Trade law and Constitutional Challenges: Why the BC Wine Industry Needs to Worry Now

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Mark Hicken, a lawyer here in Vancouver, recently wrote an article on how Canada’s trade obligations under NAFTA and GATT are being violated by the current BC liquor monopoly system. He forecasts that because the distribution and markup systems treat imported wine differently from domestic wine, that this could be the basis for a NAFTA and GATT challenge.

Furthermore, many legal experts knowledgeable about wine law believe that the federal Importation of Intoxicating Liquors Act is unconstitutional. Since this act not only prevents BC wineries from shipping direct to other provinces but is also the legal basis for provincial liquor monopolies, a legal challenge will likely result in a massive shakeup of the current liquor monopoly.

While this is good for consumers, it will be bad for BC wineries since they rely on the competitive advantage given to them by the current system. Mark argues that without a large reform of the system now, if NAFTA and GATT challenges or a constitutional challenge is successful, the resulting shakeup of the BC liquor monopoly could seriously impair a BC winery’s ability to compete in the market. What is needed, Mark argues, is back-end assistance to supplement the high costs of BC wine production, and a reform of the liquor distribution system.

This is a fascinating article and, in my opinion, prescient of the future of wine law in BC. If something isn’t done soon, the entire system could unravel and both consumers and BC winery owners will have a lot to worry about. Reform is necessary NOW, as a proactive approach to solving this problem. A reactive approach will surely end up in the death of many businesses in our province. To read the full article, go here.

Comments

  1. Paul Rickett
    February 25, 2010

    Mark’s blog does not allow comments.

    The article is a pretty good summation of the state of play but there is one inaccuracy.

    BC wine sold in Govt stores is priced the same as ex-winery so the consumer does indeed pay the markup etc. (net of the QEP) but the winery absorbs the cost rather than raise its prices. Effectively the govt stores gain a preferential volume price compared to private stores for access to their 200+ store retail system.

    Incidentally, the mark-up calculators on Mark’s site seem to be broken.

  2. Shea
    February 25, 2010

    I’m pretty sure Mark did say that. The point is that consumers aren’t paying more than they otherwise would at the winery (which is not true of non-BC wines). I do believe that Mark said the wineries are absorbing the costs of selling in government liquor stores (minus the QEP discount).

    To quote his article:
    “However, BC wine that is sold through government liquor stores is

      subject to BCLDB markup and fees

    . However, a portion of that markup is rebated back to the winery through a program usually known as the VQA Support Program or QEP (Quality Enhancement Program). ” [My emphasis.]

    Shea

  3. Paul Rickett
    February 25, 2010

    Comment in haste and re-read at leisure 🙂 You are right. But the consumer is not disadvantaged by this policy if they choose to buy at Govt stores. All that happens is that a significantly higher proportion of the price is directed into govt coffers instead of the winery’s.

  4. Shea
    February 25, 2010

    True – but, I would argue that in the grand scheme all this does hurt the consumer.

  5. Mark Hicken
    February 26, 2010

    Shea, Paul,

    Thanks for reading the article. Yes … you are correct, the wineries absorb some of the markup if they sell through the LDB and make less than if they were to sell it themselves or through most of the private stores (although VQA stores are a whole other issue). This is why you will rarely or never see the really high demand wines in LDB stores. By the way, I have fixed the calculators now … sorry, there was a small programming issue related to moving web hosts.

  6. Shea
    February 26, 2010

    Mark, thanks for the comment – and the excellent article.

    Cheers,
    Shea

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