InterProvincial Shipping Legal Update

Here is an update on the status of the constitutional challenges to interprovincial alcohol restrictions that are currently before the courts in New Brunswick and Alberta.

Comeau Case (New Brunswick). The trial level decision found that New Brunswick's restrictions on the interprovincial importation of alcohol were unconstitutional. The case was then appealed directly to New Brunswick's Court of Appeal. The NB Court of Appeal has refused leave to appeal (i.e. they have declined to hear the appeal). This means that the lower level court decision stands and constitutes a precedent only within the Province of New Brunswick. It remains to be seen whether leave will now be sought for the case to be heard by the Supreme Court of Canada and whether such an application would be successful. CBC coverage of this decision is here: Acquittal of Cross-Border Beer Shopper Stands.

Steam Whistle, Great Western (Alberta). An injunction was issued earlier upon application by Steam Whistle (of Ontario) that prevented the application of discriminatory beer markups in Alberta which favoured in-province breweries. The Alberta government subsequently revoked the discriminatory beer markup system. However, it then instituted a "rebate" system for small Alberta breweries which had a similar practical economic effect. On November 9th, an Alberta court issued another injunction (upon application by both Steam Whistle and another brewery, Great Western of Saskatchewan) such that the breweries will not be affected pending resolution of the issue at a full hearing to be held in May 2017. The breweries will presumably argue that any discriminatory markup or rebate system is unconstitutional under s.121 of the Constitution which creates a "free" trade zone between the provinces for Canadian products. CBC coverage of the decision is here: Great Western, Steam Whistle win latest battle in Alberta beer war.

It should be noted that each of the above cases could potentially have significant effects for provincial liquor policy across the country. Most Canadian provinces currently impose some restrictions on the interprovincial transport of alcohol (see: Shipping Law Update). These could be overturned or affected by the Comeau case if it gets to the Supreme Court of Canada. In addition, many provinces (including BC) impose discriminatory liquor markups which favour their own in-province breweries, wineries or distilleries. These could be overturned or affected by the Steam Whistle/Great Western case if that case makes its way up the appellate ladder.

Premiers Announce Limited Deal for Access to Canadian Wine

On Friday July 22nd, the Premiers of British Columbia, Ontario and Quebec announced a limited deal to improve access to Canadian wine in their respective provinces. The joint press release is here: Increasing the Flow of Wine Among Quebec, Ontario and British Columbia. The press release does not provide any detail as to what the initiative covers but it refers to easier on-line access to wines produced in these three provinces. It also refers to the fact that the initiative will be implemented through actions of the liquor boards in each province. As noted, there is currently very little information about the extent of this agreement.

However, it is possible that the agreement is based upon a relatively new e-commerce program unveiled by the LCBO (Ontario's liquor board) late last year, which indicates a process for "special orders" of Canadian wines. The details of that program can be found here: LCBO E-commerce, particularly in the links labelled "e-commerce presentation to the trade" and "FAQs about e-commerce" (both are PDF documents). If the LCBO program is the basis for this provincial deal, then the following characteristics would constitute the fundamentals of the program:

  • Wineries would be able to list their products on an e-commerce website run by the liquor board in the other province (e.g. LCBO or SAQ, Quebec's liquor board).
  • Consumers in the other province could purchase any of the listed wines so long as they ordered by the case. 
  • The wines would not be stocked by the liquor boards. Rather, they would be ordered by the liquor board from the winery following a customer order.
  • The winery would ship the wine to the liquor board in the other province, who would then either deliver the wine to a government liquor store for pickup by the customer (free) or arrange for delivery to the customer's home or office at extra cost. Delivery would only be possible within that liquor board's particular province.
  • It seems likely that the wines listed on the site would be subject to provincial liquor board markups, which in the case of Ontario are 73.5% for out of province wine. This would mean that the wines would either have a higher end-consumer price in the other province than they would in their home province or that the winery would have to sell to the liquor board at a significant wholesale discount.

Alberta Govt Reverses Discriminatory Markup Policy

The Alberta government has announced that, effective August 5th, it is eliminating the discriminatory liquor markup policy that was introduced in the last provincial budget. As reported here earlier, Alberta had previously had a liquor markup policy that applied equally to products regardless of place of origin. The budget changed that by providing lower preferential markups to small breweries located in Alberta and provinces that had signed the New West Partnership. As a result, an Ontario brewery, Steam Whistle, sued the Alberta government and obtained an injunction to prevent the change on the basis of a preliminary argument that s.121 of the Constitution (the "free trade provision") might prevent provinces from charging markups or fees that did not apply equally to all Canadian products. The Alberta government has now announced that they are reversing course and going back to a system that is non-discriminatory: Government to Create Consistency for Alberta Beer Markups. This move should effectively end the Steam Whistle case - which will also end the potential for a court ruling on the effect of s.121. At the same time, the Alberta government announced it will later introduce a "grant program" to encourage the growth of Alberta based small brewers.

NB Appeals Cross-Border Liquor Decision

The New Brunswick government has filed an appeal of the "cross-border" liquor case that was decided last month (the Comeau case) and which held that provincial liquor laws could not impede the "free trade zone" guaranteed by s.121 of the Constitution.  The appeal goes directly to the New Brunswick Court of Appeal (skipping an intermediate level of court) and contends that the judge made errors of law in interpreting s.121. One of the primary appeal arguments is that the judge did not follow older decisions of the Supreme Court of Canada that interpreted s.121 in a much more restrictive manner. The CBC news report on the appeal is here: New Brunswick appeals cross-border liquor case. The appeal is not surprising given the importance of the issues in this case.

NB Case Strikes Down Interprov Liquor Restrictions

In what could prove to be a groundbreaking decision of immense importance to the Canadian wine industry, a New Brunswick judge has found today that provincial laws that restrict the interprovincial transport of liquor are unconstitutional. The judge found that s.121 of the Constitution which guarantees a free trade zone within Canada does not allow provinces to create laws that prevent Canadians from transporting liquor from another province. It is not currently binding on other provinces because it is the decision of a NB trial court. However, if it is appealed to the Supreme Court of Canada, which seems all but certain, then it may eventually become binding across the country. Even now, it will likely be influential because there is now a precedent for other Canadian jurisdictions, if not a binding one. I note that all Canadian provinces have some form of laws, regulations or policies that inhibit the interprovincial trade in alcohol (Manitoba is the least restrictive). All of these restrictions are now vulnerable to a similar challenge.

This case may become Canada's Granholm (a case which opened up the U.S. market to direct to consumer wine shipping). This may be the start of a new era when Canadians from one part of the country will be able to legally purchase wine, or other alcohol, from another part of the country just as most people in the world are able to do. This is a very significant development for the Canadian wine industry because it may transform their markets from customers in a single province to all of the residents of the entire country.

Here is a link to the full decision: NB Liquor case.