Why are small wineries and brewers terrified of fighting Canada’s liquor laws?

Published in

Campaign for Canadian Wine

4 min readSep 24, 2015

Help us fix Canada’s antiquated wine laws at winecampaign.ca

Two years ago, Toronto lawyer Ian Blue published an article in Advocates Quarterly claiming that the legislation underpinning Canada’s provincial liquor monopolies was unconstitutional.

Blue was referencing the Importation of Intoxicating Liquors Act of 1928, a Prohibition-era law which gives provinces the power to fine or arrest anyone who brings liquor into a province without selling it to that province’s liquor board.

Blue argued that the law is unconstitutional because it violates the Constitution Act of 1867 which, in section 121, requires that items of “growth, produce, and manufacture to be admitted free from one province into another.” Legislation that forces breweries and wineries to sell their products to a provincial liquor board is clearly contrary to that principle, Blue argued.

So Canada’s provincial liquor monopolies, which account for billions of dollars a year in provincial income, are based on a little-known, illegal law. Surely this must have garnered some attention in Canada’s press?

Not so. Blue wrote a column in the National Post and made a few TV appearances, but the story got almost no traction. Few Canadians seemed to care about the constitutionality of a piece of legislation passed during Prohibition.

“[The LCBO’s] monopoly is based solely on an unconstitutional federal law, the Importation of Intoxicating Liquors Act (IILA) passed almost 90 years ago. The law is unconstitutional because it violates section 121 of the Constitution Act, 1867….”
Ian Blue, Vice, January 16, 2014

In 2012, parliament passed an amendment to the IILA which allowed individuals to carry a “personal amount” of wine, beer or booze across a provincial border, as defined by each province.

Many media outlets trumpeted the amendment as a victory for Canada’s wineries and breweries, but from a constitutional perspective, this amendment fixed nothing. Blue’s original argument was that the provinces never had the right to restrict the movement of goods across their borders in the first place — that’s why they asked the federal government to pass the IILA. So why do we still have provincial liquor monopolies?

So why do we still have provincial liquor monopolies?

At this point, anyone new to this topic might assume that the debate over provincial liquor monopolies in Canada represents a classic choice between private and public interest. But it’s a lot more complicated than that.

The idea that privatization would decrease tax revenue is not entirely accurate — many studies have shown that increasing the number of private liquor outlets would increase tax revenues.

The social argument for government control of liquor distribution — that the shorter hours and higher prices at provincial liquor stores decrease overall consumption and prevent binge drinking and alcoholism, for example — is also a misguided one. There is no reason why private liquor stores could not be subjected to similar regulations and constraints.

In the end, the most compelling explanation for the persistence of provincial liquor monopolies seems to be the issue of control.

Big wineries and breweries, Ian Blue explained to Vice in 2014, favour the present system because it gives them “free distribution.”

This claim might puzzle some Canadians. If provincial monopolies are government-controlled, how can they favour big brewers and wineries?

Perhaps the most salient example can be found in Ontario, where outside of provincially-run LCBO stores, the only other place Ontario citizens have been able to buy beer (until very recently) is the Beer Store.

Though not operated by the LCBO, the Beer Store benefits from and is effectively part of Ontario’s provincial liquor monopoly. What most Ontarioans don’t realize is that the Beer Store is a private company, with private shareholders. Here is a list of the Beer Store’s primary shareholders:

Labatt Brewing Company (AB InBev) — 49%
Molson Coors Brewing Company — 49%
Sleeman Breweries (Sapporo) — 2%

That’s right. A substantial chunk of Ontario’s liquor monopoly is owned by three large corporations, none of which are Canadian. An Angus Reid survey in 2013 found that only 13% of Ontario residents were aware of this fact.

The Wine Rack, Ontario’s largest private wine retailer, has a similar arrangement with the province. They’re owned by Constellation Brands, the largest wine producer in the world.

So why don’t Canada’s smaller wineries challenge provincial liquor monopolies, despite the fact that they’ve been proven to hinder the growth of wineries?

Blue says that smaller breweries, wineries and distilleries are afraid to challenge the system due to a simple fear of being delisted in provincial stores.

“Small breweries and wineries are afraid to challenge the system for fear of being delisted in LCBO stores.”

— Ian Blue, ***Vice*, January 16, 2014**

The conflict, then, is not between private and public interests, but between entrenched interests, and Canada’s smaller wineries and breweries, whose only goal is to distribute their product across the country and operate in a fair competitive environment.

These are the people who would benefit the most if the IILA were reformed or repealed — smaller wine merchants, small wineries, artisanal breweries.

If you’re interested in helping Canada’s smaller wineries, consider signing our petition at winecampaign.ca.