Share This Blog

Another Beer Mark Up Lawsuit

gwblogoAnd Great Western makes three.

There are now three lawsuits (okay, two lawsuits and a trade complaint) against the Alberta government’s new beer mark-up policy. Saskatoon’s Great Western Brewing officially launched a lawsuit yesterday (read one of a few possible media stories here). They join Toronto’s Steam Whistle and Calgary importer Artisan Ales in challenging the new policy. For a background on the policy read here.

Great Western argues the flat rate mark-up combined with a grant for Alberta-based producers amounts to a violation of the Constitution Act as a barrier to trade between provinces. The Alberta government has not officially responded, using the usual “before the courts” defence, but in general their position has been that Alberta has the most open beer market in the country and that the policy is designed to help foster a local beer industry in the province with all the jobs and economic development that come with it.

This development is hardly surprising. I think I actually predicted it when the latest policy was announced. Great Western sells approximately half (I am told) of its beer in Alberta, and they have said that a 24-pack has increased over $6 in price since the change. They won’t release figures, but you can imagine their sales have dropped as a result, especially in the discount segment where many of their beer compete.

I get why they are mad. Just like Steam Whistle (who also had a large portion of their sales in Alberta) and the various importers who try to sell non-local beer to Albertans. Alberta has long been the reliable secondary market, the place where you can easily sell your beer at a decent price, especially if you are a small to mid-sized brewery.

That changed in the last year. And anytime a government tries to make a large change, lots of people are going to be unhappy.

I don’t say that to dismiss the lawsuits or the complaints of those negatively affected by the change. I say that because, well, it is true. Those who are complaining do so because the old system worked for them. Alberta breweries are singing the praises of the new policy because IT works for them. Such is the nature of politics.

I will not attempt to predict the outcome of this lawsuit, nor the other ones. I am neither a lawyer nor a trade expert. However, for the sake of those of you out there, I will offer this analysis.

The crux of all the complaints centre around the argument that the new policy taxes import beer at a different rate than local beer – effectively a trade tariff which is prohibited under NAFTA, the Constitution Act and New West Partnership. Whether that is a case is up to the courts. My guess at the government’s defence is that the same mark-up is applied to every beer sold in the province, regardless of production origin. The grant program for Alberta breweries is framed as an economic development initiative (something allowed under trade deals), and thus legitimate.

The question will be whether the courts agree. The government has explicitly tied the two initiatives, but they are also not the only government to provide economic development grants to their local breweries. Plus, there is something – at least in my mind – to the argument that Alberta continues to have the most open borders in the country. If mark-ups/grants are a trade barrier, are tasting panels, preferential shelf space and import restrictions trade barriers?

As I say, I am not a lawyer, so I don’t offer an answer. As usual in this debate, I advocate a big picture analysis. We need to look at the basket of policies that all provinces have to regulate the flow of beer across borders. Whether the courts share that perspective, I have no idea.

[Edited at 12:30pm to correct that the complaint is based upon the Constitution Act, and not the NWP as initially reported.]

12 comments to Another Beer Mark Up Lawsuit

  • Cody

    Great. When can we sue their government for not letting Alberta Brewers sell into their provinces for the last 20 years?

  • Watershed Kurt

    If the courts smash Alberta’s plan, they better go after the rest of the provinces. It will be interesting to see where this one goes.

    • More bitching about your abortive attempt to distribute Watershed in SK? Just because the tasting panel found out it isn’t a real brewery they deny the application? Rigged. Sad.

  • Kuri

    I do wonder if Alberta breweries (perhaps some of the larger ones that might be able to afford full time legal council) are preparing any legal challenges to other provinces’ liquor control boards. Perhaps they are and are waiting to see how this challenge plays out before proceeding.

  • The only ones who are going to win here are the Lawyers. The customers will end up paying more in the long run no matter what happens. We have to be 1 country and not 10 separate provinces and 3 territories. Until that happens nothing will change.Thanks

  • I have moved Steam Whistle and now Great Western off of my “okay to buy” list. I doubt it matters much to them but lawsuits like these do affect consumer decisions.

    • 80

      I have Central City on my list. Their head brewer whined about them “subsidizing the Alberta brewing industry” after the last tax changes, so I’m doing my best to help him out by not buying his beer.

      I’ll have to find out who Artisan Ales imports so I can stop buying their stuff too.

  • Kirk from Blindman

    Just to relay some context via two sources, one a law school vice-dean and the other a person in the GOA with this portfolio. (Disclaimer: I may not know what I’m talking about).

    Lawsuits: Steamwhistle’s is essentially dead as it applies to regulations that are no longer in effect. The NB constitutional challenge is before the NB Court of Appeals. Possibly be dismissed. If lower courts, though, keep finding these non-tariff barriers unconstitutional, one or more Court of Appeals will punt it up to the Supreme Court. Key is tariff vs. non-tariff. Supreme Court has held for a century that well-meaning non-tariff barriers are constitutional. They may decide to revisit, of course but it would then set up “a century of litigation” between provinces, municipalities, etc. Plus, it’ll take a decade before something like this goes before the Supreme Court, and they’ve been hesitant to modify long standing systems without a existential need (why we do not have a National Securities Regulator, for example).

    If, however, the brewers’ grant is seen as a “tariff” (at least in disguise)–which obviously GW, Artisan Ales, et al are arguing it’d be a much lower barrier. No surety of that. And yes, other jurisdictions also offer grants, etc but from what I was told that does not matter as the court rules on what’s before them, not what else is out there.

    However, the biggest *threat* to the markup is the Artisan Ales challenge under the Agreement on Internal Trade. As Alberta is a free signatory to this agreement (technically they could leave, and they have been beneficiary of some successful challenges) they must abide by its rulings or face hefty fines. People may remember the Quebec government having to modify their regulations that margarine can not be yellow as a result of one of these rulings. The Artisan Ales challenge has been “screened” (not a high bar) and is okay to proceed to the next step. Final step is a quasi-judicial tribunal. And the tribunal does not hear arguments like “but they’re worse!”, so yes, if Alberta brewers (of which we are one) feel unjustly impacted by another jurisdictions they have to file their own challenges.

    On a personal note, I believe that the market plays a big role into what beers are available where. As the craft beer market grows, we’ll see other provinces start looking for Alberta beer as well. Rising tides and what not. Personally, we’ve now had 4 different provinces request our beer (we haven’t had the capacity to fulfill), some through importers, some through liquor boards. Yes, there are bigger barriers to get into other provinces but it’s not impossible–look at some of the bigger American breweries and how far they reach. Heck, SK is able to and would pull product directly from the Connect warehouse whenever we’d let them!

    • beerguy

      Kirk, interesting observations. I, too, have been talking to knowledgeable people and generally trying to become better informed myself about all of this. I have been reluctant to offer too much of that info on the site, given its uncertain nature. But I appreciate you offering some detail around how the law works around this.

    • Hi Kirk and thanks for the reminder about the margarine and how long it took to make that change. ( 50 YEARS ) Most of western Canada did not realize that in the late 50’s 60’s in Quebec it was illegal to have yellow margarine and now I know why, ( Because the Butter industry and farmers had some say ) Hear me out beer guy before deleting my comment. Now we are facing the same situation within the beer industry and it’s called Lobbyist just like back then. Nothing has changed and the lobbyists where always there but in those day’s they would break your legs, now they sue you. It’s all about money and the customer is a second thought. Thanks Kirk

      • beerguy

        Thanks for commenting. I appreciate your take.

        And for the record I NEVER delete comments because of content. All perspectives are welcome here. I only exercise my moderating rights when the tone of the comment is inappropriate – insulting, degrading of a person or overly ill-tempered (moderately ill-tempered is fine 🙂 )

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>