Jim Ferlo’s Bad Arguments for Anti-Competitive Bar and Restaurant Regulations

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I don’t agree with much of anything Jim Ferlo has to say here, but I especially want to point out how ridiculous this line of argument is:

Step three: Undermine all existing licensees. Say what you want about the confusing system of alcohol laws in Pennsylvania. They still have permitted many local businesses to thrive. Distributors, restaurants, and taverns have all found a way to make a good living within the existing constructs of the Liquor Code. Governor Corbett’s plan seems to threaten the existence of each of these entrepreneurs and small businesses in favor of large retail establishments. He seems to be throwing them a bone in the plan, but we all know what will become of our distributors and taverns that rely on beer sales and have adapted in order to compete in a closed system. They will fail and those local businesses that support our little league teams and volunteer firefighter organizations will be lost, replaced by indifferent big box stores run by huge corporations.

This is complete nonsense. What Ferlo is defending here is an uncompetitive restaurant and bar market.

First of all, the Corbett plan does not fundamentally change anything for most of the incumbent players in the alcohol market aside from the state store employees. The ridiculous beer distributor business model is still there. Now they will have to compete with supermarkets, but they’ll also be able to sell beer six-packs and wine and liquor. Taverns and restaurants will lose their monopoly on six-pack sales, but they’ll be able to sell wine to go.

This doesn’t go nearly far enough to increase competition in the bar and restaurant market, but Ferlo is acting like this small change is the end of the world for existing bars and restaurants. Even worse, he completely mischaracterizes the nature of the threat to incumbent bars and restaurants from reducing barriers to entry in this market. It’s not more competition from big box retailers that existing bars have to fear, but more competition from new bars and restaurants.

Corbett’s plan doesn’t touch the County Quota System that limits tavern licenses to 1 per 3000 people per County, and that’s a huge missed opportunity. The plan really ought to end the license cap, or at least print so many new licenses as to make the existing ones worthless. We’d need to compensate the license holders for some portion of what they bought them for, which could get expensive, but would unquestionably be worth doing. Letting all bars and restaurants sell alcohol is the easiest way I know of to increase service industry wages.

As liberals, that’s what we need to be concerned with, not plumping for incumbent interests with silly misleading talking points.

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3 Responses to Jim Ferlo’s Bad Arguments for Anti-Competitive Bar and Restaurant Regulations

  1. Pingback: Taking down the PLCB - Page 3 - City-Data Forum

  2. Ed H. says:

    Ferlo is completely correct. Most of the states bars and restaurants work on very slim margins to stay open and keep people employed as it is now (I’m saying this as one who knows the inside and outs if the business in the state in both the Philadelphia area and the Pocono area). The addition of new restaurants and bars serving alcohol, willy nilly, as you’ve been proposing, will force many existing bars and restaurants to close, drive down wages for wait staff in the form of list customers and tips, and generally force the industry to be made up of soul sucking corporate places like TGIFridays, Ruby Tuesdays and Olive Garden in many areas. Yes, it will work out in a few select areas, like Philly, Pittsburgh, Allentown, and even some smaller towns like West Chester. But the neighborhood bat will be a thing of the past, as its largely struggling against high insurance with the stronger drunk driving enforcements and even the drunk drivers suing bars because bartenders serve them instead if baby sitting someone who overdoes it. Luckily, liberals and the Bible Belt Pennsylvania Reps will stand up against privatizing the PLCB and making a mess of the licensing system. Besides, the state just can’t afford to lose more money by selling off the liquor store licenses for $600 million if we’re lucky, while losing far more than that in a year and a half of lost PLCB sales.

    • Jon says:

      You’ve got it backwards. The addition of alcohol to more restaurant menus will make more restaurants financially viable. And since higher wages depend on higher profits, workers will have a better shot at higher pay than if profits are thinner. It’s when restaurants have to get by on food alone that the business model is more volatile. Will some crappy bars and restaurants close if there’s more competition? Of course. But they’ll be replaced by other small bars and restaurants. I don’t think the neighborhood bar is really competing against TGIFridays, it’s not the same kind of thing at all.