WineLaw.ca

Ongoing issues between the BC Wine Institute and the operators of the VQA chain of retail stores have blown up yet again after the BCWI indicated that it intends to revoke the licenses of two VQA stores, Carol\’s Wines in Coquitlam and Arrowsmith Wine Shoppe in Parksville. The problems mostly arise from the patchwork nature of BC\’s retail licensing system which is long overdue for reform. Unfortunately, it looks like only government action in the form of a complete overhaul of the system will resolve these issues for the long term. The full story is here on my marketing site, winemarketing.ca.

As expected by many, the BC Budget for 2009 which was delivered yesterday did not contain any measures with immediately apparent impact on the wine industry. This was somewhat predictable since BC wine prices are now so high at retail that there really is no room for the government to try and extract additional revenue unless they reform the distribution system (more on that later). The one lingering issue is the implementation of the HST scheduled for next July. The combined HST rate on wine will be 12% which is actually 3% lower than the existing combined rates of 10% PST and 5% GST. As a result, there would be an actual reduction on the tax rates applicable to wine if the government does not act to increase retail prices by other means (such as increasing other fees or liquor board markups). The reduction in taxes is extremely small when compared to the usurious rates of liquor board markup (117%) and other fees. However, it will be interesting to see how the government handles the difference. Tax policy must be applied fairly and consistently as between imported and domestic wine. However, liquor board markup is currently not applied fairly so there is an interesting problem on the horizon. Maybe the government will just give consumers a break and let them have a 3% cut? Just wishful thinking.

I am co-chairing a conference (with Chris Wilson of Bull Housser & Tupper) on \”Winery and Wine Distribution Law.\” which is set for November 12 and 13 here in Vancouver. We have a great lineup of speakers from both the wine industry and the legal side. Plus we have a wine tasting scheduled for the Thursday evening with the incomparable team of Sid Cross and David Scholefield. The full program brochure is here.

There\’s a 50% discount on your registration fees if you are part of the winery business … just register online but choose the student/new job option to get the discount (the winery discount is set out in the \”Tuition\” part of the program brochure).

The Alberta liquor board (AGLC) has written to several BC wineries threatening them with criminal enforcement action if they continue shipping wine to Alberta. The letter states that shipping wine directly to individual customers in Alberta is illegal under both the federal Importation of Intoxicating Liquors Act (\”IILA\”) and the provincial Gaming and Liquor Act and Regulation. The AGLC claims that all liquor shipped into Alberta must be consigned and shipped to the AGLC. The AGLC action raises countless issues, some practical and political, as well as a number of legal issues.

John Schreiner covers the issues from the wineries perspective here.

The various legal issues (including a workaround for shipping and possible solutions) are discussed in this article on wine shipping law in Canada which I have updated to deal with the AGLC\’s actions.

I wrote the wine column in this month\’s edition of the Advocate (which is the magazine distributed to all lawyers in BC). Here\’s a link to a PDF of the column which discusses public policy relating to pricing and taxation of wine in British Columbia\’s retail distribution system. I have also thrown in some wine recommendations which reflect my take on wines available in BC which are actually good deals in terms of global pricing and quality.

Good article in today\’s Times-Colonist on the need to reform B.C. liquor laws, specifically the \”tied house\” restrictions which impose strict limits on business when a person owns both an interest in a liquor manufacturer (such as a winery or brewery) and a retail establishment (such as a restaurant, bar or store). These antiquated laws (which date from post-prohibition times) prevent the owner of Lighthouse Brewing in Victoria from selling his own beer in his own bar, the Podium Sports Grill. They also prevent the Bishop family from selling their own wine (made at Carbrea winery on Hornby Island) at their restaurant at Seabreeze Lodge.

As the article points out, the original purpose of these laws was to prevent vertical control of the liquor industry such that major players would not limit choice at the retail level. However, times have changed … and there are certainly better ways to address these concerns, even if they are still valid.

Similar laws were the subject of intense criticism in Washington state, which recently reformed them so as to solve issues like the ones noted above. British Columbia could also reform its laws … it just takes the political will to do so.

In late breaking news this afternoon, Premier Stelmach of Alberta announced that he is reversing the liquor tax hikes that were implemented in the recent April budget. The hikes had added 75 cents to Alberta\’s flat tax on a bottle of wine, increasing the total tax to $3.00 per bottle. Stelmach indicated that he had been uncomfortable with the increases all along.

The California Alcoholic Beverage Control Department (ABC) has issued an advisory warning wineries (and other licensees) that they should be cautious in dealing with unlicensed third parties who offer to promote or sell their products for them on the internet. The ABC notes that some such activities are permissible but, in their view, others are not without a license.

The problems basically stem from the fact that California\’s laws define the \”sale\” of alcohol to include (amongst other things) the solicitation or receiving of orders for alcohol. The ABC\’s position is that anyone who is soliciting or receiving orders for alcohol is engaged in the \”sale\” of alcohol and therefore should be licensed as a seller (even if the activity is done on behalf of another business, like a winery, that is licensed).

These interpretations raise obvious compliance issues in respect of many internet businesses such as wine clubs and other promotional services that seek to sell wine on behalf of a winery (and who would previously have been relying on the fact that the winery was licensed to make the sale).

This article in Wines & Vines describes the problems and also notes that there are practical issues of enforcement including jurisdictional problems. It\’s likely that either some legislative reform or a court case will be necessary before the issues are resolved.

British Columbia\’s wineries may want to give some attention to this issue. Although the Liquor Control and Licensing Act in B.C. does not define the \”sale\” of alcohol to include solicitation, it does include a similar provision at s.51 where it states the following:

A person must not canvass for, solicit, receive or take orders for the purchase or sale of liquor, or act as agent for its purchase or sale, except as provided under this Act.

As a result of this provision, we likely have similar issues here in regards to whether an activity constitutes a sale or solicitation (which must be authorized under the law) or whether it simply constitutes advertising and marketing. The dividing line between these types of activities likely is not that easy to define and there will be a substantial grey area. In B.C., we don\’t have the vast array of internet wine marketing services that they have south of the border, so it\’s much less likely that wineries will be involved in such activities. However, some caution is advisable. Wineries should ask providers of such services if they can provide assurances of the legality of their services and at the very least, it would be wise for wineries to get their own advice before participating in such a service.

With the summer travel season upon us, I\’ve just updated an earlier article on \”Bringing Wine Back to Canada After a Trip\”. This article explains the duty-free allowances for wine as well as the extra charges and fees that you may have to pay at the border if you exceed the duty-free allowance. It also discusses the legal authority for charging these fees and the differences in fees between provinces and other jurisdictions.

I attended the Conference on the European Union – Canada Relationship yesterday in Vancouver which was very well attended by those seeking to determine the scope and impact of a possible EU-Canada Trade Pact for which negotations have just commenced. The EU trade officials made it clear that wine and beer has been a trade irritant in the past and would certainly be included in any trade deal. Indeed, the EU\’s chief negotiator, Mauro Petriccione, made it clear that \”when we say the agreement will be comprehensive, we mean it\”. The negotiations are hoping to conclude a deal within 2 years.

The impact of the negotiations and any prospective trade deal on British Columbia\’s wine industry could be significant for VQA producers as there are currently preferential treatments given to BC VQA wine in respect of both pricing (application of liquor board markup) and distribution within the province. I\’ll write a more in-depth analysis on this subject in due course but there could be problems and issues with both the VQA rebate system and preferential distribution channels. Although the dollar amounts related to these programs are small in the grand scheme of things, they are likely significant to VQA producers.