Liquor stores, state clash over competition rule
Lansing — A proposed change to Michigan alcohol rules would allow multiple liquor stores on the same street corner and hurt existing retailers, say critics who are expected to pack a Wednesday public hearing.
The Michigan Liquor Control Commission is attempting to eliminate the so-called half-mile rule, which has usually limited liquor stores from operating within 2,640 feet of one another since 1979. Hundreds of liquor store owners are expected to attend the hearing and speak out against the plan, according to the Associated Food and Petroleum Dealers, a trade group representing independent retailers.
The state says the rule is outdated and no longer needed.
The rule is “protectionist and anti-competitive,” said David Harns, a spokesman for the Michigan Department of Licensing and Regulatory Affairs. “It significantly inhibits the ability for businesses to get into the business or to grow their business.”
The five-member Liquor Control Commission also argues the half-mile location rule was supplanted by a 2016 law that primarily focused on allowing beer and wine sales at gas stations.
But liquor store owners say their businesses could be decimated if those locations could also apply to sell liquor.
“I bought my businesses as an investment,” said Lisa Berry, who owns two liquor stores in Jackson and North Adams, where she sells spirits at minimum prices allowed by the state. “I’m 55 now, looking to sell and probably retire in the next eight to 10 years. If this proposal goes through, my investment is virtually gone.”
Berry purchased her North Adams General Store specifically because of its liquor license, she said, and her rural store in south Jackson is the only one of its kind within five miles.
“If the Shell station a mile and a half down the road next to (U.S. Highway) 127 can get a liquor license, financially it can hurt me,” she said.
The Liquor Control Commission will hold a public hearing on the pending rule change Wednesday afternoon in Lansing and is accepting written comments through 5 p.m. Sept. 13. It’s unclear when the rule may be finalized.
“This would pretty much enable people to have four liquor stores on every street corner in some areas, or liquor stores right next to each other,” said Auday Arabo, president and CEO of the food and petroleum dealers group. “We’re really worried about the geographic saturation of liquor store licenses in some areas.”
Panel defends rule change
Michigan carefully controls alcohol sales through a three-tiered system of licensed suppliers, wholesalers and retailers. The state functions as a wholesaler and sets minimum shelf prices that stores can go above, but not below.
The commission also publishes sales totals for every licensed store in the state, which Arabo argues is data a potential competitor could use to identify a successful store and attempt to open nearby.
“If it was a real, open system, with real competition, people would be all for it,” he said of the proposed rule change.
The Michigan Liquor Control Commission grants a limited number of retail licenses per community, based on population, and reviews all requests for new licenses.
It would be “impossible” for the revocation of the half-mile rule to lead to an explosion of liquor stores on street corners around the state, said commission Chairman Andrew Deloney.
“Such an argument supposes the creation of thousands and thousands more licenses,” said Deloney, who used to work for the Michigan Restaurant Association. “The Michigan Liquor Control Commission cannot create more liquor licenses — only the Legislature can.”
The commission, in a 2013 declaratory ruling, rejected a challenge to the half-mile rule from a Holly retailer who argued the state was discriminating against it in favor of another store that sold liquor 446 feet away.
But the state now says the rule is a “regulatory burden” for both liquor store license applicants and government staff. The majority of applicants denied liquor licenses are small, independent businesses, Harns said.
Michigan retail liquor sales topped $1 billion in 2016, according to liquor commission data.
The top four sellers were Meijer stores in Grand Rapids, Traverse City and Ann Arbor, which sold between $1.8 million and $2 million each in spirits. A&L Market on Joy Road sold the most in Detroit, topping $1.15 million last year. Most liquor-specific stores sell much less.
Law generates controversy
While the half-mile rule is intended to prevent an over-concentration of liquor stores in certain areas, rescinding it would “allow businesses and communities to determine the best placement” of quota-capped liquor stores, the commission said in a notice.
The 2016 law signed by Gov. Rick Snyder did not directly reference the half-mile rule but reiterated an existing location rule giving the commission the power to waive a population-based liquor license quota if there is no other store within two miles of the applicant.
The commission argues that the Legislature intentionally omitted the half-mile rule in the 2016 law and that rescinding it will “remedy a statutory conflict.”
But the commissioners are “mixing apples and oranges,” Arabo said. “The legislation deals with quotas, and the half-mile rule deals with distance. They actually complement each other; they’re not in conflict.”
The Associated Food and Petroleum Dealers sued the state this year when the Liquor Control Commission rescinded the rule without a public hearing. The commission eventually slowed what had been an expedited process to allow for public feedback.
State Sen. Rick Jones, R-Grand Ledge, introduced legislation in June that would write the half-mile rule into state law. He voted for the 2016 law allowing beer and wine sales at gas stations and said his bill would “clarify” the ensuing debate over liquor license locations.
The legislation, like a similar proposal introduced in the House, would direct the commission to use a digital “global positioning system,” or GPS, to measure the distance between liquor license store applicants and existing retailers.
“I think it’s reasonable that we don’t want to have a liquor store on every block,” Jones said, noting the state sets minimum liquor retail prices that stores cannot go below even if they face competition.
“So it would become very hard for people to suddenly have them springing up right next door to their store where they’re trying to make a living. The small mom and pops would really struggle.”