Is the Beer Store-LCBO agreement anti-competition?

Canada's largest restaurant association is calling a recently unearthed agreement on beer sales between the LCBO and Beer Store anti-competitive and is demanding an investigation into the deal by the Competition Bureau.

Restaurants Canada said a deal signed in 2000 to divvy up how beer is sold in Ontario between the LCBO and Beer Store "restricts competition and inflates the price of beer in restaurants, bars and pubs."

• LCBO, Beer Store signed deal limiting competition in beer sales

The two retail alcohol outlets signed a government-prepared operating agreement that dictates that the LCBO sell only six-packs of beer, while the Beer Store sells more cost-effective 12- and 24-packs.

This ultimately harms the consumer, according to Restaurants Canada.

We have known of the existence of an agreement for years, but we did not know the depth of the complicity.- James Rilett, Ontario Vice President for Restaurants Canada

The Beer Store is privately owned by three major multinational brewers, AB InBev, Molson Coors and Sapporo, known as Canada's National Brewers. It handles 79 per cent of beer sales in Ontario, according to the province.

The LCBO or Liquor Control Board of Ontario is government-owned and produces revenue upwards of $4.9 billion per year, with a $1.7 billion dividend returned to the government of Ontario.

Price-fixing allegations

“We have known of the existence of an agreement for years, but we did not know the depth of the complicity. This agreement fixes prices, territories and products,” says James Rilett, Ontario Vice President for Restaurants Canada.

The Competition Bureau is an independent law enforcement agency that enforces a fair level of competition in the Canadian marketplace. It has previously declined to look into claims the Beer Store was in violation of its competition rules.

"Ontarians need a neutral third party to look into this secretive agreement,” says Rilett.

The Competition Bureau is governed by a mandate that Restaurants Canada argues applies to the LCBO-Beer Store agreement. That includes:

• Promote the efficiency and adaptability of the Canadian economy.
• Ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy.
• Provide consumers with competitive prices and product choices.

Restaurants Canada represents 30,000 food service businesses in the country. It has long despised the liquor distribution in Ontario.

The association is also calling on the government to immediately cancel the agreement, calling it a "non-compete agreement."