Committee hears testimony on bills to raise liquor retailer discount and limit look-back on violations

The House Committee on Regulatory Reform heard testimony on House Bills 4113 and 4114, proposed to amend the Michigan Liquor Control Code to increase the retailer discount for spirits purchased from the Michigan Liquor Control Commission and to limit how far back the commission may consider prior violations when evaluating license status.

Representative Steckloff testified that the bills "go hand in glove" and are intended to help small, neighborhood retailers compete with larger chains. "These are the same small mom and pop shops that are trying to outlast and outside competition from big box retailers," Representative Steckloff said, adding that the bills would "align Michigan with most other states and would support our local businesses who are struggling because of the rate of inflation, crushing costs of imported goods, increased wages, utilities, and more." She said the discount would increase from 17% to 23%.

Jerry Griffin, vice president of government affairs for the Midwest Independent Retailers Association, said his members support both bills and described the discount as "the margin by which they can pay the cost of operating their stores," urging uniformity in how violations are treated across Commission reviewers.

Dave Martin of the Michigan Liquor Control Commission said the commission is "opposed, officially on both of these bills" at this time. Martin estimated that raising the discount would reduce general fund revenue by "about a 90 to $100,000,000" annually, based on a three-year running average of spirit sales. He said fiscal-year 2024 receipts from spirits, fees and fines contributed "just a little north of $400,000,000" to the general fund and totaled "close to $600,000,000" when including earmarked distributions.

Martin also described how Michigan's control-state pricing works: statute sets a 51% to 65% profit margin for state spirit sales and, under current practice, the commission uses a 65% markup. He said the commission could, in theory, set a markup as low as 51%, and noted that a higher retailer discount would apply to all retailers, including large chains such as Costco and Meijer.

Committee members pressed on fiscal and market mechanics. Representative Thompson asked about the state's profit and the $90'to'$100 million estimate; Martin described the commission's revenue components and the split of funds to local governments and the school aid fund. Representative Lanyon asked about the statutory 65% figure; Martin said "65% is in statute." Representative Wozniak and others asked how the discount would be funded; Martin said the reduction would come from the state's current share of spirit profits. The commission noted it rarely denies licenses and that applicants have appeal rights.

The committee did not vote on either bill during this hearing. Chair Aragona said the sponsors requested additional time to work on amendment language for related bills and that the committee expected more testimony next week with the aim of taking votes after further discussion.

Cards and written positions filed during the hearing included a mix of support from smaller-retailer groups and neutrality from some industry groups: Tony Mitchell, Michigan Spirits Association (neutral); Matt Solash, Distilled Spirits Council of the United States (neutral); Mark Griffin, Michigan Petroleum Association and Michigan Association of Convenience Stores (support); Scott Ellis, Michigan Licensed Beverage Association (support); and Drew Beardsley, Michigan Retailers Association (support).