Difficulty finding liquor stores in Georgia? Thank the government

Georgia has had its fair share of odd alcohol regulations. While many of these were originally crafted to curb alcohol consumption, others existed to put butts in church pews rather than at sinful tailgates or mimosa-filled brunches.

Fortunately, times are changing. In 2011, Georgia joined most of the modern world and successfully held referendums to legalize retail alcohol sales on Sundays. What’s more, it was just this year that the state approved the sale of alcohol by the drink at restaurants before 12:30 p.m. on Sundays via the much anticipated ‘Brunch Bill.’

While these reforms are encouraging steps in the right direction insofar as they offer greater individual liberty, other needless, puritanical laws have been largely ignored – namely, those related to retail licenses for distilled spirits. Currently, the state of Georgia will not allow any business, person or even family to own or have partial ownership in more than two liquor stores within the state.

As is often the case with statutes such as this, the policy was likely enacted to protect existing establishments from competition. While it may serve that purpose, it ultimately hurts Georgia’s businesses and consumers alike, and ought to be repealed.

South Carolina once had an almost identical law on the books, but the state’s supreme court declared it unconstitutional last year because the statute permitted the government to unfairly and unnecessarily police the marketplace. While Georgia’s version of the law may not necessarily conflict with our Constitution, it suffers from the same flaws identified by the South Carolina Supreme Court – it is an arbitrary and an unadulterated form of economic protectionism.

There’s no clear reason why it is permissible to operate only two liquor stores in Georgia rather than three, five or even 10. The limit is transparently arbitrary. Worse still, it’s also inconsistent in its treatment of businesses that sell alcohol. At the moment, the two-venue cap isn’t applied to restaurants that sell liquor by the drink. Rather, restaurateurs can obtain as many licenses to serve liquor as desired, which makes sense.

While the liquor-store limit is touted as a pro-business law, in reality, it is pure economic protectionism that ultimately prevents economic growth. By restricting the number of liquor permits, the law insulates incumbent shops from encroachment by other, growing retail liquor businesses. Poorly run stores that might not be able to survive in a competitive market are protected, while good, innovative companies are prevented from expanding.

The bottom line is that governments shouldn’t be in the business of picking winners and losers. Nor should they be a tool to prop up sub-par enterprises that – without their protection – could not compete.

When there is increased competition, consumers – along with many companies – win. Consumers enjoy businesses that are convenient, have competitive prices and exemplary customer service. But when there is only limited competition, businesses aren’t incentivized to strive to gain consumers’ loyalties.

There is no shortage of studies and anecdotes demonstrating the benefits of competition. Total Wine’s story perfectly illustrates this point. It began as a small fledgling business, but because of innovations, a focus on positive customer experience, and competitive prices, it has grown into a retail giant.

History has proven time and again that increased competition in alcohol markets leads to lower prices. While not a direct parallel to Georgia’s liquor law, states with government-run liquor store monopolies have average liquor prices that are $2 higher than states that allow competition. The United Kingdom has discovered the beauty of alcohol competition in recent decades. In the 1960s, the nation changed course to permit businesses other than just pubs and clubs to sell alcohol. From 1980 to 2007, alcohol prices plunged by at least 70 percent. In Minnesota, Total Wine recently entered the fray and challenged the status quo, causing greater price competition. This resulted in plummeting alcohol prices.

As seen elsewhere, increased liquor-store competition in Georgia would spur improved business practices and allow companies with a superior customer experience to expand more easily into new markets. This would be a boon for consumers.

Georgia has been on the wrong side of alcohol history for decades. But repealing this provision is about more than just retail liquor sales. It’s about fostering an environment that permits the proliferation of better businesses. It’s about allowing consumers to have more choices. And it’s about ending the state government’s engagement in inappropriate activities, including economic protectionism. When the state allows the market to function freely, businesses and consumers both win.

Marc Hyden is the Southeast region director for the R Street Institute, and he is a long-time Georgia resident. You can follow him on Twitter at @marc_hyden.