WineLaw.ca

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.

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.