University of Waterloo economist Anindya Sen recently published a study which tells us what everyone but the Ontario government already knows: the legally protected Beer Store monopoly is overcharging consumers. That is what monopolists do, after all. The price discrepancies with other jurisdictions are so obvious that beer drinkers routinely flock from Ottawa to Quebec, Windsor to Detroit, Niagara Falls to Buffalo, and so on, to save money on beer. And unlike the Liquor Control Board of Ontario, whose monopolistic retail profits at least are returned to the public treasury, the Beer Store profits accrue to foreign conglomerates Anheuser-Busch InBev, Molson Coors, and Sapporo. It’s hard to imagine a rationale for handing over $700 million to foreign beer companies annually. That’s because no such rationale exists. It is a historical accident that we should immediately rectify.
Sen’s study compared prices of beer in major Quebec retailers, and the Beer Store. He found that on average of Ontario consumers are paying $9.50 per case (27 percent) more for beer than their Quebec counterparts ($25.95 compared to $35.56). As a side note, it’s not hard to find those same brands for $16 per case in most states.
The study does point out that there are arguments for having high liquor prices. But if one agrees with that perspective, surely it would still make more sense for the excess price to accrue to the public treasury. Increased competition would lower the price of beer. But if we want to keep beer prices high for social policy reasons, we can simply increase the beer tax.
I’d argue that increased liquor taxes tend not to work out as intended, but that is a separate issue. If we’re going to keep prices high to pay for social costs of alcohol, that revenue should actually be returned to tax payers in the form of related spending.
The gigantic annual corporate welfare haul hurts consumers and hurts independent Canadian breweries. It’s time to introduce some competition to beer retailing in Ontario.