Noah Vinter
After the US ended Prohibition in 1933, the federal government gave each state the power to set their own laws around alcohol sales and distribution. Some states wanted to retain control over this industry to limit access and reduce consumption by residents. These are known as control states, and there are currently 17 of them, including Alabama, Idaho, Iowa, Maine, Michigan, and Pennsylvania. Control states regulate the sale and distribution of alcohol through government agencies, with some states limiting sales to state-run Alcoholic Beverage Control (ABC) stores. In contrast, open states allow licensed private sellers to buy and sell alcohol, with only state laws as restrictions.
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What You'll Learn
Control vs open states
In the United States, there are 17 control states and 33 open states. Control states are those in which the state government controls some aspect of liquor sales. In these states, the government intervenes at the distribution level to choose brands and set minimum prices. The government may also limit sales to state-run Alcoholic Beverage Control (ABC) retail locations.
The control state model benefits producers as once a product is approved for sale, it is sold at locations throughout the state at the same price. The government also purposely provides fewer points of access to alcohol in the hopes of reducing the rate of addiction and alcohol-related problems. Control states also earn revenue from liquor sales, which is put back into the community to improve public services.
Open states, on the other hand, allow private businesses to buy and sell alcohol. In this system, businesses set their own prices, which generally leads to lower prices and increased access to a more diverse selection of products. Open states also allow producers to sell directly to distributors or customers.
Some states are classified as "Franchise" states, where state franchise laws protect in-state distributors from abrupt terminations by their suppliers.
While control states may have fewer options and less competitive pricing, they offer a level playing field for producers and help to reduce the negative impacts of alcohol on communities. Open states offer greater accessibility and selection of alcohol but may contribute to increased consumption and related harm.
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State-run vs private retailers
After the US ended Prohibition in 1933, the federal government gave each state the power to set their own laws around alcohol sales and distribution. Some states wanted to retain control over this industry to limit access and reduce consumption by residents.
There are currently 17 control states where the state government controls at least one aspect of alcohol sales. These states can be divided into two groups. The first group is more strict and completely limits the sale of liquor to state-run Alcohol Beverage Control (ABC) stores. These include Alabama, Idaho, New Hampshire, North Carolina, Pennsylvania, Utah, Virginia, and Washington. In these states, the government takes over the wholesale trade and conducts the retail sale of heavier alcoholic beverages through its own stores. That is, the state itself engages in the sale and distribution of alcoholic beverages.
The second group takes a more indirect approach, allowing liquor to be sold at private retail locations while working at the distribution/wholesale level to determine which products will be sold and set pricing minimums. States in this group include Iowa and Vermont. In all monopoly states, a parallel license system is used to regulate the sale and distribution of lighter alcoholic beverages such as beer and wine.
The license system in control states allows private enterprises to buy and sell alcohol at state discretion. However, the licensing process can be strict and challenging for new breweries and distilleries to meet all the requirements. In addition, states decide what type of alcohol can be sold and to what extent you can have an inventory of alcohol. Control states purposely provide fewer points of access to alcohol, with limited numbers of ABC stores, in the hopes of reducing the rate of addiction and alcohol-related problems.
In "open" states, licensed private sellers are allowed to buy and sell alcohol and are only restricted by state laws. Examples of open states include California and Colorado.
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State-level restrictions
After the US ended Prohibition in 1933, the power to control alcoholic beverages was transferred to individual states, allowing them to set their own laws around alcohol sales and distribution. This resulted in a wide variation in state-level restrictions, with some states opting to take a more direct hand in liquor sales. These are known as "'control states', and there are currently 17 of them, including Alabama, Idaho, Iowa, Maine, Michigan, Minnesota, Mississippi, Montana, New Hampshire, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Washington, and Wyoming.
In control states, the state government directly regulates the sales or distribution of alcohol. While some states only control the wholesale level, Alcohol Beverage Control (ABC) states mandate that liquor be sold through state-run package stores. ABC stores have limited operating hours and may be closed on Sundays, and they are not allowed to promote liquor sales through discounts or "buy one, get one free" programs. The number of ABC stores is also restricted, requiring customers to go out of their way to purchase liquor.
The license system in control states allows private enterprises to buy and sell alcohol at state discretion, but it operates as a device of restraint rather than a grant of privilege or freedom. The licensing process is strict and challenging for new breweries and distilleries, and states decide what type of alcohol can be sold and the extent of alcohol inventory. Control states also have the power to set prices and choose brands, resulting in uniform prices across the state.
In contrast, "open states" allow licensed private sellers to buy and sell alcohol, with restrictions set only by state laws. Open states provide more locations for alcohol sales and greater competition among brands. Some states, including open states, also have dry counties where alcohol sales are prohibited entirely.
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Reduced consumption and addiction
After the US ended Prohibition in 1933, the federal government gave each state the power to set their own laws around alcohol sales and distribution. Some states wanted to retain control over this industry to limit access and reduce consumption by residents. These are known as control states, and there are currently 17 of them, including Alabama, Idaho, Iowa, Maine, Michigan, Minnesota, Mississippi, Montana, New Hampshire, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Washington, and Wyoming.
In control states, the government purposely provides fewer points of access to alcohol to reduce the rate of addiction and alcohol-related problems. This means that customers may have to go out of their way to purchase liquor instead of buying it at their local drugstore. Control systems that oversee retail alcohol sales generally result in lower alcohol outlet density, which can improve quality of life by reducing property damage and public disturbance. They also protect communities from an oversaturation of alcohol-selling locations, which has been found to increase consumption and cause harm.
In addition to limiting the number of alcohol retailers, control states also control sales through pricing. States set prices or markups, which are uniform across the state, and have a formula for how the proceeds are split between the various parties. This can help to keep sales reasonable and benefit public health by limiting the sale of alcohol. Control states can also earn revenue from alcohol sales, which can be put back into government programs that benefit the local community.
Control states also have strict limits on what alcohol can be sold, who can sell it, and how much an individual can buy. For example, some states only allow liquor to be sold at state-run ABC stores, while others allow sales at private retail locations but control the distribution and wholesale level. Some states also require a brand to obtain a state control code for each product before it can be offered for sale. This can make it challenging for new breweries and distilleries to meet all the requirements and get their products on shelves.
Overall, the goal of control states is to reduce consumption and addiction by limiting access to alcohol, controlling pricing, and earning revenue to benefit public health initiatives.
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Revenue and community investment
After the US ended Prohibition in 1933, some states opted to take a more direct hand in liquor sales. These are known as control states, and they directly regulate the sales or distribution of alcohol. Control states can earn a decent amount of revenue from liquor stores, which is then put back into the community.
In control states, the government purposely provides fewer points of access to alcohol to reduce the rate of addiction and alcohol-related problems. This means that customers may have to go out of their way to purchase liquor. Control states also try to control sales through pricing. They can set prices and decide on the formula for how the proceeds are split between the various parties (state, retailer, distributor, etc.). This means that prices are uniform across the state.
The revenue earned by control states is put back into government programs that benefit the local community. This includes improving public education and providing affordable healthcare. The control systems also benefit producers, as once a product is approved for sale, it is available in all retail locations throughout the state at the same cost.
However, the strict licensing processes in control states can be disruptive to business sales and result in lower revenues. New breweries and distilleries may struggle to meet all the requirements, and states decide what type of alcohol can be sold and to what extent. This means that supply and product choice are almost always more limited in this model.
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Frequently asked questions
After the US abolished Prohibition in 1933, the federal government gave each state the power to set their own laws around alcohol sales and distribution. Some states wanted to retain control over this industry to limit access and reduce consumption by residents.
In control states, the state government directly regulates the sales or distribution of alcohol. In open states, licensed private sellers are allowed to buy and sell alcohol and are only restricted by state laws.
Control systems that oversee retail alcohol sales generally result in lower alcohol outlet density, which may improve quality of life by reducing property damage and public disturbance. Control systems also protect communities from oversaturation of alcohol selling locations, which has been found to increase consumption and cause harm. Additionally, control states can earn revenue which is put back into the community to help improve public education and provide affordable healthcare.
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