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HICKS: Piecemeal dismantling of liquor laws a bad idea

January 31, 2015

Mike HicksThe Legislature will take up the issue of Sunday alcohol sales this session. I think it is silly to tell adults where and when they can purchase an entirely legal substance that has a 4,000-year cultural history. It is even more senseless to prohibit the sale of wine that would be used in communion on the day it would be used.

But there is a lot more to the story than the repeal of an inane Blue Law. The regulation of alcoholic beverages in Indiana contains a vast web of laws that apply differently to different types of businesses. Over the past 80 years, firms across Indiana have in good faith made investment and location decisions based upon these laws.

Now the Legislature proposes to eliminate one of these laws under the belief that to do so would increase market competition, leveling the playing field between liquor store owners and other retailers.

If only the issue were this simple, I would be an adamant supporter of the law. The truth is a bit different.

Eliminating the prohibition will not improve competition between package liquor stores and other retailers. Instead, it will clearly shift the balance to other retailers, with the primary beneficiary being big-box and convenience stores.

In 2009, a colleague and I tested the effect of ending Sunday sales on the package store industry using data from all 50 states over the past few decades. The result was, though overall alcohol sales remained unchanged, about one in four package stores closed.

If this law passes in Indiana, we should expect much the same effect. All the lost sales in package stores will be made up at stores that are not bound by the remaining restrictive laws governing package stores.

As legislators debate Sunday alcohol sales, they should know that, while a part of the legislation laudably dismantles a bad idea from nearly a century ago, the proposed law is dangerously incomplete. This law is not an extension of free markets; it instead lessens competition by leaving in place too many restrictions on existing package stores.•

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Hicks is a professor of economics and director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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