Connecticut: Malloy Seeks Lower Liquor Prices By Scrapping Minimum Price Law

A national liquor retailer filed a federal lawsuit Tuesday seeking to end the state's 36-year-old practice of regulating liquor prices.

By Christopher Keating February 21, 2017
Hartford Courant
For six years, Gov. Dannel P. Malloy has complained that Connecticut consumers pay too much for liquor because of the state's 36-year-old minimum price law for wine and spirits.
Not one to give up, Malloy is trying yet again this year to change the long-running system that has set minimum bottle prices for package stores for decades. The proposal would collect nearly $5 million in additional taxes over the next two years by changing the law, according to Malloy.
But the plan has prompted a bitter battle with the small, mom-and-pop liquor stores pitted against the giants of the industry like Maryland-based Total Wine & More, which advertised and sold liquor below the minimum price in Connecticut last year before paying a settlement to the state and agreeing not to do it again. The issue was debated Tuesday during a public hearing by the legislature's general law committee, which has jurisdiction over alcohol issues.
Discussion centered around whether the law promotes jobs at neighborhood package stores or if it instead harms consumers and encourages them to buy liquor out of state.
Store owners and their employees packed into the atrium at the Legislative Office Building and the crowd was so large that a special "overflow" room was set aside to provide extra seating.
Some Republicans and Democrats on the committee, who have rejected the proposal in the past, were skeptical again.
"The state of Connecticut is trying to raise revenue on the wrong items," said Rep. Daniel Rovero, a conservative Democrat from Killingly. "We want to sell more liquor in Connecticut. How many problem drinkers do we have now?"
But Jonathan Harris, Malloy's consumer protection commissioner who defended the plan, responded, "We're not the agency that raises revenue. ... All we're saying is [we are] injecting more price competition."
Carroll J. Hughes, the longtime chief lobbyist for the Connecticut Package Stores Association, said Malloy's numbers for the additional tax revenue are wrong. The reason, he said, is that the state would collect lower sales taxes if the price of liquor is decreased under the proposal. The state's 6.35 percent tax on retail sales would be charged on lower-priced bottles across the state - costing the state millions of dollars in lost sales taxes, Hughes said.
Despite the long-time package store tradition in Connecticut, Malloy says the pricing system makes no sense.
"If we had a law that forced stores to sell bread for a price that was determined by state government, people would be screaming about capitalism and big government," Malloy said. "But for some reason, we allow this anti-free market mandate to continue for this one particular industry - and we are, in fact, the only state in the nation that operates in this manner."
He added, "Because of this law, business owners have fewer rights in determining the operations of their businesses, and consumers are forced to pay artificially inflated, high prices for products that are sold at a substantially lower price nearly everywhere else. Let the businesses determine the prices for these products, not the government."
But Hughes argues that Malloy's plan would force hundreds of small package stores to close because they are already operating on tight profit margins and could not compete on prices with the large liquor giants who can afford to buy larger volumes of alcohol.
Edward Cooper, the chief spokesman for Total Wine, said the current system is unfair to consumers as lawmakers try to balance the budget in a difficult year. The company operates superstores in West Hartford, Manchester, Norwalk, and Milford.
"We agree with Governor Malloy that keeping liquor prices artificially high for the benefit of 1,100 package store owners while the state is making difficult cuts to balance the budget is wrong and should be rectified by the legislature this year," Cooper said.
He added, "The governor's bill would eliminate artificially inflated prices that we are currently required to charge to consumers. It would allow retailers to sell alcoholic beverages based on their true and actual costs."
While the legislative battle continues, Total Wine is also pursuing a federal lawsuit in Connecticut that seeks to overturn the system that it believes violates U.S. antitrust laws.
Liquor is among the most heavily lobbied issues at the Capitol. In 2012, Malloy tried to change the minimum pricing law and then succeeded in a compromise to end the long-standing ban on Sunday liquor sales. Three years later, Malloy and the legislature changed the law to allow package stores to remain open beyond the traditional 8 p.m. closing hour every day except Sunday.
Nick Revenikas, who operates the Cordial Shoppe on Boston Post Road in Old Saybrook, said Malloy's proposal would cause package stores to close statewide.
"Look what happened with Home Depot and the little hardware stores,'' Revenikas told The Courant. "After a while, they are all gone. Look at CVS and the little pharmacies. The state is going to lose money from the income tax" if package stores employees lose their jobs.