- Monday, 27 June 2011 08:48
- Written by Mark Hicken
The first wine law reference text in North America has just been published, Wine in America: Law and Policy. It's edited by leading Napa wine lawyer, Richard Mendelson. While the text is U.S. focused, most of the main issues are also applicable to Canada so the American analysis gives a good framework for discussion of the same issues north of the border. I can attest that I am already finding this book to be invaluable!
- Wednesday, 15 June 2011 07:02
- Written by Mark Hicken
June 15, 2011 is the 90th Anniversary of the repeal of prohibition in BC and the establishment of government control of the sale of liquor within the province. The BC prohibition commenced on October 1, 1917. It was soon judged a failure, resulting in law-abiding citizens becoming criminals for simply wanting to have a drink with their dinner. Following a referendum, prohibition was repealed on June 15, 1921. On the same date, a “government control” system was implemented for the sale of liquor within the province.
It is the 90th anniversary and the government monopoly Liquor Distribution Branch (LDB) still controls and sells all liquor within BC at the wholesale level and still sells a vast amount through its government retail stores which have extremely high operating costs. The LDB is a $3 billion per year business in B.C. It generates about $900 million per year for the government but costs about $300 million per year to operate.
The following are some of the legacies of prohibition which make BC look ridiculous when compared to the rest of the world:
- Today, all liquor sold within BC must be registered and listed with the government. All imports of liquor must be approved by and processed through the government wholesaler. Yet, we don’t do this for cigarettes or guns.
- Today in BC, and unlike most of the rest of the world, it is still illegal to consume alcohol in a public place such as a park. BC citizens cannot legally enjoy a glass of wine while enjoying a picnic.
- It is still illegal to carry liquor across provincial borders (a criminal offence with possible imprisonment). In Europe, you can ship alcohol between countries without a problem. While Canadians cannot legally return from a vacation in another province with any alcohol, they can bring back 2 bottles per person after a trip to another country.
- We have excessively high taxes on liquor which result in prices being about double what they should be. For example, Chateau Ste. Michelle Riesling, a Washington state wine, is commonly available for $6 south of the border. It is $15.99 in BC because the standard LDB markup on wine is 123% plus 12% HST on top of that for a grand total of 135% tax.
- Wine is good for you when used in moderation as intended. No amount of soda pop is good for you but that is taxed at only 12%.
- We have arcane regulation of restaurants and private retailers such that these independent businesses are not permitted to do things which are otherwise commonplace. For example, they cannot store liquor off-site. They cannot transfer liquor between locations of the same restaurant or retail chain (even if the LDB is out of stock). They must buy nearly all their liquor from the government, usually from a single designated government store. If they order anything other than mainstream products, they are forced to order in full case lots via a slow and inefficient delivery system. As a result, restaurants frequently run out of products or encounter storage and financial issues due to the requirement to order in such large quantities.
- Restaurants and bars are denied wholesale prices entirely. Private retailers are given wholesale prices which are fixed artificially high by their chief competitor (the government stores). As a result, there is virtually no competition in the retail liquor business and consumers are denied the sales and good deals that are common in other countries.
- It is illegal for a private person to sell a bottle of liquor to another private person. Auctions are also illegal (unless done for charity).
- Citizens cannot take their own wine into a restaurant and have the restaurant charge them a corkage fee (even if the wine was purchased from a government store). This is illegal – it’s considered to be “illicit liquor”.
- Tuesday, 31 May 2011 13:29
- Written by Mark Hicken
Many people have been asking me about progress on wine law reform efforts. Here's a quick summary of where things stand.
Inter-provincial Wine Shipping Laws. A great deal of media attention was focused on this issue as a result of Terry David Mulligan's action a few weeks ago. If you haven't heard, Terry crossed the border without incident with his case of wine. In the run-up to the event, I have never seen so much attention paid to the shipping issue which is a good thing. There appears to have been minor progress in terms of some provinces, including BC, now recognizing that there is a problem. However, most provinces are still not supportive of attempts to introduce a national personal use exemption. The people in Ottawa who are pushing for reform, including Kelowna MP Ron Cannan, have indicated that they will continue to push forward. Basically, it is now a question of whether there is sufficient political will at the federal level to implement change in the face of provincial intransigence. Wineries need to help with this by directing consumers and the public to the FreeMyGrapes.ca web site where they can express support and contact their federal MPs and provincial MLAs.
Liquor Distribution Reform. This is the issue that consumers get most excited about. As noted in an earlier post, there has been some progress in Manitoba (of all places since they have no wine industry) where the government has announced that they will start selling beer and wine in grocery stores (albeit under liquor board control). I'm not in favour of the way this is being done but at least they are considering the issues with consumers in mind. Ontario's position appears to be that there will not be much change: see this article "Ontario Not Getting Corner Store Beer and Wine". Here in BC, we have seen no progress, although perhaps that's because the government is consumed with bigger problems (such as the HST, see below).
Taxes. Alberta remains the only Canadian jurisdiction with a flat tax system on wine which, in my view, is the sensible approach if you want to guarantee provincial government revenue while also encouraging selection and value for the consumer. Unfortunately, BC's system is almost the exact opposite - a crazily complicated formula which discourages almost all efficiencies. Our taxes and markups on wine remain some of the highest in the world and prices are consequently ridiculous which creates a drag on our important hospitality and tourism industries. Hopefully, once the government gets past the HST referendum, they will start taking a broader look at how inefficient our liquor pricing system is. In terms of the HST, I personally hope that it is retained following the referendum as I believe that it is sensible long term tax policy (and for the wine industry it is certainly preferable to the old GST/PST system).
- Friday, 20 May 2011 14:21
- Written by Mark Hicken
A conference on wine law is coming up at UC Davis (which is home to the renowned viticulture and enology program) from June 2nd through June 4th. The conference will deal with changes to EU and US wine labelling laws, wine fraud, and the issue of making international wine laws compatible. There are also optional dinners and an excursion to Napa. Full info is here: UC Davis Wine Law Conference. Register by Tuesday May 24th.
- Thursday, 19 May 2011 07:19
- Written by Mark Hicken
The Georgia Straight has a major investigative piece today which criticizes BC's outdated liquor system and related laws. It's a well written and thoughtful piece which provides input from many industry players including the former minister, the general manager of the LDB, the head of the BCGEU, restauranteurs, retail store owners. Here's the article: BC's Liquor Rules Still Sting. A couple of points: the article does not delve into the details of some of the more egregious issues in the system ... perhaps someone else will pick up the torch on that. I am quoted as favouring increased privatization (true) and the government system is defended (by others) as being useful because it ensures uniformity of price across the province. That last point has always seemed odd to me. Why is it a legitimate function of government to ensure that liquor prices are the same everywhere? The government doesn't do that for milk or fresh vegetables. Why on earth would they do it for liquor? Is liquor an essential service and milk is not?
Meanwhile, a potentially seismic shift comes from Manitoba where the government has announced that it will permit beer and wine sales in grocery stores (albeit under the control of liquor board employees) as well as corkage in restaurants and online social event permits: see the new release (PDF File - Province Introduces New Hospitality Strategy) and this CBC story, Liquor Sales Eyed for Manitoba Grocery Stores. While these moves will likely increase convenience for consumers to a limited extent, it makes no sense in my view to have government employees supervising the beer and wine aisle in a supermarket. That will simply drive up costs for no reason. However, it's a smart tactical move for the Manitoba Liquor Commission.
Hopefully, the BC government is paying attention to these issues. It's long past time that BC announced modernization of our rules and retail distribution system.