New York Alcohol Bill Benefits Big Business at Consumers’ Expense

by Michelle Minton on February 5, 2014

in Alcohol Regulation Roundup, Features, Politics as Usual, Regulation, Transparency

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New York’s consumers and small alcohol retailers could soon be paying more for their tipples, for the benefit of big wholesalers. A bill now making its way through the New York legislature would require all wine and liquor sold in the state to be warehoused in in-state for 24 hours prior to sale. While the bill would be a boon to the state’s two largest wine wholesalers, who already store their products in-state, it will significantly raise the cost of business for small and mid-sized wholesalers who warehouse in New Jersey—possibly even putting them out of business. Consumers will see prices increase not only right away, but also in the future as competition dwindles.

The bill’s (S3849-2013) author, Senator Jeffrey Klein (D-Bronx), touts it as a way to even the playing field and protect warehouse jobs in the state, while pointing out that 33 other states have similar laws. But so what? In practice, the bill will do nothing to help consumers, either in the short or long term. Right away, prices will increase, as wholesalers are forced to rent space in New York’s more expensive warehouses.

Small and medium-sized liquor and wine dealers will pay an additional $10 per case—a cost increase that, as Connie Oehmler of Verity Wine Partners estimates, will result in an extra $2 per bottle for consumers. And that’s assuming these small and medium wholesalers remain in operation. For many, the cost increases may mean they have to close shop. Over the long term, the reduced competition will give largest wholesalers and warehouse owners little incentive to reduce their prices.

While the bill would provide little benefit to New York consumers, it would prove lucrative for the state’s two largest wine and liquor wholesalers—Southern Wine & Spirits and Empire Merchants–which have put a lot of money into bolstering the bill’s chances. Empire Merchants, which has warehouses in Queens and Brooklyn, has contributed a total of over half a million dollars over the last eight years to key lawmakers in the state, including Gov. Cuomo, state Senate co-leader Dean Skelos, and Assembly Speaker Shelly Silver. Klein, who has received $33,000 in campaign donations from the Empire Merchants, reportedly met with Empire on the legislation, according to a New York Post source. Oehmler is right to call the bill a “blatant, bald-faced attempt to put all their competition out of business.” And this isn’t the first time that a New York lawmaker or Klein, specifically, has been wrapped up in a proposal that appears to be written for the exclusive benefit of a few big New York businesses.

In addition to raising raising alcohol prices, the bill will also likely encourage cross-border alcohol purchasing, as consumers seek out cheaper products in neighboring states, resulting in a lost tax revenue for New York. Despite all the negatives, Klein likely will not back away from his flawed proposal.

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