Vice President Kamala Harris shocked the political world when she suggested price controls as a way to deal with inflation. Price controls were last implemented under the Nixon Presidency and their impact was a negative for the economic system.

With playing a central role in her economic plan layout, there is no doubt, if elected President that Kamala Harris will implement price controls. The question is how expansive will the price controls be?

Conventional wisdom believes price controls will apply to food, gas, and everyday essentials.

There are some I discussed this issue with that believe liquor is not within the realm of possibility for price controls, because it is not essential to everyday living, and the average person does not feel a significant bite from the increase in liquor prices.

But remember the pandemic, liquor stores were deemed essential and permitted to remain open. Even in a time of emergency when we were shutting down churches, restaurants, clothing boutiques, and social organizations, liquor stores were still operating.

Suppose for a moment that price controls are applied to the price of liquor and retailers have a ceiling for what they can charge, what is the impact on the real world?

The first thing we should look at is the impact on market competition. Even before the discussions on price controls, the FTC already seemed to enter the marketplace to artificially distort market pricing. If you read between the lines in the FTC’s investigation into Southern Glazer’s Wine & Spirits, it seems the investigation centers around deals Southern entered into with big box and chain retailers that are not available to small retailers. These favorable deals allow the chain liquor stores to sell at prices that a small retailer cannot compete with.

So, what happens to the small retailer if we implement price controls on the retail price? Clearly, they become hurt more than a Walmart or a Total Wine that can survive in a price control environment. It would seem that implementing price controls would conflict with Lina Khan’s crusade to level the marketplace. Further, it would artificially reduce the profits for small liquor stores and put many out of business. As the Treasury Report (Competition in the Markets for Beer, Wine, and Spirits) on the liquor industry seeks to increase competition and open markets, the implementation of price controls would do the opposite.

One wonders how the Vice President would respond about an inquiry into liquor price controls and the unintended consequences of being contrary to the Biden Administration’s view on competition and Lina Khan’s view on the marketplace? Does she walk away and disavow the Biden Administration policies she supported for four years, or does she try to justify things another way, and does she have an escape hatch?

The only escape hatch she can exercise in my mind is price controls on liquor wholesalers. She could mandate a ceiling on the price wholesalers charge to retailers, which may allow small retailers to maintain or lower prices.

Would this be good policy and help her become aligned with the Biden Administration’s philosophy?

The answer would be no. Interfering and mandating the terms of a contract between two private parties would set a bad precedent. Distorting prices would not lead to open competition or cure market ills. Until there are more market options and a reduction of franchise laws and other arcane liquor laws, the system will not become open and competitive. Punishing a wholesaler and limiting what they can make will lead to less wholesalers, more of a bottleneck than already exist in the problematic current situation, and less competition in the long run.

In concluding, election year is upon us and the candidates are posturing for votes, we must take their policies seriously and think about how they could impact our industry. From Trump’s tariffs to the Harris price controls, we must be cognizant of their impact because many politicians aren’t.