State Liquor Regulations Are Anti-competitive

Boy, you go away for four days and the world throws up some serious treats for your return! I’ve been arguing against state-level restrictions on the importation of alcohol for years and years, and I am ecstatic to report that the Federal Trade Commission has weighed in on the negative consumer effects of such bans. From Thursday’s press release on the report:

A Federal Trade Commission staff report released today concludes that e-commerce offers consumers lower prices and more choices in the wine market, and that states could expand e-commerce by permitting direct shipping of wine to consumers. The empirical study finds that state bans on direct shipping prevent consumers from saving as much as 21 percent on some wines and from conveniently purchasing many popular wines from suppliers around the country. FTC Chairman Timothy J. Muris stated, “E-commerce can offer consumers lower prices, greater choices, and increased convenience. In wine and other markets, however, anticompetitive barriers to e-commerce are depriving consumers of those benefits.”

This study does something very important, and all too rare in government policy-making: it relies on amassing and analyzing empirical data to evaluate the competitive effects of a policy.

“Policymakers had little actual evidence to assess the impact of online wine sales on prices and variety. The study of wine sales in McLean, Virginia is the first empirical study assessing how state direct shipment bans affect consumers,” said Jerry Ellig, Deputy Director of the FTC’s Office of Policy Planning. Ellig and Alan Wiseman, a former FTC economist, co-authored the McLean study.

You can read the entire report to judge for yourself the weight of the empirical evidence. In my estimation, this report provides a strong argument against the continuance of state alcohol importation bans.

Now if this argument can help overcome the political power of the wholesalers … perhaps we will even revisit the specifics of the repeal of Prohibition, which stipulated the wholesaler industry structure with which we are now saddled. Yes, I’m an optimist! But this report feeds my optimism that knowledge drives away ignorance and that knowledge can be sufficient to overcome rent seeking in a decentralized network society such as ours.