An LCBO sign at the Spadina and Front Street location in Toronto, on July 23.Carlos Osorio /The Globe and Mail
Several major alcohol suppliers have launched court action against the Liquor Control Board of Ontario, saying they have been unfairly fined for “contradictory pricing policies.”
The suppliers, who produce almost 70 per cent of the spirits sold at the LCBO, filed a notice of application with the Ontario Superior Court of Justice on Tuesday. They are seeking an order from the court that declares a pricing provision, which requires suppliers to sell to the Crown corporation at the lowest price in Canada, “of no force and effect.”
They have also filed a complaint with the Competition Bureau of Canada alleging that the LCBO’s enforcement of this pricing provision is anti-competitive and hurts consumers across the country.
Spirits Canada said that suppliers were blindsided by retroactive tax bills from the LCBO that dated back to April, 2023, and another set issued last week, amounting to upward of $100-million.
The LCBO disputed the claim in a statement on Wednesday and said these are not fines and it’s following the terms of its contracts with the suppliers.
The suppliers are makers of brands that include Crown Royal, Canadian Club, JP Wiser’s, Forty Creek, Bacardi Rum and El Jimador Tequila.
Cal Bricker, the head of Spirits Canada, which represents the industry, said in an interview on Wednesday that suppliers have been frustrated in their continuing discussions with the LCBO.
“We were out of options at this point,” he said of the court action. Mr. Bricker did not rule out suppliers pulling their products off the shelves.
“If anybody did that – absolutely out of reluctance – it would be because they couldn’t operate in the market any more.”
Mr. Bricker said the pricing provision has been in place for longer than a decade, but the LCBO has only recently enforced it. “Not only are they charging us for now, they’re charging us for products that were sold a year ago,” Mr. Bricker said.
At issue are the LCBO’s claims that Quebec’s liquor board received similar products – that are also sold in Ontario – for a lower price. Under the LCBO’s terms and conditions, Ontario must buy products from suppliers at lower prices than are available to other jurisdictions, and the board said the suppliers had breached contract terms. Other jurisdictions have similar stipulations.
However, Mr. Bricker explained that the LCBO’s pricing practices require suppliers to meet the minimum retail pricing requirements, which the Crown corporation raises each year. Mr. Bricker said Quebec, for example, doesn’t have the same retail pricing rules so the prices are often lower than Ontario’s minimum price allows.
“In many cases, brand owners couldn’t even comply if they wanted to because they’d be violating Ontario’s minimum price rules,” he said, adding that the suppliers are being unfairly fined.
In a statement on its website on Wednesday, the LCBO said it was aware of legal action taken by multiple suppliers. It described the allegations as “inaccurate and highly misleading to consumers.”
“The fact is that when suppliers do not honour our legal agreements on consumer protection, the only people that lose are Ontarians,” the Crown corporation stated.
“These are not retroactive tax bills, fines, nor penalties, but rather pricing chargebacks levied in accordance with terms of our long-term contracts,” LCBO added. “Our position remains that it would not be fair to let a few suppliers gouge Ontario consumers.”
LCBO stores reopened on Tuesday after its unionized workers ratified a new three-year collective agreement. Hundreds of retail stores were closed for two weeks because of a strike by workers.
Jayme Albert, a spokesperson for the Competition Bureau of Canada, confirmed in an e-mail statement on Wednesday that the agency had received a complaint from the group of spirit suppliers related to pricing policies enforced by the LCBO.
Mr. Albert said the agency would examine the facts before determining if an investigation is warranted.