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New laws have the potential to alter how liquor and wine is currently sold and regulated.
Of the many topics tackled at the eighth annual seminar on Wine & Liquor Law in BC, held in conjunction with the 2017 Vancouver International Wine Festival, two in particular have the potential to alter how liquor and wine is currently sold and regulated. The impacts are not yet known, but they are likely to be far-reaching and be upon us far sooner than government bureaucracies and others would like.
US Trade Challenge to BC Wine in Grocery Stores
On January 18, in the closing days of the Obama administration, the US filed a trade action with the World Trade Organization alleging that the BC grocery model discriminates against US wine pursuant the General Agreement on Trade and Tariffs. The challenge zeros in on measures governing the sale of wine in grocery stores which allows only BC VQA wines on regular grocery store shelves. So far 18 grocery stores, most of them Save On Foods, have acquired VQA licenses to sell wine. Imported wine may be sold in grocery stores only through the restrictive “store-within-a-store” model.
In the weeks following the US claim, several other countries have joined in, including the EU, New Zealand, Argentina and Australia. Rather than go to a hearing and face the strong possibility that WTO will impose a remedy, on session presenters and lawyers Al Hudec of Farris Vaughan Wills & Murphy LLP and Mark Hicken of the Vintage Law Group, recommend taking immediate steps to negotiate a settlement.
Hudec cites potential Canadian defences such as “grandfathering provisions” under NAFTA and the argument that California and BC wines are not ‘like’ products. “With NAFTA up for negotiation and many trade irritants on the table, there is a danger that wine might be caught up in the overall US-Canada trade issues,” he says. “I recommend negotiating some kind of phase-in, like Ontario’s introduction of wine sales in grocery stores in February, 2016, which has been excluded from the current US trade action.”
In the Ontario rollout, 35 of the licences would sell only Ontario wines, while the other 35 would be allowed to sell imported wines as well. After a three-year phase-in period, all of the outlets would be allowed to sell both foreign and domestic wines. ”The alternative to a negotiated settlement is that the grocery store model could be fundamentally restructured in a way that is detrimental to the BC wine industry,” says Hudec.
Mark Hicken of Vintage Law Group: “We are in dangerous territory. Given that consumers love wine in grocery, the wine industry has take control of this and have a coordinated response.”
Interprovincial Shipping Restrictions
Get ready for a revolution in interprovincial trade of wine and liquor. At present, according to lawyers Ian A. Blue and Arnold B. Schwissberg, “all interprovincial trade barriers are verboten.”
Until the Supreme Court of Canada weighs in on the matter, the Comeau decision in which Judge Leblanc ruled that, S. 121 of the Canadian Constitution Act permits “the free movement of goods among provinces without barriers, tariff or non tariff stands as the law of the land.” If S. 121 is upheld, the repercussions on existing provincial liquor board regimes will be huge.
Within a province, the venerable institutions would still maintain taxing rights through the legislature but would have to adjust their focus to the proper sale, delivery and consumption of liquor.
“Losing control of where the wine comes from loosens up the market and creates more opportunities,” says Blue. “The boards could no longer use their authority simply to line their pockets.“
Provinces are faced with having to compete with lower prices so consumers do not have an incentive to shop in other jurisdictions. It also means that a province cannot put up barriers to Direct to Consumer or DTC sales, a prospect which has strong appeal for producers such as Sandra Oldfield of Tinhorn Creek. “We want better access for people who cannot come to the winery,” she says.
The bottom line: Considering the potential effects on supply-side management, the Comeau decision stands “to alter the commercial fabric of Canada,” says Blue. “But any decision by the SCC will likely include an adjustment period of one to three years.”
