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It’s Time to Repeal Clarksville’s Good Ol’ Boys’ Liquor Store Permit Law
Clarksville, TN – The Tennessean recently reported that certain folks in Clarksville are questioning the merit of having a limit of only a dozen liquor stores that can be allowed to legally operate in Clarksville at any one time.
The out-dated fifty-year-old city ordinance has created an artificial market for “certificates of compliance,” not to mention creating in the local liquor market an oligopoly (the market condition that exists when there are few sellers, as a result of which they can greatly influence price and other market factors).
Both the local liquor oligopoly and the market for “certificates of compliance” hurt Clarksville’s local economy.Residents of Clarksville don’t have to be reminded that the city’s local government is its greatest barrier to economic progress. What should Clarksville residents do, then, about this archaic local law?
City Councilman Joel Wallace (to whose campaign I contributed in the last election, I should say, in the interests of full disclosure) and his fellow Councilwoman Deanna McLaughlin have both questioned the merits of the ordinance. As the Tennessean reported, Ms. McLaughlin “tried to pass an ordinance in 2012 getting rid of the limit,” and has “said she would be in favor of either writing a specific process or forgoing the limit altogether.” I think eliminating the limit altogether would be the best course of action for Clarksville.
The city’s ordinance, as the Tennessean reported, is so antiquated and obsolete, it even includes language specifying that liquor stores cannot sell “any alcoholic beverages on credit.” The law means store credit, but without clear legal language hardline anti-alcohol lawmakers might try to interpret that as a prohibition against using credit cards at liquor stores.
Here are some more outmoded restrictions included in the law:
As the Tennessean reported, “the only thing the law specifies for the compliance process is that it must be signed by the mayor.” I’m sure residents of Clarksville during the last fifty years can look back at our former mayors and feel confident that there has never been any question about the ethics or integrity of those individuals.
All sarcasm aside, let’s look at the economics of this law for just a moment. Please forgive me, but I am going to apply to oligopolies a few things said about monopolies by U.S. Court of Appeals for the Seventh Circuit Judge Richard Posner, who literally wrote the book on Economic Analysis of Law, because, in my legal and academic opinion, the statements are applicable. If you disagree, fine; but I hope most of you will indulge me.
In summary, because people who have to compete in competitive markets want to be able to charge higher prices, they will seek opportunities to enter into monopoly or oligopoly markets. The higher prices that businesses in monopoly or oligopoly markets can charge, because there is little or no competition, attract people from more competitive markets. This is usually a good thing, because the lure of higher prices draws in competitors who then have to sell goods and services in the formerly-monopoly or formerly-oligopoly market, and that has the effect of driving down prices.
The government wants prices to be high for at least two reasons. First, when prices are higher, demand is lower. That means, the higher the price is on liquor, the less liquor will be consumed. In Clarksville, for example, higher prices on liquor might be a great thing for providers of lower-cost alternatives, like beer, and the people who are friends and business associates with, for example, beer distributors and other people in the beer business.
Second, the city profits more from its 5% “inspection fee” that, according to the Tennessean, “gives the city 5 percent of the total amount each liquor store spent on purchasing alcoholic beverages each month. The city collected $637,000 in the last fiscal year and plans on collecting $610,000 next year, according to Laurie Matta, finance director for the city.” Oh, and by the way, you’re a fool if you think the liquor stores aren’t passing on that 5% “inspection fee” (read: “tax”) to their customers.
With all the other quality controls that are part of the liquor production and distribution business, are you really willing to pay 5% more for every bottle of liquor you buy to make sure it’s “inspected” by the city? What are they inspecting, exactly, that is worth a tax of $637,000 in a single year?! That’s $637,000 that could have remained in the pockets of Clarksville’s citizens, that could have been spent in the local economy, but was instead collected by the city and spent on the city’s budget.
These “certificates of compliance” should not exist. The entire system needs to be scrapped. There is no reason to have an artificial market for “certificates of compliance,” nor is there any reason to restrict the local competition in the liquor store business.
I urge you, dear reader, to call your city Councilman or Councilwoman, and ask them to propose and support a new city ordinance repealing the 1963 ordinance in its entirety. It does not need to be repealed and replaced with new regulations. It just needs to be repealed. Period. The free market is more than capable of regulating the number of liquor stores that can exist in Clarksville. The city government has more important things to worry about than the number of liquor stores in town, like bringing vitality back to downtown, curbing urban blight, and improving traffic flow around town.
Noel R. Bagwell, III, Esq. is an attorney and the founder of Executive Legal Professionals a small business Legal Services firm serving entrepreneurs and businesses in Tennessee.
Noel is also the Leader for the Start-Up Entrepreneurship and Small Business Legal Issues Aspects of Practice for the National Center of Preventive Law.
A graduate of Cumberland School of Law at Samford University in Birmingham, AL, Noel distinguished himself by earning the 2010 Scholar of Merit award for his academic performance in Economic Analysis of Law.
After law school, Noel opened a general practice law firm in Clarksville Tennessee, a wonderful town just down the road from Nashville, Tennessee; and soon after founded Executive Legal Professionals to focus on providing ongoing and á la carte legal services to entrepreneurs and businesses for flat monthly rates.
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This article was written by Noel Bagwell for ClarksvilleOnline.com, and is intended only to inform the general public of the author’s opinion. The opinions expressed in this article are those of the author, and not of any government agency, company, corporation, or individual.
SectionsArea, Business, Opinion, Politics
TopicsAntiquated, Archaic, Attorney, Certificate of Compliance, City Council, City Ordinance, Clarksville, Clarksville TN, Corruption, Councilman, Councilwoman, Deanna McLaughlin, Economic Analysis of Law, Economics, Economy, Gannett, Good Ol' Boys, Joel Wallace, Law, Lawyer, Liquor, Liquor Store, Local, Local Government, Local Law, Mayor, Mayors, Nobel Prize, Obsolete, Old-Fashioned, Ordinance, Outmoded, Permit, Posner, Prohibition, Tennessean
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