Pennsylvania flexible pricing ‘no longer fair or balanced’

Trade groups have testified against pricing regulations in the US state of Pennsylvania, which they say are “no longer fair or balanced”.

In 2016, legislators in Pennsylvania passed Act 39, which granted the state-run Pennsylvania Liquor Control Board (PLCB) “common retail marketing abilities”, such as pricing flexibility across its products.

The act means that the PLCB is no longer required to use proportional pricing when pricing certain products, and allows it to include a handling fee in the price of all products.

Now, officials from the American Distilled Spirits Association and Distilled Spirits Council of the United States have testified before the Pennsylvania House Liquor Control Committee regarding the impacts of the Flexible Pricing Program.

David Ozgo, Distilled Spirits Counil’s chief economist, said: “Given that the PLCB is a state-sponsored enterprise, any revenues generated that are greater than operating costs are a tax.

“Thus, flexible pricing really means that the PLCB has created a system of random taxation. Obviously, it is only the legislature that is allowed to impose and set the level of a tax, not independent government agencies.

“I urge legislators to repeal flexible pricing in Pennsylvania to restore consumer protections.”

Before the flexible pricing was passed as part of Act 39, the PLCB was required to price all products by a proportional formula. Under the new rules, PLCB negotiates the cost and mark-up on every item, and US trade groups have accused the government-owned retailer of “routinely increasing its 31% mark-up”.

American Distilled Spirits Association president and CEO Matt Dogali said: “While we firmly believe in a State’s right to control alcohol beverages, we also believe we must always be serving the consumer with quality products at a fair price. Pennsylvania’s system is no longer fair or balanced for the supplier and the consumer in the commonwealth is paying the price with higher retail costs.

“Act 39 has become a de facto tax increase on whatever products the PLCB chooses. A tax increase not paid by the supplier, but rather one paid by the citizens of Pennsylvania at the cash register.”

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