LILLEY: LCBO facing lawsuit over alleged predatory practices

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Fresh off a strike, the LCBO is now facing a lawsuit from Canada’s top distillers over alleged predatory practices. Bacardi, Beam-Suntory, Brown-Forman, Corby, Diageo, Forty Creek Distillery and Rémy Cointreau all allege that Ontario’s government-owned liquor monopoly is engaged in illegal activity that threatens the ability to operate in the province.

The lawsuit filed Tuesday in the Ontario Superior Court of Justice asks the court to strike down a provision of the LCBO’s rules for selling to the liquor monopoly.

The provision in dispute effectively says that all suppliers of alcohol must provide the LCBO with the same or lower prices as are provided to any other provincial liquor board. According to the lawsuit, the LCBO has never enforced this clause against any of the distillers and decided to last fall after noticing lower retail prices in Quebec’s government liquor stores.

Lower prices at the Société des alcools du Québec, or SAQ, is not news to anyone who has been paying attention. In fact, along the Ontario-Quebec border shopping at the SAQ instead of the LCBO is fairly common.

For example, a 750 ml bottle of Bacardi Gold rum retails for $28.95 at the SAQ while a bottle of Wisers Deluxe retails for $29.75 at the SAQ but $32.45 at the LCBO. It’s even worse for high-end products with Johnny Walker Blue selling for as low at $310 a bottle in Quebec but starting at $359 at the LCBO.

The difference isn’t a lower price offered to the respective liquor boards, it’s the mark-up and pricing structure they use. Quebec’s SAQ, unlike Ontario’s LCBO, actually believes in offering consumers lower prices.

Despite being the largest purchaser of beverage alcohol in the world, the LCBO doesn’t negotiate prices to get you, the consumer, a lower price. Nor can they claim they keep prices higher to ensure more money for the government to pay for health care or education.

The LCBO delivers the second-lowest rate of return per capita in the country. At $159 per capita, Ontario is only ahead of Prince Edward Island and well behind provinces like Alberta which delivers $178 per person while using a private retail model.

Essentially, in Ontario we have the worst of all worlds. Prices are higher, returns are lower and the LCBO is a bully alienating every aspect of the industry, not just distillers but local wine producers, craft brewers, foreign governments advocating to have their products listed in Ontario.

Nobody likes the LCBO.

The lawsuit by the distillers is an attempt to bring about change to an organization born out of prohibition and still trying to keep up with modern business practices. Their lowest price or else policy sounds like something Al Capone would have enforced when he was rum running.

In their filing to the court, the distillers argue that the provision has no legal force and effect and that “the LCBO has no legal right to retroactively enforce the Disputed Provision.”

Millions of dollars charged back against a supplier because the LCBO looked at the website of their Quebec competitor and noticed lower prices. It couldn’t be due to LCBO policies or the bloated bureaucracy down at their Taj Merlot headquarters along Toronto’s waterfront.

One smaller but successful distiller told me that paying this fee, which amounts to a mob cash grab, would threaten the future of his business.

The LCBO’s response to all of this is laughable.

“By breaching the terms contained in our Purchase Order Terms and Conditions that require that LCBO receive the same or lower price as other Canadian liquor jurisdictions, LCBO customers are unfairly made to pay more for beverage alcohol than other consumers across the country,” the LCBO said in a statement.

“Our position remains that it would not be fair to let a few suppliers gouge Ontario consumers.”

The only people gouging Ontario consumers are the folks at the LCBO who keep prices artificially high while delivering a lower return to government.

Like the strike that didn’t have to happen, the LCBO didn’t need to let this dispute come to this point. Premier Doug Ford who can crack the whip at the LCBO to bring back paper bags didn’t need to let this happen.

This lawsuit makes Ontario look like a bad place to do business. This lawsuit makes the LCBO look like bullies.

Ford would be wise to call CEO George Soleas and tell him it’s time for this dispute to go away.

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