January 12, 2010
CIGARETTE AND LIQUOR SALES
By: Duke Chen, Legislative Analyst
You asked why there is a minimum mark-up for cigarettes and a prohibition against selling alcohol below cost. Also, you asked why there are defined hours for the sale of alcohol to be consumed off premises.
Connecticut law imposes a minimum mark-up for cigarette sales (CGS § 12-326b) and prohibits selling alcohol below cost (CGS § 30-68m). The rationale behind these laws is to prevent monopolies in these industries. The laws protect smaller merchants from being forced out of business by larger merchants, who may have the ability to sell their products below costs, thus creating a monopoly.
The law restricting the time of liquor sales serves a different purpose from the minimum pricing laws. Under the Twenty-first Amendment of the Constitution, which repealed Prohibition, states are given great amounts of authority to regulate the production and distribution of alcohol. One of the ways Connecticut regulates the distribution of alcohol is by statutorily limiting when it may be sold.
Currently, Connecticut allows the sale of alcohol for consumption off premises to be between Monday and Saturday from 8:00 a.m. to 9:00 p.m. (CGS § 30-91(d)). Since the inception of the Liquor Control Act, the deadline for sales has changed several times, from 6:00 p.m. in 1933, to 11:00 p.m. in 1939, to 9:00 p.m. in 1957, to 8:00 p.m. in 1967, and back to 9:00 p.m. in 2003.
MINIMUM PRICING LAWS
The reasoning behind mark-ups and prohibitions against selling below costs is to prevent monopolies in certain industries. Generally the purpose of these laws is to protect small independent merchants from larger merchants, who could, in theory, sell items below cost and drive out their competitors, thus creating a monopoly.
Connecticut prohibits cigarette distributors and dealers from selling below cost. The law presumes that their cost includes a percentage mark-up that depends on the type of seller and transaction (CGS § 12-326b). The law defines “cost” as the basic cost of cigarettes and the cost of doing business. The “basic cost of cigarettes” means the sum of the lower of the invoice or replacement cost plus the face value of tax stamps minus any trade discount for something other than cash. The “cost of doing business” means costs related to the sale of cigarettes, as calculated for federal income tax purposes, including labor, rent, depreciation, selling costs, maintenance, delivery, interest, licenses, taxes, insurance, advertising, pre-opening expenses, and central and regional administrative expenses.
Connecticut prohibits retailers of alcohol for off premises consumption from selling at a price below their cost. For this purpose, “cost” means the posted bottle price from the wholesaler plus charges for shipping or delivery to the retailer's place of business paid by the retailer (CGS § 30-68m(a)). (Attachment 1 is an OLR report (2009-R-0171) providing information on minimum pricing laws.)
HOURS FOR ALCOHOL SALE
Authorization to Regulate
Unlike other products, the manufacture, sale, or transportation of alcohol was originally prohibited by the Eighteenth Amendment of the U.S. Constitution, which was adopted in 1919. The amendment was subsequently repealed in 1933 by the Twenty-first Amendment, which also allowed states to regulate the production and distribution of alcohol. Connecticut subsequently passed the Liquor Control Act in 1933, which
regulates the production and distribution of alcohol within the state, including the hours when alcohol may be sold. Currently, Connecticut allows the sale of alcohol for consumption off premises to be between Monday-Saturday from 8:00 a.m. to 9:00 p.m. (CGS § 30-91(d)).
1933 and 1939. The statute for when alcohol may be sold has changed several times. The Liquor Control Act originally allowed package stores to stay open until 6:00 p.m. In 1939, package store owners successfully sought legislation allowing them to stay open until 11:00 p.m. There are no records concerning the legislative rationale for extending the hours because the legislature did not transcribe the public hearings or floor debates.
1957. In 1957, the General Assembly moved the closing time from 11:00 p.m. to 9:00 p.m. by amending on the floor a liquor price bill.
The Liquor Control Committee held public hearings on an earlier bill that proposed an 8:00 p.m. closing time. During the hearing, the package store owners, who were the major group advocating for the earlier closing time, expressed their fear of being robbed due to the late closing hour. This fear was brought about by Mad Dog Taborski and his partner Culombe, who committed a series of robberies, pistol whippings, and execution-style murders that took six lives in late 1956 and early 1957.
The 9:00 p.m. closing time that was ultimately agreed to was a compromise between the 8:00 p.m. proposal heard before the Liquor Control Committee and the existing 11:00 p.m. closing hour.
1967. In 1967, the General Assembly moved the closing time back from 9:00 p.m. to 8:00 p.m.
The original bill had a closing time of 7:00 p.m. At the hearing, the majority of package store owners supported the earlier closing time, again expressing concerns about keeping the stores open past 7:00 p.m. They also stated that there were relatively few shoppers after 7:00 p.m. and an earlier closing time would give them a chance to do more social and community work.
Grocers, on the other hand, generally opposed the proposed earlier closing time, because it would force them to cover shelves and turn away potential customers.
During the legislative debate, legislators made many similar arguments. They finally agreed on an 8:00 p.m. closing, and the bill passed with a substantial majority. (Attachment 2 is an OLR report (2000-R-0918) providing more information on the 1957 and 1967 public hearings and legislative debates.)
2003. In 2003, Connecticut changed the closing time of package stores from 8:00 p.m. to 9:00 p.m. as part of the budget bill. The bill was sent to the floor through a procedure known as “Emergency Certification,” which means the speaker and president pro tempore jointly propose a bill and send it directly to each chamber floor for action without any committee referrals or public hearings. The House and Senate transcripts on the bill do not mention the later closing time or indicate legislative intent.