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Wright Study Cited in Detroit Free Press Article

A 2010 study by Professor Joshua Wright and James Cooper of the Federal Trade Commission was cited in an article appearing in the Detroit Free Press in which the author argues for dismantling of Michigan's three-tiered liquor distribution system.

The author argues that the current system, created after Prohibition ended, serves to ensure monopoly profits and limited competition in the spirits market and should be repealed on the basis that it is anti-consumer.

Wright's 2010 study showed that "post and hold" laws like those in Michigan result in dramatically higher prices. The study indicated that prices for a representative six-pack of beer were estimated to increase between 12% and 30%, while the increase for wine was in the 6.4% to 18% range. The rise in cost of distilled spirits rose between 9% and 32%, according to the study.

In addition, the study found "no measurable effect" on drunken driving or underage drinking, despite the resultant price hike.

The Mackinac Center: Rethink Michigan's liquor distribution system, Detroit Free Press, July 31, 2011. By Michael D. Lafaive.

Excerpt:
"According to a House Fiscal Agency analysis of the 1976 law that granted these privileged beneficiaries their beer monopolies, the rationale was that' retailers may ask for unfair discounts for [sic] competing wholesalers in order to get the best deal possible.' How competition was unfair to consumers is unclear.

"In 1986, the Legislature granted similar distribution monopolies for wine, with some minor exceptions. Gongwer News Service at the time reported this as 'a concession granted to the Michigan Beer and Wine Wholesalers in negotiations with legislators,' apparently to obtain support for a wine cooler bottle deposit bill.

"Another law protecting beer and wine monopolists from competition is known as' post and hold.' In 1979, the Legislature first adopted such a measure for beer. This law requires wholesalers to announce -- or post -- any price changes in advance and hold those prices for a length of time, in the case of beer for 180 days. In effect, the law makes it easier for wholesalers to legally collude to the detriment of consumers. A similar stipulation for wine also exists."

Read the article