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AIT Panel Rules Against Alberta Mark-Up Policy

On Friday, a panel convened to hear a complaint against Alberta’s new mark-up policy rendered its decision (read the Journal story on the decision). In a split 2-1 decision, they ruled in favour of the complaint by importer Artisan Ales and against the new Alberta mark-up policy and subsidy. You can read my background on this case here.

The panel was an adjudication hearing under the Internal Agreement on Trade, a national trade agreement between provinces. The complaint was launched by Artisan Ales, a prominent beer importer whose portfolio includes Dieu du Ciel, Trois Mousquetaires and other respected craft breweries. Artisan Ales was supported by the right wing Canadian Constitutional Foundation in its challenge.

The case revolved around whether the second phase of the policy (the Alberta government having conceded the first iteration contravened the AIT) should be seen as one policy with two components, a mark-up and a grant program, or whether the pieces should be taken as distinct actions.

The majority decided it was one policy and rendered a decision that, as a whole, the policy contravened the AIT. The minority opinion disagreed with that assessment, arguing the mark-up and the grant needed to be evaluated separately and, having done so, came to the conclusion they did not violate the agreement. This may seem like legal hair-splitting, but it is actually a crucial aspect in understanding both the intentions and consequences of the policy.

Rather than parse the decision (which I have read) for the legal fine points, which at this point seem less fruitful, I want to consider what the decision means and what happens going forward. The CCF has, not surprisingly, torqued the decision as a “huge victory” and is calling for a return to the pre-2015 mark-up policy. I suspect that outcome is unlikely.

First, the government has the right to appeal. I fully expect them to do that. At the minimum that will delay any effect of the decision.

Second, the upcoming decision in the lawsuit by Steam Whistle and Great Western is likely of more political significance, both because of its higher profile and its direct judgement on the constitutionality of the policy. I anticipate the government will not act until it hears the result of that case. Should it lose both suits, the policy may very well be doomed. Should they win the lawsuit, it will likely trump the AIT case.

I say that because there are no specific penalties for contravening the AIT, which is my third point. It has long been a criticism of the AIT that it does not have an effective method for punishing contraventions. The CCF/Artisan Ales case may demonstrate that weakness. The panel cannot order remedies to the aggrieved party – meaning Artisan gets nothing other than some of its legal costs paid for. Nor does the panel have the same force of law the courts do to compel compliance.

While I don’t expect this will happen, the government could simply ignore the ruling and face any political consequences and countervailing measures by other provinces. As I say I doubt the Alberta government wants to start a trade war, but such is the nature of trade deals. The media talks about them like they are inviolable laws, but in reality require the voluntary cooperation of the parties to have any meaning (just look at Trump and NAFTA these days).

To that extent Artisan Ale’s challenge has always been something of a quixotic adventure; it may prove a point but is likely unable to significantly alter policy. Plus, at least on the CCF’s part, it was also part of a broader ideological campaign to discredit and undermine the Alberta government (as evidence I point to their description of the policy as a “protectionist tax grab”, which is high hyperbole at its finest).

While I do not dismiss the substance of this ruling – there is no doubting it is a blow to the government’s beer strategy – personally I am waiting for the Steam Whistle/Great Western lawsuit decision for it will have more lasting ramifications (at least after appeal). It is more significant for no other reason than it can level significant financial penalties against the government, not to mention a court ruling that the policy is unconstitutional has significantly more weight than a trade panel decision.

So while this is both a noteworthy and for Alberta brewers somewhat ominous decision, we remain in the early days of this story. More significant developments await.

For fans of beer policy, it will be an interesting summer. I just hope it doesn’t all happen in the next two weeks, as I am heading off on a brief holiday. But don’t worry, I have pre-written some posts to keep you entertained in my physical absence.


2 comments to AIT Panel Rules Against Alberta Mark-Up Policy

  • PB

    If I were Artisan Ales, I’d be considering tweaking my business model irrespective of future tax structure. The local beer scene has improved so much in the past two of three years that demand for imports is going to be affected. I’m not a big drinker of Artisan Ales products, but my consumption of California beer (for example) is way down given the availability of excellent Alberta and BC beers that didn’t exist or weren’t available until recently.

    • Byron

      Well, from the perspective of the importers, so much as I understand, is that the demand for better local beer was hinged on the education we received from imported beer from Quebec, BC, California, Oregon, Belgium, Germany etc. Shelves and shelves of inexpensive world-class beer driving a core Alberta beer culture that went on to start these breweries we’re seeing now. I’m also pleased to see better (room for improvement) beer locally. And thank goodness because the only reason I’m not drinking more beer from the list I gave earlier, is a financial one.
      As a consumer, I hate the tax policy. As I lover of local business success stories, especially ones involving my friends, I love the policy! I can tell you I overall drink way less beer now. Which I suppose is the over arching trend the beer industry will one day have to face.

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