The last few weeks have seen growing calls in the media for broad reform of BC\’s liquor laws, which in my view, are hopelessly outdated. The (unlikely) catalyst for change appears to be the situation of the Rio movie theatre in Vancouver which is caught by post-prohibition era requirements that prevent the issuance of a liquor-primary license to any business that is also licensed as motion picture theatre (see Arcane Liquor Laws Kill Rio Theatre\’s Business). While I sympathize with the Rio\’s situation, it is really the tip of the iceberg in respect of a regulatory structure which was created almost 90 years ago and which is almost completely out of touch with the requirements of modern business and the realities of contemporary society. Kurtis Kolt nails the broad problems in this blog post: Dear Mr. Mayor. CBC has run a number of stories on the issue including this one related to the sale of beer and wine in supermarkets and this political radio discussion (relevant part starts at 13:25) where all of the panelists (of different political stripes) agreed that it was time for change. The City of Vancouver has also entered the fray and will consider a motion tonight which will ask the provincial government to help the Rio out and to review its liquor laws and policies. We will be discussing many of these issues at the upcoming conference on Wine & Liquor Law in British Columbia to be held February 27th in Vancouver – please join us if you are interested.
Two interesting stories this morning. A new study distributed by the American Association of Wine Economists (Why Reducing the Cost of Wine Might Actually Save Lives) finds that it could be good public policy to reduce wine prices and increase access (put wine into supermarkets) in order to save lives. The study is based on data that indicates that jurisdictions with higher wine consumption (as opposed to beer and spirits consumption) have much lower rates of traffic fatalities. In an unrelated story of interest to BC, the Manitoba Liquor Control Commission has announced that it is amending its liquor laws to permit the sale of alcohol in movie theatres. This issue has received significant media attention in BC where, so far, there has been no change to laws which prohibit this (see Arcane Liquor Laws Kill Rio Theatre\’s Movie Business).
The folks at ShipCompliant have written a great summary here of some likely U.S. trends for 2012 in the areas of wine law and distribution: Wine Sales and Distribution 2012 – A Look Forward. They highlight movement on the direct to consumer shipping issue, modernized marketing, privatization and federal action on wine sales and distribution. All of these are also hot topics in Canada. As the year progresses, we will have to see whether the trends in the U.S. are also reflected in the Canadian marketplace.
The 3rd annual Wine & Liquor Law in BC Conference will be held on Monday, February 27, 2012 at the Metropolitan Hotel in Vancouver. The conference immediately precedes the Vancouver Playhouse International Wine Festival and particularly its Trade Days component which runs from Feb 29th through Mar 2nd. The wine and liquor law conference will cover the latest legal and regulatory developments in the industry including shipping law reform, taxation, licensing, geographical indicators, third-party marketing, and the economics of the BC industry. Speakers include Thomas Carey (Dickenson Peatman Fogarty, Napa), Jeffrey Thomas (BC Wine Authority), Bert Hick (Rising Tide Consultants, Vancouver), Ian Tostenson (BC Restaurant & Food Association), Andy Hira (SFU), Randy Wilson (Liquor Plus, Victoria), Chris Wilson (Bull Housser Tupper, Vancouver), Al Hudec (Farris, Vancouver), Tony Stewart (Quails Gate Winery), Mike Raffan (Township 7 Winery), William Knutson (Spierhead Winery) and myself (I am co-chair with Chris Wilson). You will not want to miss this essential conference if you are involved in any way in the wine or liquor industry in BC. Full information and online registration is here on the conference organizer web site. Plus if you are a reader of \”winelaw.ca\” or are attending the Playhouse Wine Festival, you can get a 50% discount on the conference fee (register as a \”student\” on the registration page to obtain a discounted rate of $297.50 – 50% off the regular $595 fee). Hope to see you there.
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Time for Liquor Policy Review in BC?
Three recent articles in the main stream media make it clear that the BC government may want to consider a wide ranging liquor policy review sooner rather than later. This Globe and Mail article, Vintners Raise Their Glasses to Dix\’s Push to Relax Liquor Laws, raises questions as to why the provincial government has not come out more strongly in favour of Bill C-311 when it is abundantly clear that the public wants this reform. In addition, this article from Whistler, Pride Week Organizers Soul-Searching at 20 Year Mark, asks why the provincial government is continuing with its outdated liquor licensing policies when those policies are actively shutting down economic activity in the tourism and hospitality sectors. Finally, Tim Pawsey reviews the continuing absurdity with our wholesale liquor distribution system in this article for the Courier: Overhauling Antiquated Liquor Laws Anything But Fluid. As I have said previously, I am hopeful that 2012 will finally be the year when BC decides to take a new more sensible approach to liquor policy and regulation.
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2012: The Year of Wine Law Reform?
Is it too much to hope that 2012 could finally be a year when some of BC\’s (and Canada\’s) outdated wine laws get reformed? Here are my picks for the top three issues that need modernization.
1. Wine Shipping Laws. On this issue, there has never been so much progress and good will. Bill C-311 was introduced into the House of Commons in 2011 to reform Canada\’s archaic 1928 federal prohibition on the transport of wine across provincial borders. The Bill has now passed second reading and is headed for the House of Commons Finance Committee for consideration. If it passes on third reading, hopefully sometime in the spring, it will create a national personal use exemption so that Canadians can direct order wine from other provinces in limited quantities for personal consumption. The Bill has received cross-party support as well as kudos from the public and media including today\’s Globe and Mail editorial: Let the Wine Flow.
2. Wholesale Pricing and Distribution. Vancouver food and wine writer, Tim Pawsey, nails a huge economic problem for BC when he describes problems related to both distribution and pricing in our outdated liquor wholesale system in this article: A Few Potable Predictions for 2012. The distribution absurdity is obvious when artisan spirits produced on Hornby Island have to make six ferry trips and travel almost 200 kilometres (nearly 400 round trip according to Google Maps) in order to be sold at the Hornby Island General Store, which is located about 300-500 metres from the distillery (according to Google Maps, about 3 km by road). Why? Because all spirits produced in BC are distributed by the monopoly BC Liquor Distribution Branch, which mandates that the product be routed through its wholesale distribution warehouse, located in Vancouver. As Tim points out, BC\’s wholesale liquor pricing system also needs to be fixed by introducing a normal wholesale pricing structure for wine and liquor. The current BC system \”works backwards\” from government mandated retail prices, effectively removing competition and putting most restaurants and private stores at a huge disadvantage by denying them proper wholesale prices (restaurants get ZERO discount off government retail, private stores mostly get 16% off). Wine consumers should care about this because it means that you will pay about $20 or more at retail and probably about $40 in a restaurant for a wine that wholesales for about $7: see these LDB markup calculators for the details.
3. End the Prohibition Era Mentality on Licensing. BC\’s liquor licensing laws received large amounts of negative press in 2011, mostly because they have not been properly updated for decades and because they still incorporate a prohibition era mentality in terms of enforcement. The problems are too many to exhaustively list but they include: hopelessly outdated restrictions on festival events (Whistler Jazz Fest denied a liquor license), no happy hours, no corkage in restaurants, caterers that can\’t pick up liquor, no alcohol in movie theatres, and many arcane rules that favour government liquor stores over private ones. See this article – BC\’s Five Looniest Liquor Laws for more info.
BC is already a fabulous food and wine destination … but to continue with that progress, we need to make sure that government policy encourages food and wine culture. My wish for 2012 is that government will wake up to the fact that our
outdated and archaic regulatory and distribution system is preventing the continued growth of our food and wine industries … and stifling
economic activity and job growth in the tourism and hospitality sectors. Happy New Year!
Bill C-311, an Act to Amend the Importation of Intoxicating Liquors Act, has now passed second reading in the House of Commons and has been referred to the House Finance Committee (you can read the Hansard debate here). This Act, if eventually passed at third reading, will amend the IILA to introduce a national personal use exemption to permit direct to consumer shipment of limited quantities of wine between provinces for personal use. The Act has gained support from all federal parties and continues to receive very positive media coverage and public support.
British Columbia\’s neighbouring jurisdictions, Alberta and Washington state, have both modernized their liquor and wine regulatory regimes to move away from the post-prohibition \”government control\” model. This leaves British Columbia seriously out of line with its neighbours in terms of the promotion of economic growth/jobs in the wine industry and within the broader hospitality and tourism sectors. See this article on FreeTheWine.ca for more detail: BC Falls Behind Neighbours On Wine Law Reform and this chart which compares major differences on liquor regulation between BC, AB and WA.
This article from the Economist (Behind the Zion curtain) also shows how out of date the BC system is. The Economist lauds Washington state for moving to a modern regulatory and distribution system while criticizing other \”control states\” for failing to update their post-prohibition mentality. Particularly, the Economist singles out Utah for its backward system. While Utah\’s system is worse than BC\’s in many respects, the Economist identifies an alarmingly high number of problems that are common to both jurisdictions: restricting the sale of alcohol to publicly owned stores (we have private stores as well but the prices are fixed by the government ones), a \”restrictive distribution system\”, enforcement of revenue splits between alcohol and food in restaurants, banning happy hours, imposing restrictions on the number of licenses (BC does that for retailers), and forcing restaurants and bars to pay the same \”markup for their booze as consumers do in state-run stores\” (BC\’s system is even worse than Utah\’s on taxation). To paraphrase the ending of the article, \”Eat, drink and be merry – tomorrow you may be in British Columbia\”.
Wineries and other licensees should be aware that the BC LCLB issued a statement on internet marketing in the October 2011 issue of their “Liquor Line” newsletter which is available on the LCLB website here. The statement warns licensees that the sale or advertising of any liquor product without a license is not legal in BC. It then continues by saying “[t]herefore companies like Groupon or ethicalDeal.com cannot legally include liquor as part of a promotion. Given this, it is not permitted for licensees to enter into and offer these sorts of promotions. (emphasis added)” This wording could be interpreted as prohibiting many third-party marketing companies from including liquor as part of their marketing services or promotions when they are working with a licensee such as a winery or retailer.
The question then arises: is it legal for third party marketing companies to work with licensees at all and, if so, what can they do? It is my view that it is legal for third party marketing companies to work with licensees so long as all parties pay careful attention to structuring their relationships correctly. The issues are basically the same as those faced by the California ABC which recently issued a detailed advisory on these issues (Third Party Providers – PDF) which was created after extensive industry consultation and legal advice. It’s my opinion that the analysis in the California advisory is well done and should also be applicable to British Columbia.
I have confirmed with the BC LCLB that their statement was based on an analysis of the ‘default’ method of Groupon promotion under which the marketing company processes and is an integral part of the sale. However, there are, in fact, many other methods of structuring internet promotions (some of which may be legal and some of which may not) and the LCLB has also confirmed that “each case must be considered on its own merits”. However, the LCLB has not confirmed that they will follow the same principles as have been established in California and there may well now be confusion within the BC industry as to what is permissible and what is not (as there was in California prior to the ABC issuing its ruling). In the interim, licensees should be cautious about internet marking and should obtain legal advice if they are entering into these types of marketing arrangements.
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Wine and Liquor News Update
I\’m working on some longer articles about Washington\’s successful privatization initiative and LCLB policy on internet marketing but in the interim … here\’s a grab bag of news:
BC Government Liquor Policy At Work: This Vancouver magazine article shows the absurdity of BC\’s current liquor policies which deny wholesale discounts on wine to restaurants: The Joie-O-Meter. The survey looked at the restaurant price for a bottle of Joie Rose, one of BC\’s nicer wines. It found that to get the best price, you would have to go to Chez Panisse, a restaurant in … Berkeley, California.
No Problems With Farmers\’ Market Tasting in Washington: This Seattle Times story once again shows that BC needs to put its post-prohibition approach to liquor regulation into the trash can. Washington state started a pilot program to permit tasting of wine and beer at farmers\’ markets and reports that there have been zero complaints so far and that the entire program is \”running smoothly\”.
Festivals and Conferences: The Vancouver Playhouse Wine Festival is set for the last week of February, 2012 with its theme country as Chile and varietal focus of Cabernets. Some tickets have already gone on sale with more in the coming weeks. A third annual wine law conference will also precede the festival on February 27th. Wineries should also consider attending the Direct to Consumer Wine Symposium in San Francisco, which will be held on January 19th.