Craft Beer Industry Incentives Deemed Unconstitutional

On June 19, 2018, the Court of Queen's Bench issued its decision in Steam Whistle Brewing Inc. v Alberta Gaming and Liquor Commission, 2018 ABQB 476 [Steam Whistle]. Justice Gillian Marriott held that the Alberta Gaming and Liquor Commission's (AGLC) tariff and grant policy for Alberta craft breweries was an unconstitutional restraint on interprovincial trade.

This is one of several interprovincial trade issues making headlines in recent months, and may foreshadow how the Court will decide other interprovincial trade issues.

Summary of Decision

The Court agreed with Steam Whistle Brewing Inc., a craft brewer based in Ontario, and Great Western Brewing Company, a Saskatchewan brewer, (collectively, the "Plaintiffs") that the AGLC mark-up scheme was unconstitutional.

The AGLC collects a mark-up from liquor producers to fund supply chain development and other initiatives within the agency. Prior to 2015, the mark-up was based on the size of a brewer, with large, multinational brewers paying a higher markup than smaller craft brewers. In 2015, the AGLC lowered the mark-up for Alberta, British Columbia and Saskatchewan producers only. In 2016, the mark-up changed again to equalize the mark-up charged to all craft brewers, but included a grant to Alberta craft brewers, which reduced their mark-up to 2015 levels.

Justice Marriott considered two arguments rooted in the Constitution Act:

First, the Plaintiffs argued that the mark-up constituted a tax, which an administrative body could not impose, under section 53 of the Constitution Act. Justice Marriott concluded that the mark-up met all the criteria of a tax, but that its substance was a proprietary charge, in essence a fee paid by liquor producers to access the AGLC's supply chain and wholesale operation.

Second, the Plaintiffs argued that the mark-up constituted a barrier to internal trade, in contravention of section 121 of the Constitution Act. Justice Marriott applied the Supreme Court's reasoning from the recent decision of R v Comeau, 2018 SCC 15 [Comeau]...