WineLaw.ca

A front page story in this week\’s Business in Vancouver (\”Entrepreneurial spirits dampened\”) explains that BC\’s artisan spirits industry wants to be treated like BC\’s wine industry. The article chronicles numerous problems including the familiar ones of hefty LDB markups as well as with the inefficiency of the LDB distribution system. At the present time, all spirits in BC, including locally produced artisan spirits, are routed through the LDB distribution system and are subject to full LDB markup (170%). As a result, the artisan spirits industry is asking for \”direct delivery\” treatment such that they can bypass the LDB system and its markups. While I have sympathy for their concerns, this is a thorny issue … because it demonstrates the general inequity with the current BC distribution system and its many inherent structural problems: how is the government going to extend direct delivery to artisan spirits without also addressing the trade issue of discrimination against imported products? The obvious solution is a complete overhaul of the current system but I\’m not holding my breath on that one. 

Canada\’s toughest drinking and driving laws are now in effect in British Columbia. The new laws provide very stringent and immediate \”administrative\” penalties when a police officer determines that a driver has a blood alcohol level over .08, and lesser but still significant penalties if the blood alcohol level is between .05 and .08 (see this Vancouver Sun story and this CBC story for details). The new laws give police officers a great deal of power and discretion.

A colleague of mine who practices criminal law says that he is advising everyone he knows not to drive after drinking anything at all due to the new rules and to his belief that roadside screening devices and procedures are prone to error. If that is the broad consequence of the new laws, there may be some significant effect on winery tasting rooms … the least of which may be to make sure that you increase your number of spit buckets.

Update: It appears that the above predictions have come true, at least to some extent. BC restaurants are reporting drops in liquor sales of between 10-40%. One winery owner reported that his on-site restaurant had seen initial drops in wine sales of 50%. There appears to be a great deal of confusion as to the actual effect of the new laws as well as if there is any permissible \”safe\” amount. For more information, please see this government page on impaired driving. This PDF chart of the new penalties may also be helpful.

Debate is raging in the U.S. right now over two significant wine law issues. The first is an attempt by U.S. wholesalers/distributors to stop the progress in inter-state direct shipping of wine to consumers which was introduced by the Supreme Court decision in Granholm v. Heald. The wholesalers/distributors have introduced a bill (HR5034) that would limit any further extension of these rights and may well roll back the gains made to date. There are good summaries of the issues on the Fermentation Blog and on the Free the Grapes site. The second issue is various privatization initiatives across the country including two in Washington state which will be voted on in November, the most prominent of which would remove the state\’s monopoly on the retail sale of spirits, privatize the wholesale distribution system, and which would also reform various liquor laws. Winery groups in WA state have taken opposing stands on the initiatives for various reasons outlined in this Wines & Vines article.

As harvest season approaches, a couple of items of news:

Use of Social Media by Wineries. I attended a very interesting law conference in Seattle last week on the use of social media. One issue that was discussed in depth was the new approach of the U.S. Federal Trade Commission which has issued a set of endorsement guidelines in order to try to prevent consumers from being misled by product endorsements that are made in situations where there could be factors which influence the objectivity of the endorsement. Generally, the FTC is now requiring that endorsements make full disclosure of any material issue that might affect the endorsement. So, for example, if you are being paid by a winery to promote their wines, you would not be able to post a rave review on your blog without disclosing the fact that you are being paid. In addition, the FTC takes the position that free product or other benefits should be disclosed … hmmm, how many wine bloggers/reviewers/commentators get free product or free trips/dinners to the winery??? This definitely requires further study!

New Liquor Regulations. The new trade practices regulations dealing with the modernization of sponsorship/advertising rules and tied-house have apparently been delayed by a few months while the LCLB engages in consultation with the industry. Hopefully, this will not take too long as changes in these areas are welcome and long overdue.

Today\’s Globe and Mail has a good opinion piece from Lysiane Gagnon entitled \”Canada\’s Customs Inquisition\”. It deals with the problems travelers face when they honestly declare that they are bringing back more bottles of wine than their duty-free exemption allows. According to the article, such honesty can sometimes trigger secondary searches or other intense questioning. My personal experience has never been this bad, although I have had bizarre supplementary questions related to firearms (why would CBSA relate these two?). Generally though, the article makes a good point: why are our border agents acting as tax collectors for Canada\’s liquor boards?

In a completely unrelated vein, there is a profile of yours truly in this week\’s issue of Lawyers Weekly: Lawyer Starts Boutique Wine Firm.

For some summer doldrums entertainment, you may want to read this non-exhaustive list of Outdated BC Wine Laws & Policies which has just been posted on the Free the Wine web site. The list would be funny if it wasn\’t true. Sadly, it shows that BC still has a long way to go in bringing our wine industry environment into the 21st century.

In an earlier post, I noted that there has been a minor controversy this summer regarding the use of Enomatic \”wine tasting machines\” in some private retail stores. I asked for clarification on this from the LCLB and I can now confirm the following:

• The use of Enomatic machines is permitted so long as the store is otherwise complying with the terms of its license in regard to consumer tastings. Store owners should check the terms of their license – but the terms and conditions for most licenses are here.
• For most stores, the most significant restriction will be that self-service on tastings is not permitted (in other words, customers cannot pour their own tastes) … this will mean that they cannot operate the Enomatic machine themselves. Instead, as applicable, the agent or a store employee would have to operate the machine.

Some retailers have complained to me that the rules regarding tastings in LRS stores are overly restrictive particularly the requirements to dispose of any unfinished bottles at the end of the day (which defeats the purpose of the Enomatic machine). In this regard, the LCLB has told me that they are currently reviewing their policies in regards to tastings and they expect to \”clarify\” the policies in the near future. Hopefully, this will mean some modernization of the policies with clearer accommodation for new technology like the Enomatic.

Generally, it\’s my view that the current policies need to be updated – so long as there are safeguards to over-service, it\’s always a good thing if consumers can try wine before they buy it. In regards to limiting the amounts served, the Enomatic is actually a great tool because the machine measures pours much more accurately than people do and customers could be given a \”smart card\” that limits them to the exact amount permitted by the tasting policy. If it is any consolation to private retailers, I can attest that the rules for tastings in LDB stores are equally frustrating – a recent LDB memo on this subject has caused some agents to re-think how they will address in-store tastings in government stores.

Update: this story has now been covered by the Vancouver Sun: Another Bizarre BC Wine Law Dampens Competition

Here\’s a grab bag of a few bits of interesting summer liquor news …

BCLDB Liquor Sales Down. The latest edition of the BC LDB\’s Quarterly Market Review shows that overall liquor sales in British Columbia for the quarter ending in June were down 8% by volume and almost 5% by value over the previous year. Those are significant drops when total annual sales figures for BC are $2.8 billion. Sales of wine and spirits were both essentially flat while sales of both beer and coolers were down considerably. The LDB missed its sales targets last year and numbers like these seem to indicate a repeat performance.

HST Impact on Restaurants. As was expected, it has now been confirmed by the Canadian Restaurant and Food Services Association that the introduction of the HST had a strongly negative effect on restaurant sales in July. The Association is now asking government to mitigate the impact by considering other compensatory measures such as a long requested wholesale discount on liquor. As I have previously written on many occasions, BC\’s liquor wholesale distribution system for restaurants is seriously outdated since restaurants get zero discount – they pay full retail price when they buy wine and other liquor. This puts them at a serious competitive disadvantage when compared to restaurants in neighbouring jurisdictions (such as Alberta and Washington) and also creates sticker shock and dismay when tourists see the price of wine on restaurant wine lists. Let\’s hope government listens on this one.

Enomatic Controversy. I have recently been made aware of a minor controversy involving the use of \”Enomatic\” wine dispensing machines in various private liquor stores. These machines (from Italy) dispense measured pours of wine for tasting and keep the wine fresh for up to 3 weeks by preventing oxygen from entering the bottles. A few private retailers have purchased these machines to allow customers to sample wine before purchasing. I can attest from seeing them in operation in Italy and California that they work extremely well. However, the LCLB is apparently having some difficulty with them: read the full story here on the Winecouver blog. Update: August 6th … I haven\’t been able to get any additional information on this to date but Wines & Vines has now covered the issue: Government Limits Wine Dispensers.

It\’s the summer travel season. Many British Columbian wine enthusiasts will be venturing south of the border and will want to bring a few bottles home with them. As most will know, that is a very expensive proposition in BC if you exceed your miserly duty-free allowance of two 750ml bottles of wine per person. However, the introduction of the HST has made these importations ever so slightly less expensive. Previously, for BC, the charges were 85% liquor board markup plus 10% PST plus 5% GST.  However, the sales tax portion has now gone down from 15% to 12% and is calculated in a way which is slightly more advantageous. Canada Border Service Agency (Customs) has revised its memo on this issue to show the new tax collection rates and process. The following table shows you the comparative rates for importing a non-duty-free 750 ml bottle of wine into a Canadian province when you return from a trip to the U.S and also shows you the effect of these charges if you import a 750 ml bottle of wine that cost $15.

As you will see, the rates charged at the border for British Columbians are very high in comparison to most other provinces (Quebec is also very high). In BC, you will end up paying more than double the original price once you have imported the wine. Once again, British Columbian wine lovers are getting soaked by our government on this issue.

Please note that for almost all provinces, these rates are only valid in the \”travellers stream\” – which means you must personally bring the wine across the border with you. If you ship the wine, the rates are generally much higher (it\’s hard to believe that the BC rates could be higher, but they are!). There are also quantity limits for these rates: 45.45 litres for BC; 45.45 litres for AB (although the memo says 9.09 which is wrong); 45 litres for ON; no limit for MB; 9 litres for Quebec. Also note that the way of calculating these fees differs from province to province – see the CBSA memo for details.

You may also wish to read my Bringing Wine Back to Canada After a Trip article.

The Costco led initiative in Washington state to privatize the remaining elements of Washington\’s liquor distribution system has been certified and will appear on voters\’ ballots in the fall. If the measure passes, Washington\’s remaining state liquor stores (which have a monopoly on spirit sales) would be privatized. The distribution system would also be deregulated and price controls repealed. As will be apparent (and despite the \’success\’ of the anti-HST campaign), the process for getting a voter initiative such as this on to the ballot is much easier in WA than here in BC. Still, progress and reform south of the border may have some influence on legislative policy here in BC. Is it too much to hope that our archaic distribution system and irrational wine tax structure will soon be changed? If you need reassurance that the time for change is overdue, read Jake Skakun\’s recent blog post: \”A Layman\’s Attempt to Understand What It Means to be a Licensee\” where he shares his frustration at our outdated system.