National Post: Overthrowing our booze overlords

During the aging process of any good distilled alcohol, something strange happens. The inebriating substance evaporates and leaves the barrel through pores in the wood. In most cases, around 2% of it escapes in this manner. The craftsmen who produced this product call it “the angels’ share” — it’s their gift to the heavens above, and through this gift they are rewarded with a smoother and better quality liquid.

With most of Canada’s monopolized booze retailers, a similarly strange process occurs with the money in our wallets — though the end result is less romantic and much harder to swallow.

Monopolies, both public and private, are taking advantage of their market control at the expense of customers. They’re helped by a clutch of archaic laws that desperately need revising. Thankfully, some Canadians are waking up to the smell of the bad brew.

Several lawsuits against our alcoholic overlords now have the potential to significantly change how monopolies function, greatly benefiting consumers in the process. These suits are bringing us one step closer to the distant dream of liberalized liquor.

The first court case would affect all of Canada. Gerard Comeau is challenging the constitutionality of New Brunswick’s Liquor Control Act, after he was charged with illegally transporting more than 12 pints of beer into New Brunswick. The RCMP followed him across the border from Quebec during a 2012 beer run. He’ll be relying on Section 121 of the Constitution Act, which ensures that goods “shall be admitted free into each of the other Provinces,” and will seek to overturn a Prohibition-era Supreme Court decision that misinterpreted that section. If Mr. Comeau’s challenge succeeds, importation barriers will fall in every province.

In an ideal free market, this new influx of Canadian alcohol would result in more competition on the shelves of liquor stores everywhere, reducing prices. Without any competition, though, consumers themselves will have to exert enormous pressure on the monopolies to have access to these products.

Take Quebec’s Société des alcools (SAQ) as an example. Many of the province’s best products can’t make it through the SAQ’s bureaucracy and onto store shelves, forcing them to sell internationally rather than domestically — as I’ve written in these pages before. If the state won’t even sell the fruit of its own people’s labour, we can hardly expect  it to abandon cheap international wholesalers in favour of better quality (but out-of-province) Canadian products with lower profit margins. At least not on their own prerogative.

Which brings me to the next lawsuit. Jean-René Jasmin has just launched a class-action suit against the SAQ, asking that the crown corporation return $2.4-billion to customers who have been gouged by the monopoly’s incredible price markups. He claims that these markups, which can reach as high as 400% and bring the state $1-billion in annual profit (setting aside the extra half billion in tax revenue), are infringing the rights of Quebecers under the Consumer Protection Act. His focus is especially on wines under $25 and spirits under $50, where the markups are highest. In a previous lawsuit, the Quebec Court of Appeal said  the SAQ is not immune from consumer laws, giving hope that this new case could be more successful.

If Mr. Jasmin has his way, the SAQ will likely have to cap their markups, meaning Quebec liquor prices may actually become more competitive relative to other jurisdictions. If markups are capped, the SAQ may also be  tempted to diversify their offerings to products that are currently less profitable — like other Canadian beer and spirits.

Ontario may also face some changes.

For one, the Liquor Control Board of Ontario and the three-company cartel operating The Beer Store face a $1.4-billion suit by pub owner David Hughes, who took action following the leaked sweetheart deal that limits beer choices and make prices uncompetitive in Ontario. Like Mr. Jasmin in Quebec, Mr. Hughes argues the monopolies have infringed the Competition Act.

In another move, Michael Hassell, a lawyer from Toronto, is threatening to break up The Beer Store if nothing is done about its gouging in the next provincial budget. As the co-owner of Barge Craft Beer, Mr. Hassel thinks he should have the right to compete with the private monopoly and sell microbrews in his own stores. He argues the status quo is unfair and an “unreasonable restraint of trade.” He would like to see the market open up, and rightly so.

Aside from the last case, these lawsuits won’t do much to change how liquor is sold. It will take much more effort before Canada’s retail alcohol monopolies are abolished. However, they push us one step further in the direction of fairer prices, more choice, and fewer abuses of power.

That’s something we can definitely drink to.

National Post

Tom Kott is a consultant at HATLEY Strategy Advisors, a Montreal-based public affairs firm.

Original post HERE. Republished with permission from the National Post


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