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October 5, 2005

5 October 2005

Privatization of alcohol trade in Ontario and Quebec: Consumers would come out ahead in an Alberta-style system, says the MEI

Strongly backed by figures, the Research Paper published today compares the performances of the LCBO and SAQ, which enjoy a similar monopoly, with the retail liquor market in Alberta, which was largely liberalized in the early 1990s. Data shows that this system provides a number of advantages to consumers:

Number of stores: The number of stores per 100,000 inhabitants is five times higher in Alberta (42.1) than in Ontario (7.7) and three times higher than Quebec (12.8). Even in absolute numbers, Alberta (1,087 stores) beats out Ontario (779) and Quebec (801).

Availability of products: Examining the number of products available on the provincial market, Quebec (7,148 products) does better than Ontario (3,449) but Alberta, with its liberalized market, offers consumers many more products (11,575) than the SAQ or LCBO.

Product prices: Various price surveys lead to the conclusion that Alberta consumers pay amounts that are similar to those in other provinces, though prices may differ according to individual products or product groups.

Government revenues: The fear that privatization of the LCBO and SAQ would cause the Ontario and Quebec governments to lose a stable source of income is not justified. In 2002-03, Alberta’s flat markup on alcoholic beverages brought in more for the provincial government ($24.27 per litre of absolute alcohol sold) than the Ontario ($23.42) or Quebec ($23.43) governments collected in dividends from their respective publicly owned monopolies.

Changes in sales: It may be feared that a private system could stimulate sales and lead to unbridled alcohol consumption. However, from 1993 to 2003, alcohol sales in the private Alberta system rose only 1.2%, compared to 13% in Quebec and 4% in Ontario.

“Neither theoretical arguments nor economic performance justify preserving the LCBO and SAQ monopolies,” says Valentin Petkantchin, research director of the Montreal Economic Institute and author of the study. “The current system not only penalizes Ontario and Quebec consumers but provides no advantage to their provincial governments, which could obtain the same dividends if they liberalized the liquor trade.”

Titled Is Government Control of the Liquor Trade Still Justified?, this study is available on the Institute Website. The MEI is an independent, non-profit, non-partisan economic research and educational institute. The MEI participates in public policy debates by providing wealth-generating solutions, primarily in areas of taxation, regulation, health and education reform.

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Information and interview requests: Patrick Leblanc, Communications director, Montreal Economic Institute, Telephone: (514) 273-0969 / E-mail: pleblanc@iedm.org

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