The Ties That Bind – How the BC Liberals Want to Limit Beer Choice
It came to my attention yesterday that with respect to tied houses and related trade practices in British Columbia, the Liberal government intends to reduce current provincial regulations. For them, it isn’t a question of whether or not to do so; it is a matter of how much.
For those who do not know what a tied house is, this is the definition from the Liquor Control and Licensing Branch (LCLB) consultation paper that was recently circulated to some potential stakeholders:
A tied house is an establishment that has an association, financial or otherwise, with a liquor manufacturer or its agent that is likely to lead to its products being favoured.
What this means is that a pub that is owned or has some contractual arrangement with a brewery, may find itself obligated to sell beer from that brewery alone. As a result of the Liquor Inquiry Commission of 1952, this was made illegal due to the lack of competition that resulted from brewery consolidation. Those were the beer Dark Ages in Canada when “beer” was synonymous with mass-produced lager because that is all you could get. It took 32 years before craft brewing even resurfaced here!
With respect to regulatory changes currently being contemplated for tied houses in BC, the LCLB consultation paper offers the following three options:
- Total elimination of tied house prohibitions.
- Limits on the number of tied houses a corporate entity can own.
- Permit tied houses with “public interest restrictions.”
The options offered for related trade practices are:
- Elimination of all restrictions.
- Eliminate or reduce most restrictions.
- Streamline some policies and procedures.
Why is the Liberal government considering these at all? The consultation paper provides the following reasons:
- The federal government already regulates business practices through the Competition Act.
- The LCLB’s limited resources might be better spent on public safety priorities.
- Inducements between suppliers and licensees are already quite common (even though they are illegal).
- With 9,000 licensed establishments, it is unlikely a liquor supplier could adversely impact consumer choice.
- The LCLB has approved a number of financial ties between liquor suppliers and licensees involving small wineries and bars.
It is instructive to also consider the remarks on this subject from Rich Coleman, BC Minister of Public Safety and Solicitor General, provided in the appendix of the consultation paper:
It was all about tied houses and things like that, where people would come in and offer: “You become a specific beer for the whole operation, and we’ll do this, this and this for you.” That would be called a tied house, and there was concern about those breweries coming in and owning the brewery as well as owning the retail.
The reality is that today the consumer has a number of choices that they want when they go into a licensed establishment, and so they do that.
The historical reasons for the policy are no longer very applicable. The rules don’t help us protect public safety, and experience has shown us that the rules are widely ignored and virtually impossible to enforce because of.
What role does Coleman see for his ministry in this area? Coleman said,
What we really want our people concentrating on is four things. We want them concentrating on four public safety issues with regards to enforcement of liquor. These are overservice to people, serving of people under-age, overcrowding in liquor establishments and the sale of illegal liquor. Those are the four priorities we want our people to be concentrating on.
We’ve always felt that as we modernize and we learned, prior to the Olympics and going through the Olympics, how we could handle these things with regards to the operation of liquor establishments, we can take this next step in modernization and still protect the public safety.
Now this may seem like a reasonable objective for the Ministry of Public Safety, but let us consider what the Liberal government is actually pushing for and if its case has merit.
The BC Libs say that the federal government already regulates business practices through the Competition Act. While it may be the case that there are relevant federal regulations, their actual enforcement is quite another thing. Considering the consolidation that has taken place in key industries such as banking, media, and telecommunications, we know this is a sick joke. Oligopoly is the name of the game, baby, and we all pay more because there isn’t much competition to speak of.
It is suggested that the LCLB’s limited resources would be better spent on public safety priorities, the four areas mentioned by Coleman above. Well, how much of a problem is over service, underage drinking, over crowding, and illegal liquor? More than the costs associated with tobacco? Why are resources limited? Is it because of Liberal tax cuts whose extent seems to be driven more by ideology than a reasoned assessment of necessity? And if these regulations seem out of place coming under the purview of public safety, why push to abolish them instead of seeking to place them in a more appropriate ministry?
The consultation paper offers that “inducements between suppliers and licensees are quite common. Given this, any deregulation may not lead to a significant change in actual business practices.”
So if you were wondering why so many places offer the same ten taps (if even that) of crap, now you know why. Because inducements for establishments to carry a particular beer portfolio are common, despite this being illegal. This is a concession by the provincial government that they (and, for that matter, the feds) are not enforcing anti-competitive trade regulations, the intent of which is to prevent the precise limitation of choice we have been experiencing. The only reason a chink in the armour has opened up is because of the many people working at the grass roots level to support our craft brewers. Enough people have become educated that they are dropping the monoculture of Wonder beer in droves for the spice of life that is the variety found in craft beer. This change is evident at liquor store tills, but it takes time for bars and pubs to come around because the inducement they accepted obligates them to continue selling whatever corn or rice juice they have chosen. The most effective way to push these establishments to change is by voting with your wallet. Don’t patronize places that celebrate swill!
How bad can this really be? According to the LCLB consultation paper, “there are over 9000 licensed establishments, including 5,600 restaurants.” Therefore, they assert, “It is unlikely that a liquor supplier(s) could purchase or induce a significant number of licensed establishments so as to adversely impact consumer choice.”
No shred of evidence is offered to back up that contention because it is standing on very thin ice. Those of us who enjoy our beer, know how mind-numbingly uniform is the pedestrian beer offering at the majority of these establishments, especially when you venture outside of Vancouver and Victoria. Perhaps our political elite think ten brands of suds is variety enough, regardless of who actually owns those brands and that the majority consist of generic, industrial lager. Is it a revelation that the top-selling brands happen to be the ones most heavily advertised? That the ones most heavily advertised are made by conglomerates with the deepest pockets? That the non-craft brewers garner over 86% of BC’s beer sales?
BC is only at the early stages of becoming a competitive beer market and the BC Liberals, it seems, want to kick the stool out from under it. How does allowing tied houses improve choice and competition for consumers? It doesn’t because it allows a corporation with sufficient financial muscle to legally lock out competitors. This is a very different set of circumstances from the final rationale offered in the LCLB’s consultation paper, that they have allowed a brewery or winery to have a tasting room that only serves its products — in essence, a tied house. This is a reasonable exception that hardly threatens to control choice and competition in BC’s 9,000 other licensed establishments.
In conclusion, it is clear to me that the case the Liberal government is presenting for the deregulation of tied houses and related trade practices is deeply flawed at best and spurious at worst. It has very little to do with public safety. To speak of it in such terms is offering a straw man.
I find it curious that the way the BC government approaches the brewing industry in our province is very different than our wineries. We can see from the latter that when small businesses are given the means to thrive without the threat of being undermined or shut out by dominant players, a vibrancy develops that is more beneficial to consumers. This is starting to happen in BC’s beer market with more people switching over to craft beer, spurring entrepreneurs to open new breweries and brewpubs. However, allow Anheuser-Busch InBev, SABMiller, Heineken, and Molson Coors the means to lock out competition, their insatiable appetite for greater profits would make them jump at the chance, even if it meant earning a mere wooden nickel.
If you don’t want to return to beer’s Dark Ages, you will need to actively support efforts to lobby the government because, as the LCLB consultation paper makes clear, the status quo is not an option for the Liberals. CAMRA is the organization that represents your interests when it comes to beer. If you aren’t currently a member, join today to help provide them with the means for protecting your rights. (See CAMRA Vancouver’s submission to the LCLB.) The best thing, is that you can enjoy a tasty brew while serving your community!