Canada: The $2 Million Case Of Beer

Last Updated: June 27 2018
Article by Thomas O'Reilly

Steam Whistle Brewing Inc. v. Alberta Gaming and Liquor Commission – June 19, 2018

Sir Mick Jagger informed us that "you can't always get what you want," and this time, the Alberta government gets more of what they don't need. The Alberta beer mark-up, combined with Alberta's Small Brewers Development Program (SBDP), once again has been declared offside – and this time with a nearly $2 million restitution order against the Alberta Gaming and Liquor Commission (AGLC). You can read the whole decision from Justice Gillian Marriot of the Alberta Court of Queen's Bench here: Steam Whistle Brewing v. AGLC

As we said in our recent Of Beer and Borders article the Alberta government has had open borders since 1993 in its retail market for all Canadian and worldwide alcohol producers, in the spirit of free trade. More recently, this has been a disincentive for Alberta's homegrown brewing talent, who don't have a reciprocal ability to sell their beer in other, less free-trade provinces. Less than two weeks ago, an Agreement on Internal Trade (AIT) Appeal Panel ruled the Alberta government beer mark-up, and rebate under the SBDP for Alberta brewers, was an illegal obstacle to interprovincial trade under the AIT rules. That AIT complaint was brought by liquor importer Artisan Ales of Calgary, but they were not the only ones who took legal action against Alberta.

Steam Whistle Brewing of Toronto, and Great Western Brewing of Saskatoon, also took the Alberta government to court, but on the grounds that the beer mark-up and SBDP rebate were an unconstitutional restriction on interprovincial trade. The same constitutional provision (section 121) worked in favour of the New Brunswick government in the Supreme Court of Canada's decision in the Comeau case – where New Brunswick's law restricted individuals from bringing alcohol across provincial borders. In Comeau, the law was not an unconstitutional restriction on trade, because its primary purpose was to allow the government-run New Brunswick liquor regime to maintain control over liquor supply and distribution within the province – not primarily to restrict liquor from other provinces being sold in New Brunswick.  

But in the Steam Whistle case, Justice Marriot found that the Alberta beer mark-up of $1.25 per litre, with an SBDP rebate to only Alberta brewers, was in effect a barrier to interprovincial trade, and so was contrary to section 121's venerable words: "All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the Provinces."

Then Justice Marriot dropped another keg on Alberta's foot: she found that Steam Whistle and Great Western were entitled to monetary restitution for the effect on their revenue from this unconstitutional trade barrier – Steam Whistle in the amount of $164,000, and Great Western in the amount of $1,938,000. These amounts represent the $1.25 per litre paid by each of these breweries for their sales in Alberta, prior to them obtaining an earlier interim injunction against paying the mark-up.

Like the AIT Appeal Panel decision, Justice Marriot gave the Alberta government a stay of 6 months before her decision takes effect, to try to ameliorate the effects of the loss of the beer mark-up and SBDP system, and to address how the restitution will be paid. The Alberta government can appeal this decision to the Alberta Court of Appeal, and so they do have another chance to reverse their recent misfortune.

If Alberta does not appeal, or does not succeed on an appeal, lack of a support program for Alberta craft brewers is not their only problem. There are many more out-of-province beer producers who have paid millions of dollars under the mark-up to sell their products in Alberta. This decision has painted a giant bullseye on Alberta's back, with a dollar sign in the middle of it, for all of these other mark-up payees to take aim at.

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