A recent judgment (Banville & Jones Wine Co. Inc. v. Manitoba Liquor Control Commission) from the Court of Queen's Bench in Manitoba deals with the difficult issue of the trade practices of a provincial liquor board when they act as wholesaler to both their own chain of retail liquor stores and to private retail wine stores. This judgment is the culmination of a long dispute between the private stores and the Manitoba Liquor Control Commission (MLCC) under which the private stores alleged that MLCC was acting in ways preferential to their own stores and which harmed the interests of the private stores. The judge described the dispute as "contentious" and introduced the dispute by commenting as follows:
Despite what was initially to be an operational relationship whereby the MLCC would facilitate a functioning co-existence with the private wine stores (and by extension, the variety and choice that would flow therefrom), the MLCC has instead chosen to compete head-on with the stores. Complicating such competition is the fact that it takes place while the MLCC is simultaneously occupying, what is for the private wine stores, a suspicion-engendering position by which the MLCC regulates and controls significant aspects of how the MLCC’s competition is able to do business. The resulting relationship is such that it produced from the arbitration panel, after having heard the evidence, the following clear and justifiable comment:
… This relationship, we think, has given rise to the problems which have led to the allegations in the Notice to Arbitrate and in the suspicions of the stand alone specialty wine store operators about the motives of the MLCC and, in particular, of Crawford. It is, we believe, time to reconsider this relationship.
In the end, for technical reasons related to the applicable legal standard of review, the judge upheld an arbitration panel's award which favoured only one of the private stores' complaints. However, both the arbitration panel and the Court indicated strongly that an arrangement whereby a liquor board acts as wholesaler to both its own stores and to private stores should be avoided. At the conclusion of the judgment, the Court stated:
After having reviewed the entirety of the record, rife as it is with the undercurrent of animosity and examples of the contentiousness about which I wrote at the beginning of this judgment, I would be remiss if I did not make the following comments.
Although I have dismissed the [private stores'] appeal — largely on the basis of what I believe is a rigorous application of the appropriate standards of review — my determinations in that regard ought not to be seen as a judicial benediction of the conduct of the MLCC. Although the members of the arbitration panel (unanimously or as a majority) variously made findings of fact and drew inferences to which I have deferred, there was, in the case of some of the allegations in the notice to arbitrate, evidence adduced that could have equally resulted in findings and inferences less favourable to the MLCC’s position. I say that not for the purposes of second-guessing the arbitration panel (whose findings and inferences contained no palpable and overriding error), but rather to underscore its own conclusion that the time has come to revisit the relationship between the private wine stores and the MLCC. [emphasis added]
The judgment is interesting reading because it illustrates the formidable difficulties that private retail wine stores have when dealing with a wholesaler/supplier who is also their major competitor. At one point in the judgment, the court reviews evidence provided by the CEO of the MLCC whereby he candidly admits that the liquor board was surprised at the loss of business to the private stores and was unhappy about losing that business from its own retail stores.
Of course, the structural problems that exist in Manitoba also exist here in B.C. The private wine and liquor stores here must also obtain their product from the BCLDB which is their major competitor. As readers will know from my previous comments, I think it makes more sense for government to get out of the retail liquor business entirely. However, if government wants to stay in it to any extent, there should at least be a complete separation of the wholesale and retail aspects of the business so that the LDB's current conflict of interest is eliminated. While the Banville judgment is only a single precedent, it provides a useful view from the bench as to how judges might view these issues in the future. The message is sensible and fair: don't permit a government monopoly wholesaler to also act as a retailer if it is supplying private stores with which it's retail operations compete.