AFPD Challenges Liquor Control Effort to End ‘Half-Mile Rule’

By: Kris Harris

The Associated Food and Petroleum Dealers (AFPD) filed a lawsuit Wednesday, March 22nd, in the Court of Claims asserting that the Liquor Control Commission (LCC) violated the Administrative Procedures Act when it took only five weeks, from the time it submitted draft rules to the Office of Regulatory Reinvention rescinding the half-mile requirement, until filing the rule as complete with the Department of State.

The LCC proposed to eliminate the half-mile rule, which has been around since 1979, that prohibits off premise retailers selling liquor from obtaining a permit to do so unless they are located at least a half-mile from a similarly permitted retailer, had prompted the lawsuit charging the action could decimate existing businesses.

Usually, it takes many months, sometimes years, for a rule to move through the process, which generally involves a substantial public comment period. However, the MLCC did not want to hear from the general public, or even the licensees it governs, and wanted to rescind this almost 40-year-old rule under the darkness of night so it could take effect immediately.

“The lawsuit explains that the mere rescinding of the rule does not violate the law,” said Auday Arabo, president and CEO of the AFPD. “The problem was the process the Liquor Control Commission used to expedite without proper notice or public hearings, which violated due process rights of all off-premise liquor license holders in the State of Michigan.”

AFPD contends that this ruling has taken away any recourse licensees have regarding their concerns. “If we don’t fight this, it could result in the complete annihilation of the small liquor retailer,” said Arabo. “We don’t want a liquor store at every comer. There is great value to the public with this half-mile rule.  All we are asking for is that the MLCC, which is a government agency, follow the process which they have been called to do since 1933.  We are simply asking for a public hearing and transparency in government.”

This case seeks a ruling that the MLCC and ORR must follow the notice, publication and public comment provisions of the (Administrative Procedures Act Section 41 and 42) to properly rescind the rule.

As explained in the suit, the half-mile rule provides current licensees security to operate under a strict regulatory scheme in a highly-regulated industry. The sudden and swift abolishment of this long-standing rule – accomplished in direct violation of the APA – now allows a new licensee to literally set up shop next door to an existing licensee.

Since 1979, retailers have received the benefits and privileges of this rule, which prohibits the approval of a specially designated distributor license if an existing specially designated distributor license is located within 2,640 feet of the proposed site.  This rule, enacted for almost 40 years, has offered licensed retailers of liquor, security from an already over-saturated market.  The rule has protected communities from having four liquor retailers on every busy corner in the State of Michigan.

“The commission is using a section of law allowing it to bypass the usual rule-making procedures by claiming it is rescinding a rule in conflict with existing law,” said Arabo.  “The commission has no grounds to invoke this exception.”

“Thousands of retailers who have invested their life savings into their businesses, and have lived and abided under (the half-mile rule), will risk losing their livelihood for which no amount of damages could compensate,” said Arabo. “Hundreds of new applicants will receive licenses and immediately jeopardize, annul and nullify the value and benefit that existing licensees have enjoyed.”

“It is more of what you would see in a dictatorship than a democracy,” said Arabo. “We will fight this every step of the way. We will work with the legislature to address this blatant abuse of power by the MLCC.  By rescinding a rule that has been around since 1979 without public testimony and public scrutiny, demonstrates they have total abused their powers.”