Ontario liquor board threatens agents with supply cuts

The government-owned Liquor Control Board of Ontario is threatening to cut off supplies to small-town alcohol retailers in an attempt to block a private-sector distributor's plans to sell them beer…

The Financial Post
January 24, 2002

Ontario liquor board threatens agents with supply cuts
Move follows Beer Store attempt to sell to retailers
David Menzies

LCBO%20logo%20F.jpg

The government-owned Liquor Control Board of Ontario is threatening to cut off supplies to small-town alcohol retailers in an attempt to block a private-sector distributor's plans to sell them beer.

The Beer Store, the company that is licensed to sell beer in the province, announced earlier this month that it is launching a new program that will provide independent liquor stores in rural areas with renovation grants, higher commissions on beer sales and new signs and promotional support if they sign on as Beer Store agents.

That move upset the LCBO because it has a contractual relationship with the agents to sell them beer. In a Jan. 15, letter to all LCBO agency store operators, Gar Sherwood, a LCBO vice-president, warned that any agent who signs a deal with The Beer Store would risk terminating their current agency store authorization.

Jeff Newton, executive director of the Brewers of Ontario, the company that controls The Beer Store, notes that approval for its rural investment program was granted in December by Norm Sterling, Ontario's Minister of Consumer and Business Services.

"We were shocked to see the LCBO issue a letter effectively threatening the [livelihood] of the agents,"said Mr. Newton.

However, the LCBO contends in its Jan. 15 letter that under provincial legislation it is the only body that can authorize agency store operations and set the terms under which a retailer can purchase alcohol.

Brian Kelsey, executive assistant to Mr. Sterling, agrees with Mr. Newton's position. "The LCBO's letter is not consistent with the minister's position," said Mr. Kelsey. "If the [LCBO] has problems understanding [the minister's direction] we will have to take steps in the next few days to make it more clear. I'm hoping this [problem] is a one-day curiosity."

The Brewers of Ontario have gone on the offensive in response to the LCBO's letter to agents. In a letter sent to Mr. Sherwood dated Jan. 22, Lucio Di Clemente, president of The Beer Store, charges that the LCBO's "threat" to agency store operators is contrary to the federal Competition Act.

As well, Mr. Di Clemente demands the LCBO "desist from any further attempts to dissuade agency store operators from dealing with The Beer Store."

Mr. Di Clemente also asks Mr. Sherwood to "immediately communicate" with agency store operators that his letter of Jan. 15 was "in error."

He adds: "Without adequate remedy, [The Beer Store] will be left with no option but to explore legal action."

Mr. Newton, meanwhile, said the LCBO is simply trying to protect its market share at the expense of the Brewers of Ontario. "I don't know why the LCBO is against private-sector investment," he said.

"My sense is that as the program starts to roll out across southern Ontario, the LCBO sees it as unacceptable. The LCBO wants to extend its brand and preclude The Beer Store but the minister has dictated the LCBO behave in a certain way and they're not."

The LCBO did not return repeated phone calls.


Brought to you by WikidFranchise.org

Risks: Monopoly or near-monopolies creates sub-optimal capital allocations, Intimidation, Termination threats, Ministry of Consumer and Commerical Services, Ministry of Consumer and Business Services, Ministry of Government and Consumer Services, Ministry of Government Services, Ontario, Competition Act, Crown corporation, Canada, 20020124 Ontario liquor

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License