Chris Varcoe: Third time should be a charm to fix NDP’s broken beer program

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How many times do you need to be proven wrong before you make something right?

For the Notley government, three times should be the answer when it comes to its ham-handed attempts to give Alberta’s craft brewing industry a hand up.

Instead, it’s been caught giving a hand out to small brewers in the province, to the detriment of other Canadian companies, and has to pay out more than $2 million in restitution.

Finance Minister Joe Ceci has to clean up a policy mistake that’s as sticky as a sudsy tavern floor during Stampede.

“He’s lost three cases in a row and I think this thing is dead in the water,” lawyer Derek From with the Canadian Constitution Foundation said Thursday.

For the third time in the past year, the province’s plan to ratchet up the markup on beer and provide a subsidy back to Alberta companies has been found to violate trade rules or the law.

In a blow to the province’s home-grown brewing strategy, Court of Queen’s Bench Justice Gillian Marriott ruled this week that Alberta’s move to boost the levy on beer did “create a trade barrier” and violates the Constitution.

Section 121 of the Constitution contains a seemingly simple line: All articles produced or manufactured from any province shall “be admitted free into each of the other provinces.”

Not only was Alberta’s markup and subsidy program declared unconstitutional, it has to pay Great Western Brewing of Saskatoon more than $1.9 million and Toronto-based Steam Whistle Brewing another $164,000.

If others line up to sue, it might be on the hook for even more restitution, said From, who has been involved in several legal cases involving government beer policy.

The Notley government might wish it could go on a bender to forget how badly it missed the mark on this matter.

In October 2015, Ceci decided to tinker with the graduated markups — essentially a profit Alberta Gaming and Liquor Commission collects for supplying and distributing alcohol — charged to smaller breweries.

Historically, Alberta applied a higher rate to large multinational companies and a lower one to smaller, craft brewers from across the country.

In its place, the NDP government decided to apply a rate of $1.25 per litre to all small brewers outside of B.C., Alberta and Saskatchewan, the three members of the New West Partnership trade agreement.

But the plan was soon disputed by Steam Whistle.

“It fundamentally threatened our business in the province. More than that, we saw it as a precedent-setting action that could … snowball,” said Tim McLaughlin, the company’s director of marketing.

(Alberta faced a separate challenge by a Calgary-based beer import agency, Artisan Ales Consulting, under interprovincial trade laws, which the province eventually lost last year. And last week, the province lost its appeal of that trade ruling.)

Facing a legal fight, Ceci proclaimed in August 2016 the higher markup would apply to all suds, including product from Western Canada.

However, the province also announced a new subsidy program for small Alberta brewers to offset the higher levy.

This week’s ruling found the two-step move was offside.

It referenced the recent Supreme Court decision in the so-called “free the beer” case, which upheld a law in New Brunswick that fined a local resident for bringing 354 bottles and cans from Quebec across the border.

In that case, the Supreme Court ruled any province can restrict commerce, but only if there’s another primary purpose being pursued by its laws, such as protecting public health.

But the main intent of a policy can’t be to impede trade.

In this week’s decision, Marriott referenced a provincial briefing note for Ceci in October 2015 that indicated the government wanted to raise an additional $85 million in liquor markups and also wanted Alberta craft brewers to be part of its economic diversification plans.

“The essence of the 2015 markup was to create a trade barrier related to a provincial boundary,” the judge found.

The shift in beer policy the following year was just as clumsy.

The 2016 changes violate the Constitution, “in that it is intended to operate simultaneously with the grant program to discriminate between craft brewers and craft beer on the basis of provincial origin,” Marriott concluded.

The province has been given six months to get its program in line.

Great Western CEO Michael Brennan celebrated the victory, noting the higher markups increased the price of a dozen beer by $3.

“We decided to fight it; we believe in free trade between provinces,” Brennan said in an interview.

“I would hope as the Alberta government adjusts course on this one, they consider making a fair and very competitive marketplace in Alberta.”

Such talk will infuriate Alberta craft brewers and the government.

Ceci told reporters he’s studying the latest decision, but defended Alberta’s deregulated liquor market as being the most open in the country.

He accused other provinces of putting up barriers to Alberta beer, such as creating tasting panels and limiting shelf space in government-run liquor stores.

Domestic brewers such as Charlie Bredo of Troubled Monk Brewery in Red Deer contend the NDP’s program levelled the playing field for Alberta firms.

“I will be the first to say that Canada’s beer market should be wide open,” he said. “But that means I can sell into B.C., Quebec and Ontario just as well as they can sell into here — and that doesn’t happen right now.”

Internal trade barriers remain a problem in Canada.

Liquor levies are worth billions of dollars to provincial governments, which is why they all jealously guard their own fiefdoms while proclaiming their love for free trade.

But if Alberta has a legitimate beef about beer against another province, it should successfully plead its case before a trade tribunal or in court, just as Steam Whistle, Great Western and Artisan Ales have done.

Otherwise, it will have another sticky mess to clean up.