Competition Policy and Alcohol: A Dangerous Cocktail

Anne Rosenzweig
Alcohol and other Drugs Council of Australia (ADCA)

Summary
The evidence is unequivocal: alcohol consumption contributes heavily to drug related morbidity and mortality on an international scale and levels of harm are closely associated with availability. We have been able to measure some of the vast costs associated with this burden of injury and disease. We have also demonstrated the success and cost effectiveness of a range of strategies to reduce alcohol related harm. It is therefore reasonable to expect governments and policy makers across portfolios to draw on this solid evidence base when developing measures that may impact on alcohol consumption. In some instances, such as drink driving legislation and many health strategies, this would appear to be the case. However, in other spheres where the linkages are not so intuitive, policy and regulation have not kept pace with research outcomes

In Australia, one area in which the evidence base has not been adequately reflected is national competition policy. Over the last decade, the Australian Government has driven a reform agenda which seeks to apply competition principles to a range of regulations including those that govern the sale of alcohol. The ultimate aim of reforming liquor licensing legislation is to increase competition between alcohol retailers. However, evidence shows that this is likely to have negative consequences for the health and safety of individuals and the Australian community. It also negates the considerable potential of licensing legislation, particularly where well monitored and enforced, to reduce alcohol harms.

Background
At the strategic level, drug policy in Australia - and alcohol policy as a component thereof - is jointly formulated and endorsed by the federal and state/territory governments. Some jurisdictions also have local alcohol and other drug policies. Liquor licensing legislation, however, is solely the purview of individual state and territory governments, while competition policy is determined by the federal government. This division of effort across areas which may impact heavily on one another has, at times, been the cause of friction between levels of government, researchers, the alcohol and other drug workforce and non-government organisations.

The issue of Australia’s competition policy and how it relates to state and territory liquor licensing regulations has generated considerable public and political debate in recent years. The topic had particular salience throughout 2004 after an announcement by the federal government that five states/territories had failed to address anticompetitive elements in their liquor licensing regulations. This resulted in penalties totalling A$27 million being imposed on the relevant jurisdictions through deductions to their 2004 competition payments.

National Competition Policy in Australia
In April 1995, all Australian governments reached settlement on a national competition policy for Australia and signed a number of agreements to guide the process of review and reform of regulations that were considered to be anticompetitive. These activities were consistent with global movements in micro-economic reform at the time.

As part of these agreements, the eight Australian states and territories undertook to review their legislation and remove barriers to competition unless they could demonstrate that retaining a particular restriction was in the public interest and could not be met by other means. Liquor licensing legislation was one area that was identified for review across jurisdictions.

In turn, the federal government has been making annual payments to states/territories as a means of sharing the gains arising from the reforms as well as providing financial incentives for jurisdictions to implement their agreed competition policy commitments. These payments are based on a yearly assessment conducted by the National Competition Council of jurisdictions’ progress in implementing their reform commitments. Where existing legislation is deemed to impede competition, the council may recommend to the Treasurer funding suspensions or, as was the case with the liquor licensing regulations, funding deductions.

No ordinary product
We know that alcohol is not just another commodity. Unlike benign or healthful products it is a drug that, when misused, is second only to tobacco use as a preventable cause of death and hospitalisation in Australia (National Expert Advisory Committee on Alcohol 2001). In the ten years from 1992, an estimated 31 133 deaths were caused by alcohol related disease and injury (Chikritzhs et al. 2003) and in 1998-99, alcohol misuse cost the Australian community over $7.5 billion (Collins & Lapsley 2003). It has been estimated that of all the alcohol consumed by Australians in 2001, at least 80 per cent was consumed in ways that put the drinker at risk of acute and/or chronic alcohol related harm (Chikritzhs et al. 2003). These patterns of consumption occur in an environment in which alcohol is an entrenched part of most social occasions, including celebrations, sporting events and other recreational activities. Additionally, industry groups representing producers and retailers are well organised and resourced, with many having a strong voice in local, state and national media and governments.

Trends in youth alcohol consumption are particularly concerning, with over 45 per cent of 18-24 year olds drinking at least once a month in excess of Australia’s guidelines for acute harm, compared with approximately 20 per cent across all ages (Chikritzhs et al. 2003). It is therefore not surprising that this population group is over-represented in injuries arising from assault and road accidents. Young people
between 15-24 years account for over 50 per cent of all alcohol related serious road injuries (Chikritzhs et al. 2000) and over 30 per cent of all hospital admissions for injuries resulting from alcohol related assault (Matthews et al. 2002).

What are the likely impacts of relaxing licensing regulations?
It is likely that amending licensing legislation in order to increase competition in the retail alcohol sector will result in greater numbers and types of outlets selling alcohol. Anecdotal evidence, some of it from licensees themselves, suggests that it will also place pressure on licensed venues to engage in unsafe serving practices such as selling to underage and/or intoxicated patrons, heavy price discounting and more frequent or extended happy hours.

Research over 50 years in developed countries has demonstrated that the cheaper and more available alcohol is in a community, the higher the consumption and the greater the harms caused by the use of alcohol (Edwards, Anderson & Babor et al. 1994; Babor, Caetano & Casswell et al. 2003). When researchers examined the relationship between homicides in New Orleans, Louisiana, and two measures of outlet density they found that those neighbourhoods with a high density of alcohol outlets also had high rates of homicides, even after controlling for other possible confounders such as social disintegration, unemployment and race (Scribner et al. 1999).

Studies in Finland cited by Babor, Caetano & Casswell et al. (2003; p. 125) showed marked increases in consumption and harm when, in 1969, beer with up to 4.7 per cent alcohol was allowed to be sold by grocery stores and it became easier to get a restaurant licence. At this time, the number of off-premises sales outlets increased from 132 to approximately 17 600 and onpremises venues increased from 940 to more than 4000. Further, it appeared that the increase in outlets was associated with an increase in overall consumption of alcohol by 46 per cent. The change in regulations also seemed to have a marked impact on health outcomes. In the ensuing five years, hospital admissions increased by 110 per cent for men and 130 per cent for women while mortality from liver cirrhosis increased by 50 per cent. In terms of arrests for public drunkenness, there was an increase in arrests by 80 per cent for men and 160 per cent for women.

Australian studies have shown high correlations between rates of alcohol consumption and crime. When examining the relationship between alcohol sales and assault in the Australian state of New South Wales (NSW), Stevenson, Lind & Weatherburn (1999) found a significant relationship within the state’s capital city (Sydney) and in country areas. The researchers also looked at the relationship between alcohol sales in NSW and property damage and public disorder and found that both offence types occurred more frequently in areas with greater sales of alcohol (Stevenson, Lind & Weatherburn 1999b).

Of course the flip side of all this is that we also know that liquor licensing regulations, particularly where well monitored and enforced, may reduce alcohol related harms by lowering the incidence of heavy alcohol consumption. In summarising the international evidence regarding the effects of regulating physical availability of alcohol, Babor, Caetano & Casswell et al. (2003; p. 133) report that ‘reductions in the hours and days of sale, numbers of alcohol outlets, and restrictions on access to alcohol, are associated with reductions in both alcohol use and alcohol-related problems’.

Unfortunately research indicates that compliance with current regulations in Australia is low. A study conducted by the NSW Bureau of Crime Statistics and Research (Donnelly & Briscoe 2002) showed that large numbers of young people are being served alcohol on licensed premises when they are plainly intoxicated. In this context it was surprising to see the results of subsequent research showing that over a six year period less than 2 per cent of all licensed venues in NSW were prosecuted for serving alcohol to an intoxicated person or allowing an intoxicated person to remain on their premises (Briscoe & Donnelly 2003). Clearly there are already significant issues that need to be resolved around the monitoring and enforcement of existing licenses before state and territory governments should consider granting even a small number of additional licenses.

Conclusion
In light of the evidence on the effects of increased alcohol availability it is clearly inappropriate to treat restrictions governing the sale of alcohol like those that regulate the sale of other commodities. Added to the considerable public health concerns, the economic rationale often espoused by the Australian Government in defence of competition reform does not bear scrutiny in this case. While fiscal benefits may indeed result from greater competition between alcohol retailers, the likely increase in alcohol related harm will have economic impacts of its own through greater social, health and law enforcement costs.

There is little doubt that liquor licensing legislation requires reform across Australian jurisdictions. However, the basis for such reform should not be the enhancement of competition between retailers, but rather the reduction of alcohol related harm. Only then may licensing legislation realise its public health potential.

ADCA –Who we are and what we do
The Alcohol and other Drugs Council of Australia (ADCA) is the peak, national, non-government organisation representing the interests of the Australian alcohol and other drugs sector, providing a national voice for people working to reduce the harm caused by alcohol and other drugs. ADCA works collaboratively with the government, non-government, business and community sectors to promote evidence-based, socially just approaches aimed at preventing or reducing the health, economic and social harm caused by alcohol and other drugs to individuals, families, communities and the nation.

ADCA strongly opposes the Australian Government’s current stance on increasing competition in the retail alcohol industry. We have repeatedly called for liquor licensing to be removed from the competition reform agenda and for the 2003/04 competition payment deductions to be reversed. Our position is detailed in a submission to the Australian Productivity Commission’s recent inquiry into competition policy arrangements. However, when the discussion draft of the inquiry report was released in November 2004, we were dismayed to find that the commission had not addressed public health concerns associated with applying competition principles to liquor licensing legislation.

ADCA’s submission to the inquiry can be found in full at:
www.adca.org.au/policy/submissions/Productivity_Commission.pdf

References
Babor T, Caetano R & Casswell S et al. 2003,
Alcohol: no ordinary commodity, Oxford University Press, Oxford.

Briscoe S & Donnelly N 2003,
‘Liquor licensing enforcement in New South Wales’, Alcohol Studies Bulletin, New South Wales Bureau of Crime Statistics and Research, no.4, June.

Chikritzhs T, Catalano P, Stockwell T, Donath S, Ngo H, Young D & Matthews S 2003,
Australian alcohol indicators 1990-2001: patterns of alcohol use and related harms for Australian states and territories, National Drug Research Institute, Perth.

Chikritzhs T, Stockwell T, Heale P, Dietze P & Webb M 2000,
Trends in alcohol-related road injury in Australia: 1990-1997, National Alcohol Indicators Bulletin no. 2, National Drug Research Institute, Perth.

Collins DJ & Lapsley HM 2003,
Counting the cost: estimates of the social costs of drug abuse in Australia in 1998-9, National Drug Strategy monograph series no. 49, Commonwealth Department of Health and Ageing, Canberra.

Donnelly N & Briscoe S 2002, ‘
Young adults’ experience of responsible service practice in NSW’, Alcohol Studies Bulletin, Curtin University of Technology and NSW Bureau of Crime Statistics and Research, no. 3, July.

Edwards G, Anderson P & Babor TF et al. 1994,
Alcohol policy and the public good, Oxford University Press, Oxford.

Matthews S, Chikritzhs T, Catalano P,Stockwell T & Donath S 2002,
Trends in alcohol-related violence in Australia: 1991/92-1999/00, National Alcohol Indicators Bulletin no. 5, National Drug Research Institute, Perth.

National Expert Advisory Committee on Alcohol 2001,
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Scribner R, Cohen D, Kaplan S & Allen SH 1999,
‘Alcohol availability and homicide in New Orleans: conceptual considerations for small area analysis of the effect of alcohol outlet density’, Journal of Studies on Alcohol, vol. 60, no. 3, May, pp. 310-316.

Stevenson RJ, Lind B & Weatherburn D 1999,
‘The relationship between alcohol sales and assault in New South Wales, Australia’, Addiction, vol. 94, no. 3, pp. 397- 410.

Stevenson RJ, Lind B & Weatherburn D 1999b,
‘Property damage and public disorder: their relationship with sales of alcohol in New South Wales, Australia’, Drug and Alcohol Dependence, vol. 54, no. 2, 1 April, pp. 163-170.