A secret deal signed in 2000 by the LCBO and the Beer Store limits competition between Ontario’s provincial and private alcohol monopolies, the Toronto Star revealed on Tuesday.
What’s the deal?
In 2000, the LCBO and the Beer Store agreed to restrict competition on beer sales, according to a document obtained by Star columnist Martin Regg Cohn.
The LCBO agreed that it wouldn’t sell 12-packs or two-fours (cases of 24 beer) to consumers, and wouldn’t sell two-fours to restaurants and bars. Only the Beer Store would be allowed to sell the larger packs, which are generally cheaper by unit than six-packs.
This means Ontarians can generally only buy larger cases of beer at the Beer Store, where prices are set by the three American, Japanese and Belgian brewing companies that own the corporation.
Under the agreement, the LCBO will only sell beer brands carried in its regular stores to restaurants and bars, leaving them with few beer options not brewed by the Beer Store’s owners.
When the agreement was signed, 177 communities in Ontario had LCBO outlets that sold 12-packs and two-fours of beer. Under the agreement, if a Beer Store opened in any of those areas, nearby LCBO stores would have to cut back their beer offerings to six-packs.
The agreement also requires the LCBO to notify the Beer Store before opening in a new community.
How have the LCBO and Beer Store explained the deal?
When the Star’s Cohn asked the Beer Store if the agreement was “collusion,” Jeff Newton, head of the lobby group that represents the Beer Store, at first didn’t answer the question.
Later, the Beer Store’s lawyer emailed the Star to say that the agreement between the two companies to limit competition was not collusion.
“This is an inaccurate and inappropriate characterization, to which my client objects,” wrote Michael Eizenga, who works for a firm that represents the Beer Store.
In a statement released after the Star’s story on Tuesday, Newton wrote that the story “contains many false and inaccurate claims about the Beer Store.”
He also said that the Beer Store does not make a profit, and that the monopoly offers Ontarians the lowest average beer prices in Canada.
What has happened since the Star’s story on Tuesday?
Ontario Finance Minister Charles Sousa told the Star that he is looking into the agreement and could ultimately decide to get rid of it entirely.
Restaurants Canada, an organization that represents about 30,000 food service businesses, has asked the federal Competition Bureau to investigate the Beer Store-LCBO deal.
Restaurants Canada said Wednesday that a “neutral third party” should investigate the agreement, which, the organization said, “fixes prices, territories and products.”