January 17, 2019
The Honourable David Eby, Q.C.
The Office of the Attorney General
PO Box 9044 Stn Prov Govt
Victoria, BC
V8W 9E2
Dear Attorney General Eby:
In light of your review of B.C.’s liquor policy, I would like to encourage you to consider the principles of competition during your assessment.
In particular, allowing private distributors to supply liquor to bars, restaurants and hotels at proper wholesale prices will encourage greater competition that could lead to more product choice, lower prices and new and innovative products for B.C.’s consumers.
After a liquor policy review in 2013, B.C. enacted reforms to modernize what the final report described as “a regulatory regime that has become outdated, overly complex and excessive.” The changes modernized B.C. liquor policy, but maintained advantages for government-owned stores over private retailers. The reforms also changed the liquor pricing model in the province, which, according to your analysis, has increased retail prices by 11%.
The B.C. Liquor Control and Licensing Branch’s current policy prevents private liquor retailers from selling products to bars, restaurants and hotels.Footnote 1 As a result, businesses in the hospitality sector are limited to purchasing products from government-owned stores. This policy restricts competition at the distribution level, because private retailers are unable to compete with government-owned stores. It also restricts competition at the retail level, because bars, restaurants and hotels are unable to set themselves apart from their competitors by offering unique products sold only by private retailers.Footnote 2
Further, the hospitality sector must purchase from the B.C. Liquor Distribution Branch at consumer-level retail prices.Footnote 3 This contributes to higher prices for consumers, as establishments must add a mark-up on the retail prices to generate a profit.
In my view, the current policy may be overly restrictive – to the detriment of businesses and consumers. In its April 2018 Report and Recommendations on B.C.’s liquor regulation and policy, the Business Technical Advisory Panel made two recommendations that I strongly support:
- Hospitality licensees should not be restricted to buying their liquor products from government retail stores. Such licensees should be able to buy from any licensed source in B.C. including private retailers.
- Hospitality licensees (restaurants/bars/hotels) should be sold liquor products at a proper wholesale price, as they are in other jurisdictions.
Consumers want more choice, as demonstrated by the success of craft breweries, micro-distilleries and other innovative new producers. Allowing the hospitality sector to buy from these producers, and any licensed source in B.C., could promote competition, driving even more innovation. In addition, by allowing bars, restaurants, and hotels to buy products at proper wholesale prices, stronger competition may lead to lower prices for consumers.
I applaud your efforts to review liquor policy in B.C. and to ensure a level playing field for businesses and more choice and lower prices for consumers.
Sincerely,
Matthew Boswell
Interim Commissioner of Competition
Competition Bureau