WineLaw.ca

News from both Canada and the USA that may affect the BC wine industry eventually …

Agents Upset Over SAQ as Potential Competitor. The Edmonton Journal has an interesting article describing the efforts of the Quebec liquor board (SAQ) to set up shop in Alberta as a competitor to existing agents. Predictably, the agents that are now operating in that province are not happy over plans for a provincial alcohol monopoly to venture outside its borders and to compete with private businesses in other provinces. More profoundly, this raises questions as to the proper scope of a liquor monopoly\’s operations and, particularly, whether it is right for a liquor monopoly from a non-privatized province to wield its monopoly purchasing power in another province which has privatized.

HR5034 – Wholesalers Get Rough Ride at Congressional Hearings. The wholesaler and distributor industry groups which are attempting to roll back progress on direct to consumer shipping in the U.S. by virtue of congressional bill HR5034 got a rough ride at recent hearings in Washington, DC. This story from Wine Business describes the presentations. In related news, a consumer group has now also formed in order to advance the interests of wine consumers at the state and federal levels: American Wine Consumer Coalition.

Here\’s a great article outlining the history of the Washington state wine industry and how that state has dealt with and is still dealing with the post-prohibition regulatory environment: This Changes Everything? The Washington Costco Initiative. Anyone interested in the future of the BC wine industry should read this article. We are only just starting to deal with the issues that are covered here and, in my view, the history in WA will provide valuable indicators of what will eventually happen here. The BC wine industry cannot exist in perpetual isolation from the world market. Sooner or later, we will join the rest of the globe … better to be ready! UPDATE: this article has now been expanded into a three part series … all the parts are excellent and particularly worthwhile is the discussion related to the effects of privatization on a small winery\’s business.

A number of issues related to liquor privatization are in the news this week:

WA Privatization Initiatives Under Attack: The two liquor privatization initiatives in Washington state are under attack from an unlikely coalition of emergency workers, churches and, most significantly, liquor wholesalers: see this comprehensive article from Wine Spectator. Initial poll numbers showed that one or both privatization initiatives might pass. More recent numbers show that support is foundering under a well financed attack from the wholesalers.

Private Liquor Stores in BC: this week\’s edition of Business in Vancouver lists the area\’s leading private liquor stores and has an article which reviews some of the challenges facing private retailers when they have to source all product from their biggest competitor, the BCLDB.

LCLB Policy Directive on Standalone LRS: A new policy directive from the LCLB (PD 10-05 Standalone requirements for licensee retail stores) was just issued which deals with the continued requirement that LRS stores must operate as \”standalone\” businesses and cannot be visibly associated with other businesses. The justification for these requirements is that \”government does not support licensee retail stores in premises located in or associated with any other business, with the exceptions of an LP, a licensed hotel (including associated FP), or LRS\”. This policy rationale is likely difficult to understand from a consumer\’s perspective – in reality, it is likely aimed at preventing supermarkets and big box businesses from operating liquor stores. However, it is also questionable from a legal perspective – commercial speech through signs and advertising is protected by the Charter of Rights. If an LRS was actually connected with a nearby business, I don\’t see how government can prevent it from saying so!

A proposal to introduce minimum alcohol pricing in Scotland has been defeated on the grounds that it \”would penalise responsible drinkers, harm the Scotch whisky industry, cost jobs and [is] probably illegal\”. Opponents of the measures, which were introduced as a potential response to problem drinking, pointed to the likelihood that the rules would likely \”breach EU and international trade rules\”. As readers likely know, BC has had minimum shelf prices for alcohol for a long time. I have questioned the utility of these policies, as they are currently used, since they simply create windfall profits for suppliers and provide no proven benefit in terms of reducing problem consumption.

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.