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Alberta gov issues fines for inducement, governing body in Ontario confirms they never have

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Breweries providing cash and incentives in exchange for exclusivity in bars and pubs is an ingrained part of the beer industry.

I’ve written about this a few times over the years (most recently last week for my bi-weekly column Full Pour in the Metroland Media publication Our London). If you’re new to this issue (or my impotent ranting on the subject), the TL;DR version is this: if you’re sitting in a bar that has dedicated all of its draught lines to one particular brewery or are sitting in a pub that seems to be decorated entirely in swag from one particular company, you can virtually guarantee that cash and / or incentives were provided to that bar in exchange for space on that draught lineup.

The kicker here, of course, is that this entire practice is technically illegal per Ontario’s liquor licence act, specifically Regulation 720:

A manufacturer of liquor or an agent or employee of a manufacturer shall not directly or indirectly offer or give a financial or material inducement to a person who holds a licence or permit under the Act or to an agent or employee of the person for the purpose of increasing the sale or distribution of a brand of liquor.

Again, this isn’t new ground and is something I’ve been talking about since roughly January of 2013 when I wrote the post, In Toronto Pubs, Breweries Battle for Beer Taps With Persuasion and Cash, for the website Torontoist.

In the roughly four years since I wrote that post, nothing has changed about the prevalence of the practice except that, for the first time in my beer writing career, I’ve learned two fairly interesting things about penalties for inducements:

  1. A fine was actually issued to a Canadian brewery for this practice in May, and
  2. The Alcohol and Gaming Commission of Ontario (AGCO) has apparently never issued monetary penalties in response to inducements.

So, the first point. It wasn’t in Ontario but in May, Alberta brewery Big Rock was ordered to pay a $44,481.00 fine for violating the Alberta Gaming and Liquor Commission’s (ALGC) similar Regulation Section 81(e):

Liquor supplier/agency or officer, director or employee of a liquor supplier/agency directly or indirectly making or offering to make a  loan or advance or give, or offer to give, money, a rebate, a concession or anything of value to a liquor licensee or to an employee or agent of that licensee.

They also had to pay an additional $7000 for “hindering, obstructing or impeding an Inspector.”

I know this because the ALGC posts all infractions on their website, here. Pretty handy.

I reached out to Big Rock to see what they had to say about the inducement, and they clarified that the fine was actually related to packaged goods, not sales at bars. Their official statement to me, per Shelley Girard, VP Marketing is as follows:

Big Rock Brewery is working collaboratively with the Alberta Gaming and Liquor Commission (AGLC) to ensure compliance and is committed to adhering to regulations across all of our jurisdictions.

The recent sanction under the Gaming and Liquor Regulations relates to a situation where we had a surplus of packaged beer that was sold at a discounted rate into the retail market, which contravened AGLC regulations. We acknowledge the error, have paid the fine and we are reviewing our training and procedures to ensure this does not happen again.  

So this isn’t exactly a hammer dropping to end the shady practice of big breweries throwing dough around in exchange for exclusivity in Canada but it is…something.

I also talked to the AGLC about why and how it came to a point where they actually issued a fine and, while they declined to speak to any specific case further than what’s posted on their website, Heather Holmen, Manager, Communications for the AGLC had this to say:

[. . .] we have a dedicated team within our investigations unit that work with industry to prevent inducements in Alberta. We understand the inequities that inducements can create and are dedicated to prevention and enforcement in order to support the success of our liquor model.

Once the investigation is complete a decision is made, the amount of the fine can vary, it can go from a warning to a loss of licence. The licensee has a number of options, they can accept the fine, or they can appeal the decision, in which case the hearing goes before the AGLC Board for decision.

And so encouraged by Alberta’s efforts–they actually expressed an understanding of why inducements are shitty, for example, and apparently not only have an investigations unit, but a dedicated team within that unit to prevent inducements–I thought I might reach out, once again, to Ontario’s governing body with oversight on liquor laws for some insight into their policies and procedures regarding illegal inducements. Here’s what I got from Phil Serruya, Director Communications, Communications and Corporate Affairs Division:

In response to your questions, Ontario’s Liquor Licence Act (LLA) does prohibit manufacturers of beer, wine and spirits – and their agents – from offering or giving an inducement to a licensed establishment for the purpose of increasing the sale or distribution of a brand of liquor. The AGCO employs a risk-based and compliance-focused approach to administration of the LLA, including related to prohibitions on inducements.

The AGCO’s inspections, investigations and enforcement activities related to inducements continue to be primarily conducted on a complaints-driven basis. The AGCO has not issued any monetary penalties related to inducements.

As prohibitions against inducements exist in provinces across the country, we are in regular contact with other jurisdictions, including Alberta, to share approaches for dealing with non-compliance. In the meantime, the AGCO continues to engage with industry partners and work with licensees and manufacturers on compliance.

So, the first part is good, at least in comparison to the response I got four years ago, when an AGCO official would not even confirm that the practice was illegal. This time I actually got a statement that the law prohibits inducements. The second part is consistent with what I’ve heard previously, noting that they investigate compliance issues on a complaints based basis (i.e. they don’t do any proactive investigating) but here’s the second revelation–did you catch that part in the middle?

The AGCO has not issued any monetary penalties related to inducements.

The AGCO has never issued fines related to inducements. I knew nothing was being done about it, but now we have proof that literally nothing is being done about this. 

I mean come on.

Some folks might claim this isn’t a big deal. Every time I write about this I get some variation of the response “well, that’s how sales work.” And sure, yeah. In most industries this is how sales work. Big, successful companies use their size, success and influence to squeeze out competition.

But aside from the fact that I think that this really sucks because it means my choices as a consumer are limited by forces beyond my control, and aside from the fact that it hurts small businesses trying to build up a great industry in my backyard, when it comes to alcohol the practice is fucking illegal. The AGCO just confirmed that!

And yet….they have not issued any monetary penalties related to inducements.

Why even have the law? I don’t know what the solution to this problem is, but I’m pretty sure it’s not zero enforcement. Yuck.

Perhaps Ontario will do as Mr. Serruya suggested they are doing and “share approaches for dealing with non-compliance” and maybe learn that other jurisdictions actually have approaches for dealing with non-compliance.

But at this point, I’m no longer holding my breath.

Author: Ben

http://www.bensbeerblog.com

3 thoughts on “Alberta gov issues fines for inducement, governing body in Ontario confirms they never have

  1. Ben,
    I would imagine that it is easy to get around the legislation by the brewer and the pub contracting for exclusive rights and then completely separately the same brewer provides his new customer with posters, beer paraphernalia etc. regards John

    • Yes, it’s almost never written down anywhere and that’s certainly part of it. Brewers will pay to have a bar’s draught equipment installed or offer illegal, discounted keg deals with the implicit understanding that the brewery will retain exclusive rights on certain (or all) draught lines. This is also why it’s a stupid game to play for brewers long term: the bar is under no obligation to adhere to the unwritten agreement, so a craft brewer can dump $2000-$5000 “securing” a tap for their beer, and six months later the bar gives up to the highest bidder again.

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