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Opinion: Ford government should just go ahead and privatize Ontario liquor sales

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lcbo-0530-ph

By Jake Fuss and Alex Whalen

At a recent news conference, Ontario Premier Doug Ford renewed a 2018 campaign promise to allow Ontario convenience stores to sell beer and wine. This would be a big step toward greater consumer choice, but the government should go much further and privatize liquor sales completely.

The Liquor Control Board of Ontario (LCBO), a crown corporation, currently runs Ontario’s government liquor stores, which are therefore sheltered from true competition and have little incentive to offer competitive prices. The province also protects a private quasi-monopoly on beer sales through an agreement with The Beer Store, a consortium of three large brewing companies that dominates the beer market, accounting for 62.9 per cent of all sales in 2020-21 — although since 2015 the government has allowed select grocery stores to sell beer, cider and wine.

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The result? In the main, if Ontarians are unhappy with prices, product selection or store locations, they have nowhere else to go.

Luckily, there is a different way to run the industry. Alberta privatized its government liquor stores in the 1990s with tremendous success. Privatization allowed new entrants into the market and removed the government’s near-monopoly on liquor, which had restricted competition and choice.

When the Alberta government announced privatization in September 1993 it was operating 202 government liquor stores. Immediately after privatization, the number of retail outlets exploded and today more than 1,500 private retail outlets are in operation across the province.

Liquor store locations became more convenient for Albertans. In 2018, 64 per cent of Albertans lived within a kilometre of a liquor store — by far the highest percentage of any province in Canada and much higher than Ontarians’ 26 per cent. The difference is not surprising. The same pattern is observed in the U.S. Three-quarters of Americans are served by a private liquor retailing system, and privatized states have 50 per cent more liquor stores per capita than those in which government still controls sales.

Privatization is clearly better for consumer choice. Alberta’s liquor product selection has expanded from 2,200 in 1993 to more than 31,000 varieties of beer, wine and spirits today. By comparison, Ontarians have at least 6,000 fewer products available to them. Research shows that Albertans also enjoyed falling prices at the cash register following privatization.

Critics of liquor privatization argue that it would deprive the government of an important revenue source, as the LCBO provides nearly $2.5 billion to the government annually. But governments can apply a mark-up to — or simply tax — liquor products without having to operate retail stores themselves. Alberta’s provincial treasury expects to collect $830 million in liquor tax revenue in 2023. And of course, privatization results in additional provincial tax revenue through business taxes that crown corporations don’t pay. Critics also sometimes suggest that private retailing leads to higher rates of crime and addiction but there is little evidence of that.

Liquor privatization would give Ontario’s liquor consumers more stores, greater convenience, wider product selection and, potentially, lower prices. There’s no good reason for the Ford government not to emulate Alberta’s privatized liquor model.

Jake Fuss and Alex Whalen are economists at the Fraser Institute.