Coyote Blog

A while back I challenged anyone who doubted the burden of regulation to go try to get  a California liquor license.  Today, John Stossel echos the same theme in this post.

“The authority’s 26-page “on-premises” application requires owners’ detailed financial information, prior employment experience, proof of citizenship and floor-plan details, and it also entails fingerprinting and background investigations. It asks whether music will be played (and if so, what kind) and whether dancing is planned… Such was the complexity of the application process that “I visited the office so many times, it got to the point where the guards stopped asking me for identification,” Steve Chahalis said.

I can concur with this experience. In every state I have gotten licenses, I have encountered a bureaucracy that has pretty much forgotten even why it exists or what it is trying to achieve. The Department of Labor can be a pain in the butt, but it at least it has a mission (protect workers from depredations by “the man”), even if that mission is sometimes misguided. But it is impossible to even figure out what problem state liquor boards are trying to protect us from with some of the detailed questionnaires and picayune attention to detailed responses**.

Yet the Times and the bureaucrats have the nerve to blame the businesses: “Restaurant and bar owners are to blame for some of the delays” says the reporter, quoting a state bureaucrat who says: “Ninety percent of the applications are incomplete when submitted.”

LOL. Let me give you one example. I had to cancel my entire application, on which I had spent over a year, resubmit a new application, and pay an additional $200 in fees all because on one form (out of scores) there was a typo that showed the address on “Lake Pire Rd” rather than “Lake Piru Rd.”   So was this my fault, having a typo in thousands of words of application responses, or the fault of the state liquor board’s for not just hand annotating the typo and moving on? If you told me that the main guiding principle of ABC operations was to find a way to reject and send back every single application for even the most trivial of reasons, I could not muster any evidence to disagree with you.

I always complete the applications myself, but I may finally give in on the next California application. In California, the state is full of consultants who will fly your application through the process. Anyone want to guess who these consultants are? If you guessed “retired government alcoholic beverage commission employees,” you win. This is the retirement plan they have created for themselves — make the process so onerous for individuals trying to navigate it that they are forced to use a retired ABC employee as a consultant, after which the process magically goes smoothly.
By the way, this is also another good example of how large corporations are benefited by regulation vs. smaller competitors.  TGIFridays, for example, has a whole department of people who just do liquor licenses.

**Postscript:  Part of the problem is that states are trying to protect us from Al Capone — thus all the fingerprinting and background checks.  But that problem was solved with legalization.

To get a liquor license for my corporation in California, I must tell the state where I was married and on what date(!)  This is about the weirdest thing I have been asked on a form for my corporation.  Of course this is on top of the usual over-the-top list of requirements to get a liquor license which include providing the state with:

• Fingerprints of owners and officers
• Name of bank and checking account numbers
• Name and address of accountant
• Name and address of attorney
• For every owner and officer:
  • Spouse’s name
  • Home address
  • Home phone number
  • Drivers license number
  • Social Security number
  • Height, weight, eye and hair color
  • Value of home
  • Value of investments
  • Debts and mortgages
  • Net worth and Personal income history (again for each as individuals, not for the corporation).

The entire application, including forms and drawings, requires hours and hours to complete.  As is usually for government forms packages, the same information is requested on multiple forms.  To apply for two licenses requires two entire sets of forms filled out, signed, and notarize separately, despite the fact that 99.9% of the information is the same.  My wife and I have to fill out extensive, totally identical personal affidavits multiple times, despite the fact that the exact same forms with all this information are already on file with the State of California for other liquor licenses the company holds in the state.

The purpose, of course, is twofold:

• To make sure we are not fronting for Al Capone, a problem that went out of date about 5 minutes after the repeal of prohibition, but still drives licensing requirements 75 years later.
• To make the process arcane and onerous enough to discourage us from entering the business in California, or, as a minimum, to force us to hire a consultant to help us with the process, the profession of which is 99.9% dominated by ex-California ABC employees.  The harder the process is, the better the prospects for their post-retirement consulting gig.

I am always ready to criticize the US and our steady slide into police state tactics against our own citizens.  But I think that those who have some rosy picture of European countries being some sort of civil liberties ideal towards which we should aspire are mis-informed.  Granted that a number of these countries have more sensible attitudes both towards drugs as well as sexual relationships that don’t fit a biblical script, but their state police forces have powers over their citizenry we (at least not yet) don’t tolerate.

Today’s object lesson is Britain:

For the past couple of years the British government has been extremely aggressive in installing surveillance cameras — CCTV on high streets, speeding cameras on highways, and so on. If you are a typical British citizen, your actions are captured on camera hundreds of times a day, and you can be watched with suspicion even without the government having any probable cause reason to suspect you of anything. Relatedly, they have also been challenging people taking pictures in public, and have recently essentially made it illegal to take pictures of police officers (with the justification being the possibility of terrorist abduction of officers). The erosion of civil liberties in Britain has been short and sharp.

Now some local authorities are witholding liquor licences from pub owners unless they agree to install CCTV inside the pub. One striking recent example is The Draper’s Arms in Islington, a borough of London. As the Londonist notes:

Nick Gibson is attempting to re-open The Draper’s Arms on Barnsbury Street, a former Evening Standard pub of the year winner that shut its doors last August. But to regain a licence, he’s been told he must fit CCTV cameras that capture the head and shoulders of everyone entering the pub, and be willing to hand over footage whenever the police ask for it.

Gibson is furious at what he sees as erosion of civil liberties. However, his local MP and the Metropolitan Police keep blithely citing ‘public safety’. We find that a bit rich, considering studies have shown CCTV is less effective than increased street lighting at cutting crime, and CCTV footage is used to help solve just 3% of London robberies.

I have written on this topic quite a bit, but via Cato comes another great example of how licensing and regulation, while promoted as consumer protections, much more frequently are incumbent protection against new competitors.  Cato has a video of some folks in Oregon who started a moving business, only to find that sate law effectively requires them to get permission of current moving companies before they can operate  (apparently, someone in Oregon is enamored of medieval guild systems).

How the law works is that when a new mover submits his application for a business license, existing movers can file an objection (which apparently is pro forma).  The new company must then justify to the state why another moving company is justified by the marketplace.  Of course, absolutely no guidance is given how such a thing might be proven.

I would have found this unbelievable, had not my company faced the exact same requirement in another context.  In Shasta County, California, we wanted a liquor license to sell beer at the store we run at McArthur-Burney Falls State Park.  We were told that we could not have a license until we had proven to the County that there was enough demand for another liquor outlet.  It was for our protection, they told me — we wouldn’t want you to get in a situation where you might fail.

I have written about liquor licensing before – if ever there was a regulatory regime whose time was long past, this is it.  The extensive fingerprinting and background checks one must go through to get a license are outdated remnants of a concern for the return of organized crime, a problem that was obviated by legalization  (so that, as usual, the government regulatory regime to fix a problem was instituted at the same moment the problem went away).  Now, the liquor licensing process is used as a club by existing competitors to keep new entrants out.  My bet is that organized crime is now on the other side of the fence, using the liquor licensing process to hammer honest competitors.  And if you really want to see abuse, read the whole Rack ‘N Roll saga by Radley Balko.

I bet you are just overcome with suspense wondering if we got our license.  In Shasta County, we eventually succeeded, mainly because the store was in a gated park with an entrance fee, and we could make the argument that competition did not really cross the gates of the park.  Years later, we lost a similar battle in Lake Havasu City, AZ, where a group of local business people have really organized the town to their benefit and use every tool they can, from zoning to licensing, to keep competitors out.