This is an archived article that was published on sltrib.com in 2015, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Utah's Department of Alcoholic Beverage Control has come under intense scrutiny over the past year, including at least three state sanctioned audits and newsworthy handling of several employment disputes. With these ongoing criticisms, the dialogue among Utah imbibers often turns to privatization of the sale of alcoholic beverages. "Wouldn't it be nice to run to the grocery store and grab a bottle of wine for dinner?" We have all thought it. But the reality of privatizing alcohol sales and the actual impacts upon consumers in Utah is rarely discussed thoughtfully. Such discussion needs to occur before Utah rushes into privatization of alcohol sales.
To see the potential pitfalls of privatization, look no further than Washington State. Washington residents voted for the privatization of liquor sales in November 2011. In the nearly four years since alcohol sales went private, Washington residents have seen alcohol prices skyrocket. Why? Private profit and taxes. Washington State boasts the highest taxes on spirits in the nation. To make a profit, private retailers are forced to aggressively mark up the products they sell to survive. The result, Washington citizens are running for the borders to purchase cheaper alcohol from lower priced neighboring states. Although Utah's tax on alcohol is lower than Washington, it's still in the top ten highest taxed states for spirits. As a result, privatization here could quickly become the same runaway prices of alcohol.
And what will Utah do with its liquor stores? In Washington, 167 stores were auctioned to the highest bidder. Today it has been reported that nearly 60 percent of those stores have closed. As it turns out, the bidding war for purchasing these properties coupled with outrageously high liquor prices created economically infirm investments. This left Washington in a tricky situation, with failing store owners demanding refunds from the state and the few surviving store owners insisting on legislative tax cuts to keep their businesses viable.
If increased cost isn't painful enough, privatization is also likely to lead to less selection among your favorite products. Private retailers have little incentive to carry numerous types or flavors of vodka, for example, or that hard to find small-batch bourbon or scotch you love to break out at dinner parties. Say goodbye to your favorite, little known wines from off-the-beaten-path wineries. Instead, private retailers will largely stock only the most popular, bestselling brands and varieties.
We aren't saying the DABC is perfect. The criticisms in the state audit need to be addressed. Alcohol stores should be allowed to promote the products they are selling just as any other retail store can do. The store managers should not be doing the jobs of two or three persons, and these managers should have available to them more resources, such as ongoing retail and human resources training. The new product ordering system, drawing numerous complaints from licensees and DABC staff alike, should be revamped. Yes, the DABC is broken, but with some simple management and regulatory changes, the agency is capable of functioning efficiently and to the benefit of Utah's citizens.
Brett Tolman and Janelle Eurick Bauer are shareholders at Ray Quinney & Nebeker PC. Their practices include assisting clients with liquor licensing, DABC regulatory compliance and enforcement defense.