Retail + Distribution
- Written by Mark Hicken Mark Hicken
- Category: Retail and Distribution Laws Retail and Distribution Laws
- Published: 09 August 2004 09 August 2004
Current B.C. liquor laws do not make sense at all unless you have some sense of their history and development from the time of prohibition (which is now approaching a century ago!).
In BC's earliest "wild west" days,
there was no regulation over the liquor business at all. Bars and
saloons were major features of the larger cities such as Vancouver and
Victoria. Many were open 24 hours a day, 7 days per week. During this
era, it was perceived that there was a substantial problem of
maintaining public order as a result of unregulated drinking and
Beginning of Temperance Movement
In the early 1900s, a number of organizations (many of them religious) started to lobby on behalf of temperance and. some more aggressively, for prohibition. These groups believed that liquor was basically sinful, dangerous and counter-productive to the orderly functioning of society. These groups made little or no distinction between the various types of liquor. Wine (and beer) was lumped in with spirits such as whisky, vodka and gin. All were considered under the general rubric of liquor and thought to be harmful. These attitudes stand in stark contrast to the view of wine in other parts of the world such as Europe where, for hundreds of years, wine has been considered to be a healthy, harmless adjunct to a civilized meal. For example, Ernest Hemingway commented:
In Europe we thought of wine as something as healthy and normal as food and also a great giver of happiness and well being and delight. Drinking wine was not a snobbism nor a sign of sophistication nor a cult; it was as natural as eating and to me as necessary.
At the outbreak of the First World War, the temperance movements started lobbying harder and linked the war to temperance, arguing that a minor sacrifice of prohibition would assist the war effort. These groups became stronger during this time and started to exert strong political influence. Similar arguments were being made in the United States.
In 1916, the B.C. Government introduced a bill setting the stage for a referendum on prohibition (only men could vote at that time). The whole issue was extremely controversial, particularly to those of European origin who considered wine to be an integral part of the meals and their life. The referendum was eventually held and prohibition was approved becoming effective in B.C. on October 1, 1917.
However, the Provincial Government did not have the constitutional power to deal with matters of inter-provincial trade (which is under federal jurisdiction) so the initial ban on liquor was simply inconvenient: citizens could simply order liquor from another province or from outside the country. However, in March 1918, under pressure from the provinces, the Federal Government eventually banned the inter-provincial trade of liquor into any province that was under prohibition. This stopped the legal flow of liquor into B.C. At this point, Canada came the closest it ever had to national prohibition. All provinces except Quebec had implemented some form of prohibition at this time.
Prohibition was a Disaster
In British Columbia (and elsewhere), prohibition was an utter failure. Citizens who could afford to simply stocked up before the ban came into effect. Others purchased liquor from bootleggers who quickly jumped in to satisfy an insatiable demand. The saloons and bars did not close ... they stayed open serving "near beer" (about 1% alcohol) which was unregulated ... however, behind the bar, there were frequently unmarked containers of illegal alcohol which was often brazenly served to whomever wanted it. The policing costs of the ban were extremely high. The Prohibition Commissioner himself fell victim to the profits of bootlegging and was arrested and charged, serving time in jail. There was an exemption for liquor purchased for medicinal reasons which could be obtained from government stores or from drug stores. This loophole served to be a gigantic one: during 1919 alone, 181,000 prescriptions were written by the province's doctors at $2 each. The government which now found itself in the "medicinal liquor" business sold over $1.5 million of liquor in 1919. In 1920, the U.S. adopted national prohibition which added a huge export market to the bootleggers' business. Worst of all, the prohibition laws were generally disregarded, reducing respect for the law in general and making criminals out of otherwise honest citizens.
What Were We Thinking?
By early 1920, it was clear that the experiment with prohibition was a shambles and was extremely unpopular. In April 1920, the provincial government was desperate to find a way out of the mess and ordered a new referendum to try and create an alternative. A compromise was adopted and the new referendum question posed a choice: do you want to continue with prohibition as it stands or would you rather have a new system of government control over the liquor business. It was thought that the latter choice would pass because it would appeal to those more stridently in favour of the resumption of liquor sales and also to those who wanted regulation and control. The government control option won handily with almost a 2 to 1 margin (only Chilliwack and Richmond voted in favour of keeping prohibition). In this regard, BC was ahead of its time: it was the first province to adopt a system of government control over the liquor business. However, in the following year, Quebec and the Yukon also adopted such systems - the rest of Canada stayed dry.
Depression and Revenue
By now, the depression was in full force and revenue pressures were facing all levels of government. In 1921, the provincial government introduced liquor control legislation which would give the government control over liquor sales. Dismal government liquor stores opened where all product was securely hidden behind the counter and customers were required to go through multiple steps before being given their "precious" beer, wine or liquor. The government spoke as if control was more important than revenue but in 1922 liquor revenue provided the government with 13.8% of its general revenue which was to rise to 22.7% by 1930.
However, government control was more theoretical than actual as the bootlegging business carried on unabashed, continuing to provide its largest customer, the U.S., with liquor and by undercutting the prices in the bleak new government liquor stores. In addition, the federal law which had cut off liquor to prohibition provinces no longer applied since prohibition was gone ... as a result, citizens could once again order liquor from outside the province for personal use. Bars and restaurants were not legally permitted to sell liquor at this time but "beer clubs" flourished along with other illegal establishments. The clubs had initial success with various court challenges and the liquor system was only somewhat more regulated than it had been before.
Bars and Beer By the Glass
The government sought more control over the system and wanted to legitimize social drinking establishments. The solution was thought to be a "beer by the glass" plebiscite under which licensed drinking establishments would return. Unfortunately, the government miscalculated and the plebiscite was narrowly defeated province wide (but was approved sometimes by large margins in cities such as Vancouver). This result created more problems and political pressure. Eventually, despite the overall defeat, the government moved to let local control prevail and permitted "beer by the glass" establishments in local areas where they had been approved. Beer parlours then opened but had bizarre LCB rules. They were deadly dull. No form of entertainment or music was allowed. No food was allowed (???). Patrons had to remain seated and had to be served by male waiters. To start with men only were served but with no apparent legal authority for this, the LCB backed off and by 1927, women were also permitted but only in a separate room from the men. This is why you still see some old bar entrances which have separate doors for men and women!
During these times, the LCB and government was under a cloud of suspicion. The issuance of liquor licenses seemed to go to well connected political insiders and it was thought that to get a liquor license, you had to contribute large sums to the right people. Various investigations took place and the governments had a difficult time maintaining an illusion of fair and responsible control.
End of the Decade - End of Liquor Imports and Victory of Government Control
By the end of the 1920s, a few important developments had taken place. In 1928, the federal government, under pressure from the U.S. (still under prohibition) and a government report on excise taxes, finally acted and stopped the inter-provincial trade in liquor. This ended the personal use import exemption and citizens could no longer import liquor from outside the province. The law that did this is the Importation of Intoxicating Liquors Act which is the very same law that is still on the books today and which still gives control over the liquor business to the provincial governments. Effectively, the federal government passed the buck to the provinces and gave them the power to create whatever regulations they wanted since all inter-provincial trade was cut off unless it went through the provincial government's liquor agency. It is a direct result of this prohibition era law that we still have government control of the liquor business in BC today. In addition, by this time, all of the provinces except PEI had switched from prohibition to government control.
Prohibition in the U.S. was also a well-known failure and by the early 30s even its earlier supporters had changed their minds. For example, John Rockefeller said the following:
When Prohibition was introduced, I hoped that it would be widely supported by public opinion and the day would soon come when the evil effects of alcohol would be recognized. I have slowly and reluctantly come to believe that this has not been the result. Instead, drinking has generally increased; the speakeasy has replaced the saloon; a vast army of lawbreakers has appeared; many of our best citizens have openly ignored Prohibition; respect for the law has been greatly lessened; and crime has increased to a level never seen before.
Nevertheless, prohibition in the U.S. continued in force in the U.S. until 1933 when the 21st Amendment to the Constitution took a similar tact to that in Canada by giving the power to the individual states to regulate the liquor business. However, the end of prohibition was controversial in the U.S. and the state by state approach was used primarily so that some states could retain prohibition. In fact, Mississippi did not end its state prohibition until 1966.
Current Attitude and Approach
The rationale of control was adopted in 1920 following the failed experiment with prohibition. At that time, all liquor was viewed together - spirits, wine, beer - everything was considered as liquor, a product that was inherently fraught with peril and danger and which needed to be controlled. In the early years of government control, and as noted above, the restrictions on liquor were intense. Bleak liquor stores doled out the precious product. Dismal beer parlours were permitted but only with arcane rules and restrictions which severely limited any type of enjoyment or socializing. Of course, this rational is now almost 100 years old and flowed directly from prohibition.
Today, one would think that we might have moved on and discarded these old and now largely discredited theories, particularly in regards to wine. I'll quote Hemingway again:
Wine is one of the most civilized things in the world and one of the most natural things of the world that has been brought to the greatest perfection, and it offers a greater range for enjoyment and appreciation than, possibly, any other purely sensory thing.
However, BC's current liquor laws are historical antecedents of the control regime. The control rationale was implemented so severely that it has taken decades for the various rules to be changed or removed. For example, it was only in the 1980s (more than sixty years after prohibition) that we permitted liquor sales on Sundays. The acceptance of credit cards in liquor stores is relatively recent. Private liquor stores are relatively recent. The ability to order a drink without a meal is relatively recent. All of these strange rules stem from the control mentality.
With the plethora of recent studies indicating that moderate consumption of wine is actually extremely good for you, one might think that we would, at the very least, have separated out wine from the control mentality on the rest of "liquor". However, wine is still firmly lumped in with liquor on nearly all of BC's laws.
The bureaucracy of control in the form of the LCB and LDB remains in place (although the LDB, the retail side, has obviously been transformed into a modern retail operation). However, on the government side, modernization of the structure and particularly the laws has been slow in coming. This is likely because control has given way to another rationale: revenue. While there would seem to be little public policy reason for the government to remain in the retail liquor business (given that there are now also private stores almost everywhere), the government now relies on the revenue which the LDB stores generate. The LDB now provides the government with over $800 million annually which goes into general revenue. This is separate and apart from the sales tax revenue that liquor generates. Any changes to the liquor system in BC will now have to face the daunting task of how to maintain that revenue or provide alternate compensation for it.
For further reading on this topic, you may wish to read Robert A. Campbell, Demon Rum or Easy Money: Government Control of Liquor in British Columbia from Prohibition to Privatization (Ottawa: Carleton University Press, 1991) ... now out of print but in libraries around Vancouver.