Tuesday, September 29, 2009

Government Endorsed and Sanctioned Monopolies - Corruption!

If you recall, my last article touch on how the states liquor license policies are clear violation of the Sherman Antitrust Act yet no one does anything about it. I believe the reason someone doesn't do anything is because the public is not educated on how the liquor license process and how it helps create monopolies.

In the article I want to create awareness of how the liquor manufacturers and the liquor distributors have government sanctioned and endorsed monopolies. But let read what Wikipedia says about the Sherman Act.

"The Sherman Antitrust Act (Sherman Act,[1] July 2, 1890, ch. 647, 26 Stat. 209, 15 U.S.C. § 17) requires the United States Federal government to investigate and pursue trusts, companies and organizations suspected of violating the Act. It was the first Federal statute to limit cartels and monopolies, and today still forms the basis for most antitrust litigation by the United States federal government."

There are four levels in between the manufacturers and the consumers: (1) Manufacturers are the companies producing the liquor, (2) distributors are the ones taking the manufacturers product and selling it to retail places such as restaurants and liquor stores, (3) the retail stores such as restaurants, liquor stores, grocery stores, etc.. and (4) the consumer.

The manufacturers sign exclusive distribution agreements for territories with individuals or companies. This means there is one distributor for each product within a given territory. In other words, if a restaurant wants to buy a case Jack Daniel's, there is only one choice the restaurant owner may purchase Jack Daniel's. The restaurant owner can't go to costco to buy it. He can't use another source to purchase the Jack Daniel's. THe owner has no other choice but to buy from the one distributor. This is controlled by the state and federal licensing authorities.

Here is what the dictionary says about Monopoly:
"exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices."

In our situation, the liquor manufacturers give exclusive control of their products to one distributor in a particular area. There is absolutely no competition for that specific product in a territory, none! So this by definition is a monopoly. There is no price competition. A vendee must pay whatever price the distributor or manufacturer wants to charge.

But nothing will be done until the public is educated to understand why so many high profile politicians want these distributorships and will often do unethical thing to get them - these distributorship are cash cows!

But the public are the ones hurt through higher prices.

So please spread the word and one by one we can make this an issue where we can pressure our congress to change these rules and we can defeat the big liquor companies, big distributors resulting in our drinks costing less.

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