Last year dozens of Saskatchewan businesses paid for protection.
They paid for the opportunity to open their doors and received assurances that competitors would be kept in their place.
None of this is illegal. It doesn’t involve the mob. It’s all above board and even routine. It’s Saskatchewan’s liquor off-sale regulatory system.
Saskatchewan requires all liquor off-sale locations to buy permits, awarding them via auction: whoever bids highest can open an off-sale.
As with all commodities, the prices are based on supply and demand. The growing Saskatchewan economy is increasing demand, but the government is keeping a tight grip on the supply of permits.
For a community with a population of 2,500 or less, only one off-sale is allowed. The number of permits available rises with population, so Regina and Saskatoon get about 20 each. A winning bidder gets to keep the permit indefinitely.
The amounts paid can be significant. Successful bids in 2014 ranged from $5 all the way to $126,000. The average permit cost was $11,308.
Saskatchewan’s liquor regulations have roots that run all the way back to temperance movement. When that movement failed, government allowed people to buy alcohol, but tried to keep them from drinking too much by limiting access. This too was a failure.
Over time, liquor policy mutated. Instead of limiting access to protect drinkers, the policy started protecting those selling liquor by limiting competition.
Off-sale permits are market protection. In the past, off-sale licences were almost exclusively restricted to hotels.
Eventually, common sense prevailed that a restaurant selling beer by the glass is just as competent as a hotel when it comes to selling six-packs.
Saskatchewan recently recognized this point and removed a tangle of red tape to allow restaurants and taverns to apply for off-sale permits.
But removing that red tape also removed the fading argument that limiting off-sale permits has any purpose beyond market protection.
For anyone other than established market players, the system has the negative results that inevitably come with an uncompetitive market.
New businesses have to pay to play regardless of their competitive attributes. Those costs are passed on to consumers. And those consumers have fewer options to find the lowest price and best service.
As with any protection scheme, it won’t be easy to unravel. Some off-sales have likely debt-financed the purchase of their permits. An immediate lifting of this system would make their permits worthless, but the debts would remain.
Out of fairness, the government should consider refunding all or a portion of the permit bids when this system is rightfully unravelled.
This fall Saskatchewan will likely bring forward its plan to modernize liquor regulations. That plan must shift the focus to consumers because the current off-sale rules aren’t working.
Todd MacKay is prairie director of the Canadian Taxpayers Federation.
