BY C. JARRETT DIETERLE
Until very recently, South Carolina liquor store owners were only allowed to operate up to three retail outlets in the Palmetto State. The decades-old cap was struck down late last month by the state Supreme Court as unconstitutional, on grounds the law was arbitrary and motivated solely by economic protectionism.
While the state’s incumbent liquor stores have been quick to condemn the decision, South Carolinians should embrace the court’s holding and resist attempts to reinstate the cap in a slightly altered form.
The cap was challenged in court by Total Wine & More, a national chain alcohol retailer that sought to open a fourth South Carolina outlet. Total Wine argued that the cap exceeded the scope of the General Assembly’s so-called “police powers,” which allow states to legislate rules to protect their citizens’ health and safety.
The state Supreme Court agreed, finding the retail cap was not motivated by concerns about public health or safety, but rather was an impermissible attempt by the Legislature to favor one type of liquor store owner over another.
In other words, the law benefited small, incumbent liquor store outlets at the expense of medium- and large-sized chain store outlets — an arrangement that amounted to nothing more than raw economic protectionism.
Although the court acknowledged that the General Assembly has broad powers under the South Carolina Constitution to “regulate any trade, occupation or business” — especially in the realm of alcohol — it must have a proper reason to do so. According to the court, the state failed to identify a justification for the retail cap law other than playing favorites between industry participants: “Without any other supportable police power justification present, economic protectionism for a certain class of retailers is not a constitutionally sound basis for regulating liquor.”
The court was careful to clarify that many types of alcohol regulations are permissible exercises of the state’s police power, since they can properly be justified as protecting public health and safety. For example, a law that limited the number of liquor stores in a certain geographical area, such as near a church or school, would likely be a proper exercise of state power. But arbitrarily placing a statewide cap on common ownership of retail outlets achieved no such purpose.
The state is planning to ask the court to reconsider. In the meantime, efforts are afoot in the General Assembly to amend the retail cap law by increasing the size of the cap. Under the court’s reasoning, however, merely changing the limit to 10 or 15 retail outlets, rather than three, would continue to represent an arbitrary limit on liquor store ownership that lacks a clear public health or safety rationale. A higher cap would simply operate as a new form of economic protectionism that helps medium-sized retailers over larger competitors.
South Carolinians should welcome competition in their alcohol markets and refuse to play favorites between market participants. Small, medium and large alcohol retailers all should be allowed to compete on equal terms, which means the state’s retail cap should remain gone for good.
C. Jarrett Dieterle is a fellow at the R Street Institute in Washington, D.C., and edits the website DrinksReform.org.