Month: September 2012

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 On the down side, BC\’s arcane and outdated liquor distribution system will now likely remain firmly entrenched in the prohibition era, retaining its system of government control and price fixing.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.

The issue of whether government should or should not be involved in the liquor business (liquor privatization) continues to provoke intense interest along the West Coast. Here\’s a quick update on where things stand in the various jurisdictions with some links to some interesting articles.

Washington. Initiative I-1183 obtained voter approval in November 2011 and was implemented in June of this year when the state government shut down its remaining state retail liquor stores and state wholesale distribution warehouse system. As a result, Washington state now has an entirely privatized system of liquor distribution. The major issue in Washington following the privatization has been pricing. End consumer prices for spirits have gone up in most stores due to new taxes/fees which were included as part of the initiative (however, prices are a bit lower in \”big box\” stores such as Costco or Total). Significantly though, tax revenue on spirits has increased for the state government with recent data showing a hefty 25% increase for the latest quarter. As a result, while consumers are not seeing generally lower prices (due to the new taxes), the state government may prove to the be a winner with higher revenue. Here\’s a rundown of some of the relevant stories: Liquor sales in state picking up, Liquor prices show no signs of coming down, and Washington liquor privatization raises concerns about cross-state transportation of spirits.

Oregon. The Oregon state government is facing pressure to modernize various aspects of its regulatory regime, particularly from grocery stores who have long complained about outdated and inefficient distribution rules. Most recently, a lobbyist for state grocers told the state government that they should update state liquor laws next year or face a privatization initiative on the 2014 ballot: Grocers tell Oregon lawmakers – update liquor laws or face initiative and OLCC considers liquor sales in grocery stores.

British Columbia. The BC government continues with its \”Distribution of Liquor Project\”. This is a limited privatization project which seeks to replace the existing government wholesale distribution operation (which is coupled to a number of private bonded warehouses) with a single private operator. This is a very different approach than what was done in Washington state (see: Two Wine Neighbours – Two Approaches to Liquor Regulation). Essentially, BC is adopting the Alberta wholesale model – without affecting the government liquor stores. At the present time, the BC government has announced a short list of bidders which includes: Containerworld, Exel Logistics, Kuehne + Nagle, and Metro Supply Chain Group. The single successful bidder is supposed to be announced on October 16th, at which point a detailed negotiation process will begin. A final agreement is supposed to be signed by March 1, 2013. The transition date to the new system is slated to be April 1, 2013. It is still unclear whether this process will include reform of BC\’s arcane wholesale pricing structure for liquor (see: Privatization and BC Wine Pricing in the News and BC Liquor Economics & Privatization).

Bill C-311 ushered in a new era of Canadian wine shipping law on June 28th, just over 2 months ago. I have just updated my earlier article \”Shipping Laws on Wine Within Canada\” to provide a summary of developments to date and to include a chart showing my interpretation of the state of DTC wine shipping throughout the country (there are differing interpretations on this to which I have provided links in the article). Here\’s the short summary of some remarkable progress in a short period of time:

• Both Alberta and Manitoba had pre-existing provincial laws that permitted the interprovincial importation of wine for their residents when Bill C-311 came into effect. As a result, these provinces have been open for both winery and retailer DTC shipments since June 28th. Note: I am aware that CALJ and AGLC have been making statements that Alberta is not open for shipment, only for \”personal importation\”. In my view, this is not a reasonable interpretation of existing Alberta law.
• Ontario\’s laws are silent on the interprovincial importation of wine. It is my view that this results in Ontario being open for both winery and retailer DTC shipments on the basis of the legal principle \”that which is not prohibited is permitted\”. The LCBO has issued a contrary \”policy statement\” which, in my view, has no legal authority.
• British Columbia has amended its laws to permit the possession of unlimited quantities of wine imported from other provinces but only if the wine is 100% Canadian wine purchased direct from a winery. So BC is open for winery DTC shipments but not for retailer shipments.
• Nova Scotia announced last week that its government would change its laws sometime \”this fall\” to permit DTC shipments. It is not clear yet whether that includes both winery and retailer shipments.

The Nova Scotia government has announced that it will make legislative or regulatory changes sometime \”this fall\” that will follow the spirit of Bill C-311 and permit direct to consumer shipments of wine from other provinces to Nova Scotia wine consumers (see: Nova Scotia to Taste Wine Freedom). There are differing views of which provinces currently permit DTC shipments: see the FreeMyGrapes site for more information which includes my analysis. However, in summary, it is my view that DTC shipments are currently permitted by the laws of British Columbia, Alberta, Manitoba and Ontario. If Nova Scotia acts, then 5 out of 10 provinces will be open for DTC shipping which is tremendous progress given that Bill C-311 was only passed in June of this year. 

An Ontario Conservative MPP, Rob Milligan, has introduced Private Members\’ Bill 117, which is intended to clear up confusion in that province and clearly permit Ontario residents to import wine from other provinces in amounts for personal consumption (see story from the Northumberland View). The Bill is designed to address the uncertainty in Ontario following the passage of Bill C-311 at the federal level. Bill C-311 essentially \”passed the buck\” on wine shipping law to the provinces but Ontario currently has no statutory or regulatory provisions that deal with the inter-provincial importation of wine. Some analysts, like myself, have argued that Ontario is open to shipping because of the legal principle \”that which is not prohibited is permitted\” (see analysis at FreeMyGrapes.ca). However, the LCBO has issued a policy statement to the contrary indicating that it will not permit interprovincial importation of wine unless it is done \”in-person\” (i.e. no shipments from wineries). Bill 117 introduces a nice touch on this issue as it specifically removes all of the LCBO\’s powers in respect of any wine imported into Ontario from another province for personal consumption. Bill 117 is a private member\’s bill … such bills rarely become law. However, the federal Bill C-311 was also a private member\’s bill … and it passed with unanimous all party support.