Ontario accused of changing law to ‘protect’ Beer Store, LCBO

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Ontario's Liberal government amended the Liquor Act in the spring in an apparent attempt to retroactively insulate both the provincially owned Liquor Control Board of Ontario and the foreign-brewer-controlled Beer Store from a potential class-action lawsuit demanding $1.4-billion for allegedly inflating the price of beer, lawyers for the plaintiffs charge.

The legislative changes, included in the budget bill in June, came as the government of Premier Kathleen Wynne brought forward reforms that will allow certain supermarkets the right to sell six-packs of beer and force the Beer Store to stock more small-brewery beers.

The lawsuit against the LCBO, the Beer Store and its owners dates back to last December, after news reports exposed a "secret deal" made in June, 2000, between the two retailers that had carved up Ontario's beer market, banning the LCBO from selling 12-packs and 24-packs.

Lawyers for David Hughes, a Burlington, Ont., bar owner, filed a proposed class-action lawsuit on behalf of all restaurant owners and beer drinkers in the province, alleging that the two retailers participated in a price-fixing conspiracy that violates the federal Competition Act. The lawsuit also challenged the Beer Store's practice of charging bar owners more for big-brewer beer than it charges retail customers.

The allegations have not been proved in court. Class-actions must be certified by a judge in order to proceed.

The defendants in the case have not filed statements of defence. But lawyers for Mr. Hughes say the Wynne government has passed two key amendments that appear to pull the rug out from under the lawsuit and protect not just the government-owned LCBO but the privately owned Beer Store from the legal action.

One Liquor Act change explicitly recognizes that alcohol sold to restaurant and bar owners "may be sold at a price that is different from the price at which it is sold to the general public."

The second change refers to the "June 2000 framework," which banned the LCBO from selling 24- and 12-packs of beer, and states that the LCBO is "deemed to have been directed, and Brewers Retail Inc. is deemed to have been authorized, to enter into the June 2000 framework in relation to the Crown's or a Crown agent's regulation and control of the sale of beer in Ontario."

The language appears designed to ensure that the LCBO and privately owned Beer Store are immune from the rules in the federal Competition Act, which exempts regulatory action, said Ron Podolny, a lawyer with Siskinds LLP in London, Ont., who is acting for the plaintiffs in the case.

In an e-mail on Monday, he called the amendments "both unfair and highly irregular" and said the move "violates the accepted democratic norms." He said the government was trying to keep small-business owners, such as his client, from recouping damages they allegedly suffered by overpaying for beer.

"It is unfortunate that the Legislature would attempt to deprive small-business owners of their legal rights," he said. "… We intend to vigorously contest the validity of this retroactive legislation in court."

An Ontario government spokeswoman declined to comment on the legislative changes.

"This matter is currently before the courts, so it would be inappropriate to comment on this specific situation," said Kelsey Ingram, press secretary for Finance Minister Charles Sousa.

The Beer Store, officially known as Brewer's Retail Inc., is owned by three of the province's biggest brewers: Labatt, Molson and Sleeman. Labatt is owned by Anheuser-Busch InBev SA, based in Belgium; Molson is owned by Molson Coors Brewing Co., which is headquartered in both Montreal and Denver; and Sleeman is owned by Sapporo Breweries Ltd. in Sapporo, Japan.

A spokesperson for Canada's National Brewers, a group that speaks for the breweries that own the Beer Store, could not be reached for comment.