NCICL Calls State ABC System An Illegal Monopoly | Eastern North Carolina Now | A legal-issues think tank is calling for privatization of the state's ABC stores, even suggesting that the current government-controlled system might violate the N.C. Constitution's ban on monopolies.

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    Publisher's note: The author of this post is Barry Smith, who is an associate editor to the Carolina Journal, John Hood Publisher.

Gov. Perdue commissioned study calling for end of state control of liquor sales

    RALEIGH     A legal-issues think tank is calling for privatization of the state's ABC stores, even suggesting that the current government-controlled system might violate the N.C. Constitution's ban on monopolies.

    "To tolerate a government-sanctioned monopoly by any entity, including the state itself, is 'contrary to the genius of a free state,' according to the common sense of our Constitution," writes Jeanette Doran, executive director of the nonprofit N.C. Institute for Constitutional Law, in a recent report.

    Doran goes on to conclude in her report that if the state is allowed to monopolize liquor sales with the justification that it is protecting public health, then there would be little to keep it from monopolizing other products or services, such as health care, or commodities, including gasoline or food.

    "Although North Carolina's liquor monopoly has existed for decades, it is as violative of the Constitution now as it was in its inception," Doran writes. "The legislature can fix the problem by relinquishing the state's monopoly."

    Tyler Younts, a staff attorney at the institute, wrote a companion report arguing for modernization of the state's ABC system.

    While modernization would end "an arguably unconstitutional monopoly," Younts wrote that changes could result in up to $1 billion in government revenues.

    While there was a push to make changes in the state's ABC system, which allows for bottled liquor to be sold only in government-operated stores, a couple years ago as a response to scandals in some local systems, efforts to privatize the system have stalled.

    No bills have been filed this year to privatize the ABC system.

    Bill Brooks, president of the N.C. Family Policy Council, hopes it stays that way.

    "We like the system because of the fact that we have one of the lowest per-capita consumption rates in the country," Brooks said. "It means that you probably have fewer alcoholics, you have fewer drunks, you have fewer auto accidents and things that go with abuse of alcohol."

    Younts questions whether privatization would result in increased social ills. He cited a Commonwealth Foundation study that suggested that privatization did not necessarily result in more alcohol-related problems.

    Those findings include:

    • Alcohol consumption decreased in Iowa and West Virginia, states that recently privatized alcohol sales.

    • Consumer buying patterns in those states shifted away from hard liquor toward beverages with less alcohol content. The report suggests that since it was more convenient to buy liquor, customers didn't stock up on it at the government-controlled store.

    • Underage binge drinking is unaffected by the level of alcohol control.

    • Drunk-driving fatalities were found to be 25 percent higher in full-control states than in privatized states.

    Brooks also questioned the constitutional claim that Doran made.

    "I think the constitutional argument doesn't hold much water," Brooks said, adding that the state has a monopoly on the lottery, too.

    "Most of what I read classifies alcohol as a drug, a subject that can be abused," Brooks said. "It is legal, but it can be regulated by the state to the extent of it being a monopoly."

    Doran said the ABC issue should be looked at individually.

    "We take them as they come," Doran said. "The issue that is in most controversy is that the state's liquor monopoly... It's never a good defense to say, other people do it."

    Younts cited an ABC modernization study commissioned by former Gov. Bev Perdue in saying that the state could bring in as much as $1 billion from a full-scale ABC modernization or privatization.

    "In addition to this infusion of cash, modernization would alleviate the corruption and inefficiencies that accompany operating a proprietary business according to political considerations rather than economic realities," Younts wrote.

    Among the improprieties cited by Younts include a federal investigation into the ABC system in New Hanover County, the resignation of the ABC chair in Mecklenburg County after allegations of improper gifts from liquor companies, and missing money from a Pembroke ABC store.

    The John Locke Foundation has advocated the privatization of the ABC system for more than a decade. JLF's biennial Agenda policy recommendations have called for the General Assembly to deregulate liquor sales in North Carolina; sell the state warehouse and local ABC stores; and set flexible sales and excise tax rates to keep revenues on liquor sales neutral.
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