Contact: Ainsley Holyfield
Spirits Industry Leaders Urge Legislators to Repeal Flexible Pricing
HARRISBURG, Pa. – Distilled spirits industry officials testified today before the Pennsylvania House Liquor Control Committee regarding the harmful consumer impacts caused by the Pennsylvania Liquor Control Board’s (PLCB) Flexible Pricing Program. Among those who testified were Distilled Spirits of the United States (DISCUS) Chief Economist David Ozgo and American Distilled Spirits Association President and CEO Matt Dogali.
“Given that the PLCB is a state sponsored enterprise, any revenues generated that are greater than operating costs are a tax,” said Ozgo. “Thus, flexible pricing really means that the PLCB has created a system of random taxation. Obviously, it is only the legislature that is allowed to impose and set the level of a tax, not independent government agencies. I urge legislators to repeal flexible pricing in Pennsylvania to restore consumer protections.”
“While we firmly believe in a State’s right to control alcohol beverages, we also believe we must always be serving the consumer with quality products at a fair price. Pennsylvania’s system is no longer fair or balanced for the supplier and the consumer in the commonwealth is paying the price with higher retail costs,” Dogali said. “Act 39 has become a de facto tax increase on whatever products the PLCB chooses. A tax increase not paid by the supplier, but rather one paid by the citizens of Pennsylvania at the cash register.”
Chris Swonger, president and CEO of DISCUS, and Dogali recently sent a letter to Pennsylvania legislators regarding PLCB flexible pricing authority. They also penned an op-ed in the Philadelphia Inquirer on the issue.
Since the 2016 passage of Act 39, Pennsylvania’s landmark liquor modernization legislation, serious concerns have been raised regarding the PLCB’s implementation of “flexible pricing” and the negative impact it is having on consumers and spirits sales.
Before the Flexible Pricing Program was passed as part of Act 39, the PLCB was required to price all products by a strict proportional pricing formula, which treated all spirits suppliers equally. Anytime a wine or spirits supplier lowered its price to the PLCB, the agency was required to pass the savings along to Pennsylvania consumers.
Under the Flexible Pricing Program, however, PLCB negotiates the cost and markup on every item, keeping the details of the negotiations shrouded in secrecy. The PLCB routinely increases its 31 percent markup, confiscating any consumer savings and increasing the PLCB’s profit margin.
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