Politics

Question 3: What you need to know about alcohol license limits

Question 3 would expand the availability of licenses for the sale of beer and wine at retail locations in Massachusetts while reducing the availability of all-liquor licenses.

A customer shops at the Total Wine & More store in Everett in 2017. John Blanding / The Boston Globe

October 20, 2022

On Nov. 8, Massachusetts voters will decide if the state should increase the number of alcohol licenses a retailer can own or control. Question 3 would allow more stores to sell carry-out alcohol, particularly beer and wine, while reducing the availability of all-liquor licenses.

The road leading to Ballot Question 3 has been long and complex. This measure was designed as a “compromise” law by the Massachusetts Package Store Association (MassPack), largely written to stave off expansion efforts by chain retailers.

The proposed law would also enact public safety measures and other reforms.

Here’s a guide to Question 3 on the state’s ballot.

What would Question 3 do?

Ballot Question 3 includes five reforms. The first two impact the number and type of licenses available in the state.

The proposed law would:

Increase the total number of alcohol licenses a single retailer can have in the state from nine to 12 in 2023, up to 15 in 2027, and finally up to 18 in 2031. These new limits are a combined tally for two types of retail alcohol licenses: “all-alcohol” and “wines and malt beverages.”
Reduce the number of “all-alcohol” licenses a single company can hold in the state from nine to seven. Retailers that currently hold more than seven “all-alcohol” licenses would be grandfathered in.

What this means is that if Question 3 were passed, chain stores would be allowed to have up to 18 stores that sell some type of alcohol, but only up to seven of those stores could sell all types of alcohol. The rest would sell only beer and wine.

Under the new law, the grandfathered-in retailers would remain their current size, while other retailers couldn’t grow bigger than the new limits.

The proposed law would also:

Eliminate self-checkout when customers purchase alcoholic beverages.
Change the fine retailers can pay instead of having their license suspended for violating liquor laws. The new fine would be calculated based on gross profits from all retail sales, rather than gross profits on alcohol sales only.
Add of out-of-state driver’s licenses to the list of forms of ID that retailers can “choose to reasonably rely on for proof of a person’s identity and age.” (Right now, stores and restaurants that accept out-of-state IDs do so at their own risk.)

A yes vote on Question 3 would enact all of these reforms simultaneously, while a no vote would keep Massachusetts liquor laws as they are.

The case for limiting licenses

Question 3 is about keeping neighborhood package stores alive and preventing chain stores from monopolizing the alcohol market, according to MassPack Executive Director Robert Mellion, who helped write the ballot question.

For many decades in Massachusetts, a company could only have three liquor licenses in the state, meaning they could only have three locations that sold any type of liquor.

According to The Boston Globe, this rule “insulated” independent package stores from bigger chains that would otherwise have greater buying power with wholesalers.

But at the beginning of the new millennia, supermarkets and other big chains began pushing to have the liquor license cap lifted so that they could open more locations and begin selling alcoholic beverages at more existing locations.

These efforts were persistent but unsuccessful until 2011 when package stores finally came to the bargaining table on Beacon Hill and helped craft a compromise bill that raised the license cap to nine licenses.

“That compromise was done against the will of many local retailers across the state. It was forced on them by the rest of the industry,” Mellion said.

There is no doubt that chain stores have taken advantage of higher liquor license cap. According to the Globe, Trader Joe’s, Price Chopper, Total Wine, Shaw’s/Star Market, BJ’s, Ocean State Job Lot, Cumberland Farms, Roche Bros. and Table & Vine all have between seven and nine locations selling alcohol.

With numerous locations comes greater buying power with wholesalers, which these stores have used to leverage discounts on goods which are passed on to the customer.

The state’s Alcoholic Beverages Control Commission (ABCC) has also cited both Shaw’s and Total Wine for selling alcohol below wholesale cost, which is illegal.

But regardless of how those low prices are achieved, according to Mellion, small liquor stores can’t keep up, and mom-and-pop package stores are being forced out of business. In the last four years, he said, over 800 MassPack members have sold their licenses to other retailers.

“The people who are getting out of the business are second-, third-generation
owners of stores. They see that they can’t compete anymore against these large corporate interests that have gained a foothold in the state,” he said.

And who are those licenses going to? Total Wine, Trader Joe’s, Cumberland Farms, and other, similar companies, Mellion said.

“It’s about manipulating the system so that these large companies are the only ones left, and that’s what we’re fighting,” Mellion said.

Journalists and policy analysts agree with Mellion that chain stores are unlikely to stop pushing against liquor license caps anytime soon, given the fact that Cumberland Farms, Total Wine, and others have been lobbying to have them raised or erased for years now.

So for Mellion and other independent package store owners, limiting all-liquor licenses through Ballot Question 3 isn’t really a win — it’s simply keeping the status quo.

“Question 3 is out of desperation,” he said. “It’s a compromise to allow local retail the ability to coexist with these large chains.”

The Boston Globe Editorial Board recommends a yes vote for Question 3 for the sake of keeping small package stores around.

“The chain stores beckon — so cheap and convenient. But spending too much money in a big box can feel like a betrayal of the small, mom-and-pop stores that give our neighborhoods life,” the board wrote.

“Striking a balance is key to building a healthy economy and healthy communities. And Question 3 on the Massachusetts ballot is a good if imperfect step toward striking that balance in one sector, at least: alcohol sales.”

The case for added public safety measures

Banning self-checkout for alcoholic beverages is simply keeping in line with safety measures applied to other regulated products, such as cannabis, lottery tickets, and cigarettes, for which self-checkout is not allowed, Mellion argues.

With few employees monitoring self-checkout registers, he said, it’s easy for minors and already-intoxicated people to buy alcohol illegally.

As for changing the formula for liquor law violation fines, Mellion said it’s about parity.

Proportionally, under the current law, stores that sell only or mostly alcoholic beverages are punished more harshly than stores that sell more than just alcohol because the fine for liquor law violations is based on a percentage of alcohol sales alone.

Because of this, there is less financial incentive for food stores to be careful not to sell alcohol to minors or already-intoxicated people due to the fine being a fraction of a percentage of their total sales.

If Ballot Question 3 is passed, all alcohol retailers will be fined based on a percentage of their total sales, making application of the law equal across the board.

The case against limiting licenses

Question 3 is a flawed approach to alcohol licensing reform, according to Food Stores for Consumer Choice (FSFCC), Cumberland Farms’ ballot committee.

“Our alcohol licensing laws do need serious reforms, but this ballot measure is not the answer. It offers an incomplete solution to a complex problem, doing little to promote competition or expand consumer choice,” they wrote in the state’s voter guide. “Despite some superficially popular provisions designed to entice voters, it fails to lift outdated restrictions on local decision-making.”

The cap of licenses favors “special interests” in the alcohol industry, they wrote, “at the expense of cash-strapped consumers and their favorite local retailers.”

Instead, the committee wrote voters should vote no and ask state lawmakers for more in-depth legislation that updates the state’s liquor licensing laws.

Total Wine, which has become the biggest opponent of Question 3, argues in its new TV ads and mailings that Question 3 is bad for consumers.

“The backers of the initiative, several members of the Massachusetts Package Store Association, don’t want to compete because they can currently charge their customers high prices, carry a limited selection of products, employ less knowledgeable staff and offer an inferior shopping experience,” Edward Cooper, Total Wine vice president, said in an email to Boston.com. “Those retailers, usually fierce competitors in the marketplace, initiated Question 3 under the guise of modernizing the alcohol laws.”

Cooper also said Question 3 would enact anti-free-market protectionism that favors only small package stores and stifles competition in the market.

“We’ve never asked the government to protect us from competition. We’ve always supported legislation and regulations that would help other ambitious retailers to grow and thrive,” he said via email. “… Less competition only harms consumers.”

The case against new public safety measures

Question 3 puts unfair restrictions on large retailers, according to FSFCC.

For one, self-checkout is convenient and faster than waiting in line for a cashier, they said. Self-checkout for alcohol is also already in use across the state and IDs are still checked.

“This bill needs a rewrite to exclude the ‘face-to-face’ requirement. It is silly to include with all these other common sense measures. Currently, when I self-checkout, I am not allowed to continue with the order until my ID is verified. I’m not sure what is wrong with that,” one Boston.com reader wrote in their opinion on Question 3.

Additionally, changing liquor violation fines to a percentage of all sales is an “unfair penalty” for grocers and other food stores, FSFCC said.

The Boston Globe Editorial Board, which is in favor of Question 3, wrote that restructuring the fine would be “unduly harsh” for food sellers like grocers and convenience stores, while having little impact on package stores. It went as far as recommending the Legislature change this provision if the ballot question were to pass.

“Fines based on all retail sales instead of fines based on just alcohol sales is clearly an attack on grocery stores,” one Boston.com reader wrote in their opinion on Question 3.

What happens if Question 3 passes and what happens if it fails?

Mellion and Cooper warn of similar impacts to consumers, but from opposite angles.

Mellion predicts that if Question 3 doesn’t pass, chain stores will likely be successful in raising or eliminating the retail liquor cap, which will result in them squashing small-time package stores. Once they have a monopoly, he says, they will raise prices, and there will be no competition to stop them.

Mellion also argues that customers will lose access to specialty liquor, which is primarily stocked from medium and small wholesalers that are kept in business by small package stores. Large retailers focus on stocking the most popular products, he asserts, so customers will have less variety in products to choose from.

Cooper, on the other hand, argues that the protections offered by Question 3 stifle competition, allowing package stores to charge higher prices, offer a limited selection of products, and provide less responsive service.

According to Tufts University’s Center for State Policy Analysis (CSPA), an independent policy evaluator, Question 3 would have a “real but limited” impact on alcohol sales in Massachusetts.

“To begin, it would allow interested chain stores to expand beer and wine sales to more locations,” it wrote in its analysis of the ballot question. “Note, however, that very few chains even approach the current limit of nine licenses. … This may suggest limited demand (or capacity) for amassing more licenses.”

The CSPA also noted that chains would still be limited by licensing rules set by municipalities.

As for other parts of the law, the CSPA said that while barring self-checkout might limit automation to some degree, few stores are looking to eliminate it altogether.

“Whatever voters decide — yes or no — Question 3 will not be the final word on liquor licenses and alcohol sales in Massachusetts,” the CSPA wrote.

Editor’s note: An earlier version of this story incorrectly stated that Question 3 would decrease the number of stores that can sell all types of alcohol due to the reduction of the number of “all-alcohol” licenses a single company can hold from nine to seven. Question 3 allows stores that currently hold more than seven “all-alcohol” licenses to be grandfathered into the new regulations.