WineLaw.ca

Liberal Steps in to Help Free Our Grapes

Good news despite yesterday's set backs (see: NDP Delays Wine Shipping Law Reform). Liberal MP, Scott Brison, has saved the day by stepping in and providing more time for Bill C-311 next week. Hopefully, the Bill will now pass before summer recess. Thank you, Scott Brison.

NDP Delays Wine Shipping Law Reform

An opportunity to reform Canadian wine shipping laws (see earlier story: Canadian Wine Shipping Law Reform Comes Closer) was lost today when federal NDP members used up all of the allotted time for debate on the Bill and prevented a vote in the House of Commons. The sponsor of the reform Bill (C-311), Dan Albas, had implored the House to pass the Bill today in order to help the Canadian wine industry and Canadian wine consumers. Passage of the Bill would have amended the 80 year old post-prohibition law which prevents the shipment of wine between provinces for personal use. Unfortunately, due to the delay, the Bill will now likely be delayed until at least the Fall.

Two Wine Neighbors - Two Approaches to Liquor Regulation

This week is a significant one for the reform of wine distribution and regulation in the Pacific Northwest. It's interesting to look at the changes that are happening in the neighboring jurisdictions of British Columbia and Washington state, particularly as those changes relate to the modernization of regulatory frameworks that stem back to Prohibition. Here's a summary of what's happening.

Washington State. On Friday June 1st, Washington will completely privatize its liquor distribution system, moving to "open state" status after decades of being one of a diminishing number of "control states" in the U.S. (for more info, see Tom Wark's article: Should Alcohol Bureaucrats Be Dissing the Will of the People?). Up to now, Washington maintained overall control of liquor distribution in the state through the use of government wholesale distribution warehouses and by restricting the sale of spirits to government operated liquor retail stores. Beer and wine, however, has long been available in grocery stores and private retailers following earlier reforms. The new system, which was mandated by last November's successful Initiative I-1183, will remove all government participation in the wholesale and retail liquor business. Instead, Washington state will move to becoming a tax collector and regulator, functions that lack the conflict of interest inherent when the state is also involved in the business that it is supposed to be regulating. The taxation/regulation function is the system that nearly all governments in the world follow, particularly those where there is no legacy of Prohibition.

The New York Times ran an excellent story on the switch-over yesterday, which notes that there may actually be a "dry" period in some areas of a few days this week during the transition: A Taste of Prohibition As Liquor Stores Go Private. No doubt, there will be much commentary and analysis after the fact on the impact of the changes. However, for consumers, the major questions center on pricing and selection. Washington consumers currently enjoy beer and wine prices that are often about 50% less than those in B.C. However, their spirits prices, while lower than in B.C., are higher than in other U.S. states, particularly those in California. Initiative I-1183 requires the introduction of new percentage based state licensing fees for spirits at both the wholesale and retail levels which were projected to increase state liquor revenue by 50%. Come Friday, consumers will be able to see whether those fees have increased end pricing at retail and/or whether competition has had an effect. It may be difficult to separate these factors in any analysis of price changes. 

British Columbia. Here in Canada, changes are also on the horizon, albeit of a different nature from our southern neighbor. On Tuesday May 29th, Bill C-311 (which would amend the Importation of Intoxicating Liquors Act to permit the inter-provincial shipment of wine for personal use in certain circumstances) will return to the House of Commons for third reading and, hopefully, a final vote before heading to the Senate. If and when this Bill passes, Canada will finally jettison its Prohibition-era constraint on shipping wine from one province to another: a problem that has been mostly solved in the United States through two decades of reform efforts and one very influential Supreme Court decision (Granholm v. Heald). This federal level change would be hugely beneficial to the expansion of the Canadian wine industry and the development of Canadian food and wine culture in general.

At the provincial level, the Government of B.C. is also in the process of re-examining its liquor distribution system. The Government has already passed some smaller reforms including caterers' licenses and has mused about joining the civilized world by permitting corkage (which is currently illegal). However, the biggest possible change is the "Distribution of Liquor Project" (DLP) which essentially asks private companies to bid on the management of the government wholesale distribution system and also to provide ideas on how to re-structure it. However, B.C. has chosen to look to Alberta for the distribution model for the DLP rather than Washington. The DLP proposes that BC replace the "government monopoly" distribution system with a single private operator under contract to the government. This type of modified "control state" structure was rejected in Washington and the process in B.C. has already been criticized by various groups here. However, while the DLP will reduce competition at the wholesale level, it does provide an opportunity to address many structural problems in the current government run system including supply chain inefficiencies, limits on product selection, conflicts of interest and a byzantine wholesale pricing model. B.C. consumers have been negatively affected for decades by these problems, which along with excessive levels of taxation, have resulted in some of the highest prices for wine in the western world. It is currently too early in the DLP process to comment on any possible effects on pricing.

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The bottom line on these changes is an interesting comparison. Washington will now join the majority of the world by rejecting the Prohibition-era control mentality and becoming an "open or free state" with respect to liquor regulation. British Columbia, on the other hand, has chosen to update the control mentality a bit rather than jettison it. B.C. will remain as a "control state" albeit one that may become more efficient. In both jurisdictions, the ultimate success of any changes will ultimately be judged by consumers (and voters) on the basis of pricing and selection. We'll have to wait to see on that one in both places ... although answers from Washington may come as soon as this Friday.

Canadian Wine Shipping Law Reform Coming Closer

Bill C-311, which would amend the Importation of Intoxicating Liquors Act to permit the inter-provincial shipment of wine for personal use in certain circumstances (see earlier story: Reform Process for Wine Shipping Law Begins) will return to the House of Commons in Ottawa this Tuesday, May 29th. The Bill will then, hopefully, receive third reading and pass a final vote in the House before it goes to the Senate (see this update from its sponsor, Dan Albas MP). A rally to support the Bill was held at Poplar Grove Winery in Penticton this past Friday with Dan Albas, and BC Premier, Christy Clark, both in attendance (see Politicians Rally Around Wine Bill).

It is important to remember that the amendment, if and when it becomes law, will permit each province to define the amount of wine that is a reasonable amount for personal consumption. As a result, if real progress is to be achieved, it is essential that the provinces set realistic limits for what is a reasonable amount. As one of two leading wine producing provinces (and as the only one that is actively supporting this Bill), British Columbia is in a unique position to take leadership on this issue and to establish a precedent for the other provinces in advance. It is hoped that British Columbia will act soon on this matter. I have long argued that the limit should be 24 cases per person per year. This limit is almost the same as the 2 cases per person per month limit that they have in Oregon (both CA and WA have no limits for personal consumption). However, an annual limit would more easily accommodate wine tourism since occasional visitors would be able to take advantage of the larger exemption available on a fewer number of seasonal trips.