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Here’s to a free market in wine!

Australians are known for having a fondness for drinking alcohol. This is all part of the general easygoing Australian lifestyle, beaches, beer, BBQ’s, and an all round good time.

As you can imagine, those killjoy statists in government here have always found this to be deplorable.

No government in Australia has ever had the courage/suicidal tendencies to actually try to impose prohibition, but in general, the trade in alcoholic beverages is one of the most highly regulated type of commerce in Australia.

And, as we have a Federal system of government, and the regulation of the sale of alcohol is a state matter, we have in effect seven different regulatory environments.

Although in nearly each case, the regulations started out as a Puritan attempt to regulate the drinking habits of Australia, over time the regulations have become a way for various rent-seekers to protect their interests at the expense of the consumer.

This can have unforseen consequences… I live in the state of South Australia, and this state is the largest producer of wine in Australia. We’ve lots of famous wineries that are exporting their product all over the world. This has seen a boom in wine production, with smaller, more enterprising producers trying to cash in on the action.

They are not being helped, though, by the regulatory framework in which they are required to operate. The problem isn’t so much in producing wine, but in selling it.

The laws in South Australia require that wine, and indeed all other liquor products, be sold in specialist stores or hotels. You cannot get alcohol at a supermarket. And these specialist stores are increasingly in the hands of two large supermarket chains. And it is not so easy to get your hands on a licence to open a competiting store.

These large chains are resisting pressure to deregulate the liquor licencing laws, and using their market power to control the wine market. Because they have the cushion of increasing control of the sale of wine products, they are able to squeeze the wineries into charging less for their wines, and also, restricting who the wineries sell to.

The Adelaide Review, an oddball monthly publication hereabouts with no serious online presence covered this story last month, and told the tale an enterprising chap called Tom Hesketh, who established cleanskins.com.au to sell a range of unlabelled wine from some of the smaller wineries. His site is providing some good wines at great prices. The Adelaide Review takes up the story.

Hesketh would like to establish a shopfront to compliment his internet trade, though he estimates it would cost $30,000 to apply for a liquor licence that he probably won’t win under corrent laws. He also alleges that anti-competitive practices are affecting his business. Some wineries have withdrawn prodcuts from the cleanskins.com.au site under pressure from their wholesalers. One small winemaker who did not want to be identified for fear of commercial retribution issued this notice: “I have had to field a couple of phone calls from my current wholesale customers that buy my cleanskins and they have complained about the listing on your website. These guys are a fairly major part of my business and they won’t buy any further stock until the listing of … is removed. So I’m sorry to say that I would like to cut our brief relationship short ASAP”.

Of course, on one level this sort of thing happens all the time, and there’s actually nothing wrong with it. If you’ve worked hard to dominate the market, then it’s fair enough that you’ve got commercial muscle that you can use to wring the best terms you can out of your suppliers.

But these wholesalers haven’t worked hard to dominate the market. They are using the commerical anabolic steriod of government regulation to cheat their way to market prominence. They are the commerical equivilent of drug cheats.

14 comments to Here’s to a free market in wine!

  • John Ellis

    [quote]No government has ever had the courage/suicidal tendencies to actually try to impose prohibition [/quote]

    Except the US government in the ’30’s, of course…I guess that was so obvious it wasn’t worth mentioning?

  • Yeah I was writing in an Australian context… I will edit the post to reflect this.

  • As a fellow libertarian and aussie, I can symphathise! Except I don’t understand the link between anabolic steroids. Strength- and power- weight training consists, grosso modo, of ‘overusing’ your muscles. The contribution of anabolic steroids is to permit you to over-overuse your muscles: to work your muscles even more than you would be normally capable. But you don’t get anything for free, you still have to work. (there is a small ‘free’ benefit in that for the same amount of work you sustain less fatigue, etc, and thus can continue sooner, but we still come back to actual work)

    A better analogy would be Olympic quotas, for example, or blood-doping.

  • It is the same way here in my current home state of Minnesota in the U.S. Alcohol is only purchaseable in stores, and licesned liquor stores. Our last govenor campaigned to allow grocery stores to sell some, but the Legislature was pressured out of it by the trade group. Not suprising though.

  • Good grief. Even in TEXAS we can buy beer & wine in grocery stores.

    Just not in every county or town — which has to be the most stupid policy ever imposed.

    Just drive to any “dry” town’s border, and you’ll find anywhere from three to a dozen liquor stores lined up waiting to make money off other people’s thirst.

    Or something like that.

    Bloody fools — both ours, and yours in Oz.

  • Not suprising. It is the Same way in, Kim will hate this, Illinois.

    I lived in a suburb that was officially dry for much of the time, but there wasn’t to far to go before you got to a Grocery store that had a small beer and wine selection.

  • Richard

    Here in Alabama, you can buy wine and beer at grocery stoers, but not liquor. The liquor license, I hear, is very hard to get, and the vast majority of liquor in Alabama is sold in the state-owned ABC (Alabama Beverage Control board) stores.

  • Something similar goes on here in the US when it comes to shipping wine across state lines. Fortunately, we happen to have a fine little libertarian public-interest law firm that specializes in fighting this crap.

    Institute For Justice Case Summary — New York Wine (Swedenburg v. Kelly)

  • Thanks for that link Theif- that is a great result for US wine-lovers and a blow for selfish wholesalers.

    Alas, I couldn’t imagine it happening here in Australia.

  • J.H.

    In New Hampshire, U.S.A.., a state with a very small fairly non-intrusive govt., Beer and wine can be purchased in any grocery, convenience store. BUT…

    a) hard liquor can only be purchased in state owned

    b) the state has an import/wholesale monopoly on all
    alchoholic beverages and therefore skims a lot
    off the top.

    There are no bars in N.H. A restaurant or pub must make a certain % of its income from food sales.

    In neighboring Massachussetts alchohol can’t be
    purchased on Sunday (except the last Sunday before

  • Here’s an example of government waste — the state defeating its own purposes.

    In Pennsylvania, the PLCB (liquor control board) has authorized shops that are not state-owned to set up near state borders to stop “border bleed” because it is technically illegal to buy liquor in another state and bring it back for personal consumption. However, they acknowledge that there is no enforcement. Stupid law, stupid solution, but nobody’s complaining. What has happened is the board has created a market for liquor sales at state lines, causing a rush for competition and lower liquor prices. They’ve created an increase in competition between liquor stores and allowed free trade to flourish against themselves — the state has lost the ability to limit alcohol consumption to keep the alcoholic beverage sales within state lines.

    Might as well have allowed free trade, since the law is unenforceable. Instead they relinquish some of their control for “enforcement.” The result would be the same — the state loses money to the private sector and makes alcoholic beverages cheaper and easier to obtain. Rather than repealing such an inane law, they decided to create more legislation to achieve a similar effect.

  • Geoffrey Gold

    Can’t believe it is the long-term interest for those two supermarket chains to support such antiquated South Australian state law. In other states, those same two chains have introduced full-range “bottle shops” in ALL of their supermarkets, regardless of size.

    I recall that South Australia also had ridculous laws on purchasing petrol (gas) on Sundays and most of the street lights in metopolitan Adelaide were switched off at 1 AM in the morining to save power (after all noone is expected to be active at that hour). How were those issues resolved?

    Given the (lack of) quality of their fresh water supplies, South Australians probably have a “human rights” action for easy access to bottled wine.

  • Geoff Kenney

    “…we have in effect seven different regulatory environments.” Actually we have eight, the six states plus the Northern Territory and the Australian Capital Territory.

  • Actually, the U.S. is worse in that department. Alcohol is state-regulated, meaning we have 50 different sets of laws.