WineLaw.ca

The 2013 of the annual BC wine law conference is coming up on Monday, February 25th, at the beginning of a week which is otherwise devoted to the Vancouver International Wine Festival. If you are interested in BC wine or liquor law issues, please join us at the conference. Here are just a few of the exciting highlights:

• Update on the current state of the industry including agricultural policy issues.
• A report on the changes to interprovincial shipment of wine including a province by province review of applicable laws and rules.
• Overview of export/import issues including relevant international trade agreements.
• Discussion of the use of alternative business structures such as custom crush operations and urban wineries.
• Regulatory issues affecting the distribution of wine and liquor in BC including a review of the recent privatization in Washington state as well as potential improvements for BC’s system.
• Wide-ranging discussions of various operational issues including labeling, counterfeiting, on site tasting rooms, land management issues, environmental regulations and employment law. 

Here is a link for more information, including the conference agenda, location and registration. Those who work in the BC wine industry are eligible for a 50% discount on the conference fee: simply register as a \”student\” in the online registration process.

A new year always brings the promise of change. In BC, perhaps 2013 will finally bring the advent of consumer-focussed reform of our archaic liquor and wine laws. It is now 92 years since BC repealed prohibition … and we are still stuck with a \”government control\” mentality for both the regulation and distribution aspects of our wine industry. The current government has made some welcome minor changes in the past year (e.g. the introduction of corkage and the acceptance of interprovincial wine shipments). However, most of the major problems remain (see the FreetheWine and ModernizeWine sites) and, as such, BC remains out of step with the rest of the world. Our outdated approach creates problems for the entire province because it stifles the growth of food/wine culture and inhibits job creation in our increasingly important hospitality and tourism industries.

I am hopeful that liquor law reform will become an election issue this year … because it is long past time for BC to enter the modern age of liquor regulation. The past year saw increased media attention to liquor law issues. Whether it was arcane festival beer garden restrictions, liquor in movie theatres, interprovincial wine shipments, the shutting down of charity wine auctions or, most recently, the restriction of all age events, BC citizens are getting increasingly annoyed by an outdated approach to liquor regulation which is firmly rooted about 80 years in the past (see Liquor Law Year in Review, Open The Tap, and Liquor Laws Should Treat Us Like Adults). Most North American jurisdictions have modernized their liquor regulatory systems to a much greater degree than BC. Close to home, both Alberta and Washington state now have systems which are essentially modern. Even Ontario is now discussing modernization in the wake of a realization that the LCBO is not the economic golden goose that it pretends to be (see this Globe and Mail commentary: Four Reasons Why Ontario Will Be Better Off Without the LCBO). 

In BC, we have an election in May and hopefully, any new government will adopt a more modern approach on the regulatory side. In addition, and with relevance to the distribution side of the equation, the government\’s fiscal situation continues to deteriorate.  The next government will need to look for ways to increase revenue. Currently, the BCLDB provides about $900 million of alcohol revenue annually to the government. However, it costs almost $300 million to run the system. Our wacky and insanely complicated wholesale pricing system means that there is no room for government to increase prices. If any future government wants to wring more revenue from alcohol sales it will have to redesign the system or cut costs or do both.

There are plenty of opportunities for sensible reform of the existing system and I remain cautiously optimistic that the election may become a catalyst for change. British Columbia\’s wine drinkers deserve a government that promotes food and wine culture and that encourages the growth of economic activity in the hospitality sector. I\’ll post again later this week with some suggestions for meaningful change.

If you are interested to hear more about this topic, be sure to attend the 2013 Wine and Liquor Law Conference in Vancouver on February 25th. There will be a conference topic dedicated to the discussion of positive reform measures.

Prince Edward Island has acted to free the grapes (at least partly) by quietly amending its Liquor Control Act (s.33) to allow PEI residents to possess up up to 9 litres of wine per person that has been imported from other provinces. PEI\’s liquor board (PEILCC) says that this only applies to \”in person\” transport of wine, not direct shipment. PEILCC and I disagree on this point because the law uses the word \”import\” and, in my view, the use of the word \”import\” can only be reasonably interpreted to include both \”in person\” transport and direct to consumer shipments. The language used applies to all wine, not just domestic … and there is no restriction to winery purchases so retail purchases would also be okay. On the down side, the section is poorly worded because it creates a cumulative personal exemption … PEI residents are only allowed to possess up to 9 litres of wine that has been imported at any given time (in other words, if you already have 1 case, you will have to drink it before you can order another one) … a restriction which is both impractical and unenforceable. 

For a complete review of provincial law on wine shipment within Canada, see this page: Shipping Laws on Wine within Canada.

Modernization of Ontario\’s wine distribution and regulatory system has hit the news today as Ontario PC leader, Tim Hudak, has come out publicly in favour of at least some degree of privatization (see: PC Leader Hudak Urges Sale of Alcohol in Ontario Grocery, Convenience Stores). In addition, many Ontario wine producers are mounting a campaign to allow private wine stores within the province in order to increase their distribution and reach new markets. This campaign also received coverage in today\’s Globe from Beppi Crosariol: Wine Producers Lobby for Private Stores in Ontario. Beppi\’s article included a good analysis of the government revenue issue … which usually pops up as soon as anyone mentions privatization. Those who believe that privatization will reduce government revenue simply do not understand the economics of liquor in Canada. For a primer, see my earlier article Canadian Liquor Economics 101 which explains why privatized or partly privatized systems make more money for government than systems with government retail. But for more recent numbers, see Beppi\’s article where he reinforces the point by noting that Alberta\’s privatized system makes more money for government than Ontario\’s state retail system. 

The Nova Scotia government has followed British Columbia\’s lead by introducing provincial legislative amendments which will permit direct to consumer wine shipping into that province. The government press release is here: New Amendments Benefit Wine Industry, Consumers. The changes are stated to be similar to British Columbia\’s in that they only apply to 100% Canadian wine. The press release states that only Manitoba and B.C. already permit direct to consumer shipping. That is a contentious statement: see the FreeMyGrapes site for other views and my earlier post which concludes that BC, Alberta, Manitoba, Ontario (and now Nova Scotia) are open. The link to Nova Scotia\’s bill is here but note that the details of it will be contained in regulations which have yet to be issued. In addition, I note that Saskatchewan recently made some amendments to its liquor laws which expressly exclude direct to consumer shipping (see s.59 of Alcohol Control Regulation).

After a week of uncertainty stemming from an LCLB directive to Victoria\’s Belfry theatre (see: LCLB Halts Charity Wine Auction, Others in Jeopardy), the BC government has issued a press release indicating that it will permit charities to fundraise by auctioning off liquor. The quick response on this issue is laudable. However, the press release is confusing because, in terms of immediate application, it only refers to permission for the auction of \”gift baskets or similar items that have liquor as one of its components\”. The issue that was raised by the earlier action against the Belfry and the one that is of central importance to charities is whether or not they may auction privately donated bottles of wine. The auction of privately donated wine for charitable fundraising has been going on in BC for years, and for decades in the case of some charities. In respect of this issue, the press release is unclear. Indeed, there is no mention of privately donated wine in the release at all. Unfortunately the release seems to indicate that charities may not auction off bottles of donated wine until new laws are passed: \”Charities that wish to fundraise using only liquor, without other items as a primary component of a basket, will have to wait until new legislation is in place.\”. It is not clear from the press release what the legal distinction is between the auctioning of a \’gift basket containing liquor\’ and liquor on its own. I have requested that the LCLB provide clarification on what is intended.

Update: The LCLB has now issued a policy directive on this matter (PDF) which, while clearer than the press release, will likely cause a number of problems for the affected charities:

• The LCLB will permit the auction, without a license, of privately donated wine contained in gift baskets so long as the wine contained in the gift basket is not the “primary component” of the basket. If an auction consists of items which are primarily wine or if the event is primarily a wine auction then the event will need to be licensed. This distinction is impractical and appears to have no basis in law.
• Licensed auctions can include wine donated from manufacturers/agents or purchased from the LDB. Privately donated wine is not permitted. This is perplexing because the LCLB has licensed hundreds, if not thousands, of events in the past that auctioned privately donated wine. Frequently, the privately donated wine is the most valuable (and thus most important) part of the auction.
• The policy fails to take into account the unfairness that will be inflicted on charities who have incorporated charity wine auctions into their annual budgets and who have now had their financial stability up-ended by a sudden change in policy. In addition, the new policy will simply force private wine donors to auction their wine out of province causing a loss of charitable dollars and economic activity within B.C.
• The government is promising to introduce new legislation to permit the auction of privately donated wine in the future but as the legislature is not sitting, it is not clear when this might be accomplished.

A new LCLB policy, preventing the auction of privately donated wine at licensed charity auctions in BC, has caused the cancellation of Crush, an important fundraiser for the Belfry theatre in Victoria (see: Crush, Belfry Wine Auction Cancelled). The new policy was adopted over the summer as part of amendments to the special occasion licensing manual (PDF). This was a shock to many charities who have been holding such fund raising auctions for decades within BC without any problem. The new policy threatens the continuation of many charitable fundraising events and could affect the financial viability of some BC charities which have historically relied on these events to raise a significant amount of funding. The affected charities span the entire scope of charitable activity including arts organizations, hospitals and educational institutions. The policy seems problematic in a time of government financial restraint because a government direction to stop such fundraising will likely cause the affected charities to seek additional direct funding from government in order to continue to operate. 

Update (Oct 25, 2012): The minister responsible for the LCLB, Rich Coleman, was quoted today by CBC radio as indicating that charity auctions of private wine will be permitted and that he is hoping for a temporary fix to this problem either today or tomorrow. Will provide details once there is an official statement or news release.

This past weekend saw the Vancouver Sun publish an excellent editorial on wine shipping law reform (Allow Wineries To Sell Anywhere in Canada) with the newspaper arguing that the provinces and liquor boards should respect the democratic will of Canadians and embrace the spirit of interprovincial trade in wine as contemplated by Bill C-311 (which became law in June of this year). Unfortunately, as the editorial noted, many provinces and liquor boards are actively trying to prevent their own citizens from having consumer choice in the wine market and being able to direct order wine from other provinces. Perhaps, the most mystifying approach has been adopted by Alberta. As I have pointed out previously (see: Rule of Law Missed by Liquor Boards on Shipping Issue), Alberta provincial law clearly allows its citizens to \”import\” wine from other provinces for an adult\’s \”personal use and consumption\” (see s.89 of the Alberta Gaming and Liquor Regulation). Prior to the passage of Bill C-311, the Alberta Gaming and Liquor Commission (AGLC) took the position that Albertans were unable to direct order wine from other provinces because, although this Alberta law permitted it, federal law did not. Indeed, I received confirmation of that position from AGLC\’s legal counsel in 2009. Of course, once Bill C-311 passed, the federal prohibition was removed … and thus, one would assume that Albertans would be free to direct order wine from other provinces. However, AGLC has recently been making statements that it does not permit direct ordering and the responsible minister confirmed this position in a speech last week. As a result and in my view, both AGLC and the responsible minister have now taken a position which it is not reasonably possible to support when you read the relevant Alberta laws. I spent many years in Alberta when I was a kid and I can attest that its citizens are very proud of its \”strong and free\” approach to public policy. What is one to think of an Alberta provincial government that thumbs its nose at a unanimous vote in support of direct shipping by the House of Commons, ignores a Bill that was passed by every single member of a federal government whose Prime Minister hails from Calgary, and that comes up with bizarre interpretations of its own laws in an effort to deprive Albertans of the liberty to purchase wine from a winery in a neighbouring province. This is not the Alberta that I fondly remember. The editorial writers at the Vancouver Sun are correct: it is time for the provinces and their liquor boards to respect the rule of law and, just as importantly, to respect the democratic will of Canadians who simply want to be able to purchase wine from other places within their own country.

Here\’s a short update on wine and liquor law reform issues in BC:

Tied House and Trade Practice Reforms. BC\’s laws relating to tied houses and to trade practices in the liquor/wine industries have not been reformed in any meaningful way since the post-prohibition era. The government announced that these laws would be modernized over 2 years ago (see: BC Reforms Some Liquor and Wine Laws). However, the reforms have been awaiting new regulations ever since. The Minister recently told Business in Vancouver that these reforms would be completed \”within the next two months\”. 

Privatization. As reported earlier, the BC Government recently cancelled its limited liquor privatization project as part of a deal with the BCGEU (see BC Liquor Privatization Cancelled). Business in Vancouver is now reporting that one of the motivations for the privatization project was to try and improve problems with productivity and efficiency in the existing system and to reform the pricing structure: see Censored Documents Shed More Light on Failed LDB Privatization. Hopefully, both the LDB and the provincial government will not be content to simply maintain an outdated system which has a myriad of problems (see: BCLDB Privatization – Opportunity for Reform?). Having dodged the privatization bullet, perhaps an effort will now be made to modernize the system within the constraints of government control and in a manner which will provide tangible benefits to consumers (and voters).

50/50 Rule in Restaurants Revoked. Over the summer, the BC LCLB introduced a new policy directive (PDF) which removes some problematic language from the Food Primary Licence Terms and Conditions. Effective August 3, 2012, the words \”As a general rule, liquor sales should not exceed food sales in the dining area\” has been deleted. This is a welcome change: restaurants can now breathe a sigh of relief when customers order an expensive bottle of wine to accompany their hamburgers.  

In addition, we are now entering election mode for all of the political parties. Hopefully, modernization of BC\’s outdated liquor laws will be a part of the election discussion and the platforms of each of the parties.

The BCGEU has announced a tentative deal with the BC government which includes the cancellation of the \”Distribution of Liquor Project\”, the BC government\’s limited liquor privatization project which I have previously commented upon. Here is the government press release: Tentative Agreement with BCGEU.

The cancellation will likely be greeted with relief by some sectors of the industry which had concerns over a process which provided for minimal consultation and which appeared to exchange a public monopoly for a private one … without any guarantees that there would be benefits for consumers. On the down side, BC\’s arcane and outdated liquor distribution system will now likely remain firmly entrenched in the prohibition era, retaining its system of government control and price fixing. Regrettably, wine consumers are the ones who will continue to suffer as they have for decades … since successive BC politicians appear to have little interest in modernizing a system which is rooted in the 1930s and 1940s.