News release
January 17, 2019 — OTTAWA, ON
In an open letter to the Honourable David Eby, Attorney General of British Columbia, Matthew Boswell, Interim Commissioner of Competition, encourages the province to consider the principles of competition while it reviews its liquor policy.
Under British Columbia’s current liquor policy, private liquor distributors cannot sell their products to hospitality retailers. Restaurants, bars and hotels are limited to buying their alcohol products from government-owned stores at retail prices, as opposed to cheaper, wholesale prices. This policy restricts competition, raises prices for consumers, and limits access to a wider variety of specialty products.
“The growth of new and innovative producers such as craft breweries has brought an influx of unique products to the market,” says Boswell. “Limiting the ability of these producers to access the market and effectively promote themselves threatens to stifle competition and innovation.”
The Competition Bureau supports two recommendations made in a report commissioned by the Government of British Columbia as part of the ongoing review of its liquor policy:
ï Implement proper wholesale pricing for restaurants, bars and hotels, and
ï Allow them to purchase liquor products from any licensed source in British Columbia, including privately owned stores.
The Competition Bureau believes these recommendations will encourage greater innovation and competition in British Columbia’s alcohol industry, leading to more choice and better prices for businesses and consumers in the province.
Quotes
“I commend the Honourable David Eby’s efforts to protect the interest of consumers and businesses in British Columbia. I believe that an updated liquor policy that takes into account competition principles will lead to a greater number of innovative choices at more competitive prices for consumers.”
– Matthew Boswell,
Interim Commissioner of Competition
Quick facts
- The Competition Bureau encourages regulators and policymakers to strike the right balance in regulation to ensure consumers and businesses are protected from anti-competitive behaviour without unnecessarily hindering competition and innovation.
- The Competition Bureau actively promotes competition by intervening before federal and provincial boards, commissions and tribunals, and encouraging and facilitating compliance with the Competition Act.
- British Columbia reformed its liquor policy in 2015.
January 17, 2019
The Honourable David Eby, Q.C.
The Office of the Attorney General
PO Box 9044 Stn Prov Govt
Victoria, BC
V8W 9E2
Dear Attorney General Eby:
In light of your review of B.C.’s liquor policy, I would like to encourage you to consider the principles of competition during your assessment.
In particular, allowing private distributors to supply liquor to bars, restaurants and hotels at proper wholesale prices will encourage greater competition that could lead to more product choice, lower prices and new and innovative products for B.C.’s consumers.
After a liquor policy review in 2013, B.C. enacted reforms to modernize what the final report described as “a regulatory regime that has become outdated, overly complex and excessive.” The changes modernized B.C. liquor policy, but maintained advantages for government-owned stores over private retailers. The reforms also changed the liquor pricing model in the province, which, according to your analysis, has increased retail prices by 11%.
The B.C. Liquor Control and Licensing Branch’s current policy prevents private liquor retailers from selling products to bars, restaurants and hotels.Footnote1 As a result, businesses in the hospitality sector are limited to purchasing products from government-owned stores. This policy restricts competition at the distribution level, because private retailers are unable to compete with government-owned stores. It also restricts competition at the retail level, because bars, restaurants and hotels are unable to set themselves apart from their competitors by offering unique products sold only by private retailers.Footnote2
Further, the hospitality sector must purchase from the B.C. Liquor Distribution Branch at consumer-level retail prices.Footnote3 This contributes to higher prices for consumers, as establishments must add a mark-up on the retail prices to generate a profit.
In my view, the current policy may be overly restrictive – to the detriment of businesses and consumers. In its April 2018 Report and Recommendations on B.C.’s liquor regulation and policy, the Business Technical Advisory Panel made two recommendations that I strongly support:
- Hospitality licensees should not be restricted to buying their liquor products from government retail stores. Such licensees should be able to buy from any licensed source in B.C. including private retailers.
- Hospitality licensees (restaurants/bars/hotels) should be sold liquor products at a proper wholesale price, as they are in other jurisdictions.
Consumers want more choice, as demonstrated by the success of craft breweries, micro-distilleries and other innovative new producers. Allowing the hospitality sector to buy from these producers, and any licensed source in B.C., could promote competition, driving even more innovation. In addition, by allowing bars, restaurants, and hotels to buy products at proper wholesale prices, stronger competition may lead to lower prices for consumers.
I applaud your efforts to review liquor policy in B.C. and to ensure a level playing field for businesses and more choice and lower prices for consumers.
Sincerely,
Matthew Boswell
Interim Commissioner of Competition
Competition Bureau
Footnotes
Footnote 1
Section 8(3) of the Liquor Control and Licensing Act (LCLA) prohibits a licensee from selling or serving liquor except liquor purchased from the B.C. Liquor Distribution Branch or liquor purchased as authorized by the terms and conditions of the licensee’s licence. Section 15 of the LCLA grants the general manager of the Licensing Branch discretion to impose terms and conditions on a licence or a class of licenced establishment. The terms and conditions imposed on licensees of bars or restaurants stipulate that liquor must be purchased from a government store.
Footnote 2
For bars and restaurants with a large volume of purchases, the B.C. Liquor Control and Distribution Branch provides access to an online portal with a fuller range of products for ordering. However, establishments with smaller volume purchases are limited to purchasing from a physical government store location. The physical government stores carry a fraction of the products available through the online ordering portal.
Footnote 3
Under the Liquor Distribution Act, hospitality customers cannot purchase liquor product at wholesale prices from the B.C. Liquor Distribution Board.