spokesman for Democratic Governor Tom Wolf, who has generally supported the PLCB against GOP attempts to privatize the liquor industry, said he hasn’t reviewed the language.

But, he added, “Governor Wolf supports PLCB using its authority to get the best prices for Pennsylvania consumers.”