Lawmakers worried about a liquor license ‘black market’ in Utah

Posted at 2:07 PM, Jul 18, 2014
and last updated 2014-07-18 23:34:00-04

SALT LAKE CITY -- Utah lawmakers are worried that a bill they passed that allows liquor licenses to be sold to the highest bidder could create a "black market."

The bill passed three years ago and took effect at the beginning of the month. It allows for liquor licenses to be sold to qualified buyers instead of being turned back into the Utah Department of Alcoholic Beverage Control.

But lawmakers are now questioning if the sale of liquor licenses will be upfront, or if they have started a bidding war for them. At a meeting of the Business and Labor Committee in the interim Utah State Legislature on Wednesday, Rep. Gage Froerer, R-Huntsville, said he has heard from entrepreneurs who claim Utah has created a "black market."

"In their terminology, we've really done a transfer of wealth," he said. "Because now, instead of turning those back in, there's no reason to turn those back in. They will wait for the highest bidder to come about."

But the bill's sponsor, Sen. John Valentine, R-Orem, said it remains to be seen.

"As of yet, we haven't seen any evidence of a black market," he told the committee.

In fact, the DABC reports no one has submitted a sale of a liquor license. The liquor control agency has final approval of any license transfer.

"We don't have any idea how much value's going to be put in to the club licenses, largely because we haven't done it yet," said assistant Utah Attorney General Sheila Page, who works with the DABC. "Also, there's a perception that no one wants to be the person who sold cheap."

But lawmakers want to know if a club liquor license -- difficult to obtain because they're doled out by population quotas -- suddenly has an "artificial value."

"Where we've put a limit on club licenses, that's going to give them a value, right? Somone can come in and say, 'We want to buy your club license and as long as they jump through the hoops to be a licensee, they can get that, right senator?" Rep. Jim Dunnigan, R-Taylorsville, asked Valentine.

"We made a specific compromise that we did not want the bars to grow as an industry," Valentine replied. "We wanted to encourage more in the restaurant area, so we made a conscious decision to not have bars grow faster than our population grows."

After the meeting, Valentine told FOX 13 that he believed his bill is doing what it was intended to do, which is bring business transactions involving bars and restaurants into the light. He said he was not concerned about inflated sale prices, but said he would review it in six months to see if it was a problem.

"We've seen in other states that have adopted the same model, there's this initial bump up of value and then it kind of settles down," Valentine said. "That's what I think we'll see here."