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All Eyes on Washington (State) as Voters Consider Privatization


On November 2, 2010 citizens of The Evergreen State will see two separate measures on the ballot concerning the distribution of liquor. Both initiatives represent a big change to the current liquor distribution system. The Washington State Liquor Control Board currently regulates the sale of all liquor (wine, beer and spirits) and maintains total control over distribution and retail sale of spirits. Washington is one of the nineteen control states, and is one of three control states, along with North Carolina and Virginia, that took a hard look at privatization in this election year.

Initiatives 1100 and 1105 would privatize liquor sales, completely removing the state’s involvement from the sale of liquor. However, the state would retain its involvement in the enforcement and regulation of liquor products sold within the state. The measures could significantly decrease the amount of tax collected from liquor sales; initiatives 1100 and 1105 would both discontinue some portion of the current taxes collected on liquor, and both seek to replace the lost revenue with alternate collection methods. A loss in revenue is one of the main concerns with both initiatives, particularly I-1105.

Initiative 1100 is sponsored, in part, by Costco and Wal-Mart, large retailers who stand to receive significant benefits from its passage. If the initiative is adopted, retailers would no longer be required to to purchase liquor from a wholesale distributor; retailers could purchase spirits, wine and beer directly from the manufacturer. Additionally, retailers could negotiate volume discounts, a practice currently banned for wine, beer and spirits. Lower prices for retailers means lower prices to consumers, but some producers fear that they will not be able to compete with the low prices that large producers may be able to offer. Several other important changes would also occur, including adding the ability for retailers to charge liquor suppliers for shelf space (slotting fees) and eliminating Cash on Delivery (COD) requirements.

Like I-1100, I-1105 would remove the state’s presence from the selling of liquor, however, there are few other similarities. I-1105 is sponsored, in part, by the Washington Beer and Wine Wholesalers two Washington wholesalers, Odom Southern Holdings and Young’s Market Company. If the measure passes, state distribution centers would be forced to close by April 2012. Volume discounts would be permitted for spirit products only; not for beer or wine. Additionally, with passage of I-1105, spirit products could be sold at retail stores alongside beer and wine.

If I-1100 passes, state retail stores would be required to close, and state distribution centers could not purchase any new products effective December 1, 2011. Spirit-only distribution centers would be able to apply for a spirit distribution license as early as December 2, 2010, while new liquor permits to distribute any combination of liquor products would become available in January 2011. Liquor retailers’ licenses would be made available in June, 2011.

If I-1105 passes, operation of state liquor stores would cease, and state distribution centers would have to sell all assets by April 1, 2012. Newly licensed spirits retailers would be allowed to commence sales on November 1, 2011. Newly licensed spirit distributors would be able to begin distributing spirits on October 1, 2011.

A ballot poll from mid-October suggests that neither initiative has emphatic support, but of the two, I-1100 is in the lead. Though it is unlikely, if both initiatives pass, the common provisions of both initiatives would become effective, leaving the state legislature to sort out conflicting language. Any decision (or lack thereof) made by the state legislature could be challenged in court.

For more details on the specifics of Initiative 1100, please view the full text of the initiative or view the Senate summary. For more specific details on Initiative 1105, read the Senate summary, or view the full text of the measure. For further information and a detailed comparison of each initiative, a suggested account is Sean Sullivan’s four-part series in the Washington Wine Report. Brief summaries, quoted from the Senate summaries linked above, are provided below.

I-1100 Brief Summary:

Initiative 1100 (I-1100) amends state laws regarding the manufacture, distribution, and sale of liquor in Washington. There are two main components to the initiative. The first component changes the way the state regulates the distribution and sale of beer and wine. Washington has a three-tiered system of beer and wine regulation: a manufacturing tier, a distribution tier, and a retail tier. Beer and wine must generally move through each tier before it can be purchased by a consumer. A number of laws regulating the relationships and business transactions between and among the tiers are repealed by I-1100, including uniform pricing requirements and restrictions on financial interest, quantity discounts, and moneys’ worth.

The second component changes the way spirits, also known as hard liquor, are sold in Washington. Washington is a control state, meaning the state has exclusive control over the distribution and retail sale of spirits in the original package. I-1100 eliminates the state’s exclusivity and privatizes the distribution and sale of spirits.

I-1105 Brief Summary:

Initiative 1105 (I-1105) amends state laws regarding the distribution and sale of spirits in Washington. Washington is a control state, meaning the state has exclusive control over the
distribution of spirits and the retail sale of spirits in the original package. I-1105 eliminates the
state’s exclusivity and privatizes the distribution and sale of spirits (hard liquor).

4 Comments

  1. Thanks for the shout out. It will be interesting to see how the votes come in.

  2. Great commentary on the Washington State Initiatives!

  3. I know the vote is over and this is after the fact, but there are some flaws in this article which lead me to believe this writer is not finding all the facts, just writing what he/she thinks or may have heard from someone else. For one, the Washington Beer wholesalers never supported either initiative, and for good reason. They were both a joke. I am all for moving forward and advancing things, if they are done THE RIGHT WAY. These were ill planned attempts, especially I-1100 which was just a greedy money and power grab by the big guys, Costco and Wal-Mart.

  4. John, thanks for the clarification – we updated the post; the Washington Beer and Wine Wholesalers did not support I-1105. The two main contributors to the bill are members of the organization, wholesalers Odom Southern Holdings and Young's Market Company.

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