Last year dozens of Saskatchewan businesses paid for protection. They paid for the opportunity to open their doors and received assurances that competitors would be kept in their place. The amounts paid for this protection ranged from two digits to six.
None of this is illegal. It doesn’t involve the mob. It’s all above board and even routine. It’s Saskatchewan’s liquor off-sale regulatory system.
The Saskatchewan government is currently studying the results of its public consultation regarding liquor regulations. This fall the government will likely bring forward its plan to modernize the system. That plan must shift the focus to consumers because the current off-sale rules aren’t working.
The Saskatchewan government requires all liquor off-sale locations to buy permits. The prices are not simple fees like a those paid for a standard business licence. The government awards the permits via auction: whoever bids highest can open an off-sale.
As with all commodities, the prices are based on supply and demand. The growing Saskatchewan economy is increasing demand, but the government is keeping a tight grip on the supply of permits. For a community with a population of 2,500 or less, only one off-sale is allowed. The number of permits available rises with population so Regina and Saskatoon get about 20 each. A winning bidder gets to keep the permit indefinitely.
The amounts paid can be significant. Successful bids in 2014 ranged from $5 all the way to $126,000. The average permit cost was $11,308.
Off-sale permits are market protection. In the past, off-sale licenses were almost exclusively restricted to hotels. Eventually, the common sense point prevailed that a restaurant selling beer by the glass is just as competent as a hotel when it comes to selling six-packs. For anyone other than established market players, the system has the negative results that inevitably come with an uncompetitive market. New businesses have to pay to play regardless of their competitive attributes. Those costs are passed on to consumers. And those consumers have fewer options to find the lowest price and best service.
As with any protection scheme, it won’t be easy to unravel. Some off-sales have likely debt-financed the purchase of their permits. An immediate lifting of this system would make their permits worthless, but the debts would remain. Out of fairness, the government should consider refunding all or a portion of the permit bids when this system is rightfully unravelled.
The Saskatchewan government has stepped up and said it will unveil a plan to modernize liquor regulations this fall. That modernization needs to focus on consumers. When change does come, it must stop limiting the number of off-sales and open liquor sales to real competition.
Canadian Taxpayers Federation
