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Steam Whistle Gets Injunction Against Mark-Up Policy

steamwhistlelogoYesterday at the Court of Queen’s Bench, Steam Whistle Brewing out of Toronto was granted a temporary injunction against the new Alberta mark-up policy established in the fall provincial budget (read about the policy here). Here is the Canadian Beer News post on the development (they link to a Calgary Herald Op-Ed that was just posted, but I won’t link to it here because it contains no useful facts for people wanting to actually know what is going on and is written by a right-wing lobbyist who uses the piece to simply grind their ongoing axes).

I had heard this was coming and am not surprised. The reaction from Ontario brewers and others has been quite vociferous since the announcement and there have been rumours for weeks that some kind of legal fight was about to be launched.

I have not yet examined the court documents (I have a day job, people!) and so will refrain for the moment to comment on the substance of the decision. Besides I suspect the decision was either oral or rather perfunctory, as interim injunctions usually are.

Two things are clear. First, for the moment, Steam Whistle is exempt from the higher mark-up applied to non-Alberta beer. Second, this is an interim injunction, meaning the judge has not rendered any formal decision regarding the legality of the policy. All they have indicated is that there is enough to merit further argument and consideration.

That said, it is a blow to the new government’s plans to promote local craft beer production. They may need to go back to the drawing board if this continues to play out poorly.

But opponents of the policy shouldn’t be popping the champagne just yet (wait, what do brewers pop when celebrating???). If the policy is struck down – and that is a mighty big if – there is nothing stopping the government from finding other ways to support local breweries. Maybe those ways will be more palatable to importers, maybe not.

Besides, opponents should be careful what they ask for. Alberta continues to have the most open borders and most accessible beer market in the country. If a differential tax is seen as a restraint on free trade, then tell me how greatly restricting or outright refusing to approve the listing of any products from other provinces (looking at you Ontario and Quebec) would be seen as legal? Breweries living in protectionist glass houses should think carefully before throwing free trade stones.

Stay tuned. This is about to get very interesting.

17 comments to Steam Whistle Gets Injunction Against Mark-Up Policy

  • Owen

    And let the #kudetah begin!

  • Shawn

    Open borders don’t mean much when domestic beer is $20 a six pack.

  • Sean

    I consider myself an opponent of the mark up policy (which I think has very little to do with growing a craft beer industry in Alberta but rather everything to do with padding government revenues), but why should I have any objection to the government “finding other ways to support local breweries” or removing barriers to the listing of products in other products as an alternative to protectionist measures which only punish Alberta beer drinkers? I’m not a big fan of their product, but I applaud Steam Whistle for showing more concern for the choices available to me as an Albertan than my government, which actively limits them.

    • CJ

      You say you suspect the government’s motives is padding their pockets rather than the Albertan craft beer industry, but you think Steam Whistle’s motivation is concern for the Albertan beer drinker? Come on, don’t paint this as Steamwhistle’s valiant stand for what is right, you know better!

      Steamwhistle’s motivation is the same as the government’s… cash, plain and simple.

      • Sean

        Of course it is, but it just so happens that their interests (profitably selling beer to Albertans) and mine (having as wide a selection of beers available to me in my local stores as possible) happen to align quite nicely, even if their particular product isn’t one that I would choose to buy all that often. As there is very little degree of overlap between my interests and those of the government (extracting the maximum dollar from the taxpayer they think they can get away with), choosing sides in this dispute isn’t challenging.

        • beerguy

          I personally think we make a mistake if we reduce the policy to “getting as much tax as they can”. This is a far more complex issue than that and has a number of dimensions to it. I think, more accurately, the government is trying to nudge the market through tax rates by making local product relatively more price competitive.

          I understand if people disagree with that motivation or think it won’t work – a totally fair position to take. I just don’t think it boils down to a tax grab, as much as our friends at the Canadian Taxpayers Federation want to make it only about that (which, really is what they try to make EVERY public policy issue about).

          Thanks for the discussion!

          • Sean

            That’s a fair point, but in the absence of any evidence that the government is working at securing greater market access for Alberta brewers in other Canadian jurisdictions (which would really change the playing field for Alberta brewers and bring the product-improving benefits of competition to the marketplace), I remain skeptical that the health of the local craft beer industry is substantially animating the policy decisions coming out of Edmonton (with the exception of the highly laudable move to progressive mark-up rates). Given the confiscatory tax rates governments of all stripes in all jurisdictions apply to legal products, you will have to forgive my cynical view that governmental interest in beer consumers is limited to our ability to generate revenue!

    • Ernie

      If Steam Whistle was really concerned about getting more choice to the consumer, they’d petition their own government to get rid of unfair rules that limit imports from other provinces into Ontario. Maybe this isn’t the best way to give Alberta businesses an advantage, but considering other provinces have been finding ways to limit importing Alberta beers for years, it’s about time we caught up.

  • Vern

    The decision is just.

    It will allow ‘importers’ like Steam Whistle and Yukon to maintain their presense in Alberta and continue to offer Albertans the best selection of beer in North America.

    More importantly they will be able to retain their dedicated employees and continue to hire Albertans who are passionate about Artisan Ales and Lagers…

    It will be nice to review the economic papers behind the punitive measures brought into the market in October, 2015.

    Did the staff at AGLC wish this to ‘Hoppen’? I think not.

    I think looking back, the policy change was as Paul Weller sang ‘The Bitterest Pill’ the Hospitality sector ‘Ever had to swallow’ during one of the hardest economic downturns since the 1980’s in Alberta.

  • KB

    Other than inspecting beer from a health and safety standpoint what role should government play when it comes to organizing the beer trade?

    People like to make beer and people like to drink beer. The trend is apparent to anyone who has followed craft beer from the late 80s/ early 90s: the less the government is involved (any government) there is a corresponding increase in the number of people who brew beer, want to brew beer and the beers they brew become better and more interesting beer. Ultimately that leads to better beer being more accessible. Without a doubt less government involvement leads to more people brewing, drinking and talking about interesting beer.

    The only parties which benefit from these type of tax policies and schemes are international/multi-jurisdictional breweries, their corresponding counsel/lobbyists/advisers/accountants and maybe from an electoral perspective the government.

    If our provincial government they could put their shoulder into eliminating barriers of entrance for Alberta brewers into foreign markets (without that just becoming another government boondoggle where our officials attend unproductive meetings on the tax payer dime) that would be policy worth debating.

    • beerguy

      Actually, KB, your basic assertion about more breweries created when government stays out of the way doesn’t hold up to the historical reality. Government has had a big hand in changing regulations, creating incentives and, at times, even subsidizing, to create the craft beer industry in North America. In Canada, in particular, government policy has a large hand to play in creating market conditions.

      All governments regulate beer. The question is HOW to regulate in a manner that supports the creation of local beer production.

      • KB

        I am really not certain what you mean by government causing growth in the beer industry. I would agree that when government gave up micromanagement of the beer industry the industry began to flourish. So on that point we probably agree.

        I have been brewing and following craft beer since about 1993 and almost every account I have read about the early craft brewers points to the fact that government (along with lobbying from the bigger brewers who did not want competition through a series of byzantine rules) were one of the main challenges to brewers such as Anchor and Sam Adams and the other pioneers. These challenges included but we’re not limited to oddball rules about growlers, operating times and distinctions between pubs/brewpubs etc.

        Early accounts of the rules and regulations which plagued importers demonstrate a similar theme.

        Fast forward from 1980 to 2005 and there were still places which did not allow high alcohol beer to be produced and sold in their states and it was not just in the US (oddly Iceland had bizarre prohibitions on beer well into the 80s as well).

        All this did (particularly with advent of mail order beer companies and the Internet was create inefficiencies in customers being able to buy the beer they desired). As I am sure you are aware beer drinkers continue to lament the fact they cannot buy xxx beer because of some archaic regulation.

        You probably can show me examples of funding which brewers have received or other similar types of benefits. Some of these breweries probably make and continue to make good beer.

        But I would disagree that government involvement in the form of subsidies or management is the foundation upon which the modern craft movement is built upon. The evidence is everywhere, the foundation is built upon: the loosening of government regulations along with the hard work of brewers, writers and shop keepers has brought us to where we are today. And it will be for those reasons we will have success tomorrow.

        With one or two breweries opening in the states every day (according to a recent Washington Times article) new challenges will definitely be presented to these brewers and the challenges of surviving in that type of market are very different than the challenges faced by the early craft brewers (winning customers versus fighting red tape, etc.)

        Just as a final thought (and maybe we have some additional common ground): I am all for significantly lower forms of alcohol taxation for all brewers who sell product in Alberta.

        I am interested in your thoughts.

        • beerguy

          KB. Okay, I see your point a bit more clearly now, and we mostly agree. I guess my point was that the rise of craft beer was met with a CHANGE in government regulation, not its removal, per se. Yes, some archaic (and plain dumb) rules got removed, but often were replaced with others. For example, Canada’s first brewpub, Horseshoe Bay, was facilitated by a change of rules allowing brewpubs. It wasn’t de-regulation but re-regulation.

          The problem is not government involvement as a concept, but what is the basis for the regulation. Vestigal post-prohibition controls and laws benefiting the big corporate players are the problem. Rules encouraging local growth through incentives and shifting market dynamics are another matter.

          “Getting government out” of any industry is a convenient myth. Governments regulate – that is their job. It is a question of determining what is the right kind of regulation to achieve the desired ends.

          A completely unregulated beer industry would be very, very ugly for fans of craft beer, as there would be nothing curtailing the activities of the big players in the market.

          Thanks for the intelligent discussion!

  • Good points Jason. Let me know if you get your hands on the judgement, I’d really like to read the arguments that came forth from both sides. Disappointing that the Herald ran that one-sided opinion piece, rather than cover the story – but given their massive cuts yesterday (including beer writer Jason van Rassel) it’s not surprising.

    • beerguy

      I am VERY sorry to hear that Jason van Rassel was laid off yesterday. An excellent journalist and a man that knows his beer. Best wishes for his future.

  • Vern

    If anyone has a copy of the economic paper that formed a basis of the justification for the policy change by the NDP on Oct 27, I would love to read it to get an appreciation of the methodology and forecast benefits behind the decision. Normally when an economic policy is changed there is a forecast that backs the decision. As of today I haven’t seen the analysis using Brewers Association and Industry data indicating that the Alberta taxation and distribution model was a detriment to brewers in NWP.

  • Owen

    As a lawyer, I find the argument that regulation and taxation differentials for beer brewed in different areas of Canada is an illegal trade barrier quite interesting. I hope that whatever the outcome, the matter is appealed to the Supreme Court of Canada in order to give some consistency from province to province. Bear in mind that this case will set precedent not just for beer, but probably for tens or hundreds of billions of dollars in inter-provincial trade that is presently subject to non-tariff trade barriers. You can imagine that a piece of litigation like this may attract dozens of government and industry intervenors from across Canada, leading to litigation that will last years and rise through the court system, potentially as part of a set of test cases, all the way to the top.

    I suspect that a similar argument is being used by Steam Whistle as is being used in R. v. Comeau in New Brunswick (which is a case regarding personal importation of alcohol for personal use contrary to NB regulations), in that S. 121 of the Constitution Act 1867 ought to be interpreted to say that inter-provincial trade barriers of any kind are illegal. Up to today, that section has been interpreted narrowly to say simply that a province cannot impose a customs duty on products from a different province.

    Not to get too technical, I will link to the very readable Wikkipedia article on the subject, where it summarizes is simple terms the history of the interpretation of S. 121 and how it is presently viewed by some in legal academia.

    https://en.wikipedia.org/wiki/Section_121_of_the_Constitution_Act,_1867

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