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An LCBO store in Toronto, at the corner of Spadina Avenue and King Street West, in 2013. (Fred Lum/The Globe and Mail)
An LCBO store in Toronto, at the corner of Spadina Avenue and King Street West, in 2013. (Fred Lum/The Globe and Mail)

LCBO, Beer Store face legal action over secret ‘sweetheart deal’ Add to ...

Revelations of a secret deal to carve up Ontario’s beer market between the big-brewer-owned Beer Store and the provincially owned Liquor Control Board of Ontario have spawned a proposed class-action lawsuit demanding $1.4-billion in damages on behalf of beer drinkers.

A five-page notice of action filed on Friday in Toronto in Ontario Superior Court alleges the retail outlets engaged in a “conspiracy to fix, raise, maintain or stabilize prices of beer in Ontario” and “participated in illegal and secretive discussions and made agreements relating to prices and distribution areas of beer in Ontario.”

The allegations have not been proved in court, and class-action lawsuits need to be certified, or given a green light by a judge, before they proceed as actions on behalf of a large group of people.

The court documents were filed by lawyers with London, Ont.-based Siskinds LLP on behalf of a Burlington, Ont., man, David Hughes, and a numbered company that operates a Burlington restaurant called The Poacher, with both acting as representative plaintiffs in the case.

Named in the notice of action as defendants are the LCBO and Brewers Retail Inc., which operates the Beer Store, as well as the foreign-owned beer companies that own Brewers Retail: Labatt Breweries of Canada LP, Molson Coors Canada and Sleeman Breweries Ltd.

The action demands $1.4-billion in general damages, alleging the defendants engaged in “conspiracy, intentional interference with economic interests” and conduct that is contrary to the Competition Act. The claim also demands $5-million in “punitive and exemplary damages.”

The lawsuit was sparked by revelations in the Toronto Star this week of a secret deal between the LCBO and the Beer Store dating from June, 2000, that saw the provincially owned booze retailer agree to sell only six-packs, leaving the cheaper 12- and 24-packs to be sold only at the Beer Store. The deal originated under the Progressive Conservative government of Mike Harris, but has been sustained since by Liberal governments.

On Wednesday, Restaurants Canada, a national restaurant industry group, called on the Ontario government to cancel what it called a “sweetheart deal” and said it had asked the federal Competition Bureau to launch an investigation. The restaurant group alleges the deal restricts competition and drives up the cost of beer in restaurants and bars.

In an e-mail on Friday, Ted Moroz, president of the Beer Store, told The Globe the retailer was not aware of any litigation and had not seen a statement of claim. However, he said the company was “confident any such litigation is completely without merit and as a result, we will defend vigorously against it.”

Mr. Moroz also said the Beer Store does not fix prices: “Individual brewers independently set their own prices which are approved by the LCBO on a weekly basis.”

A spokeswoman with the LCBO declined to comment "pending the receipt of a formal notice of action."

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