Beer industry request behind rise in Ontario prices: document

The recent rise in the minimum price that can be charged for beer in Ontario followed successful lobbying by the brewing industry, an internal letter suggests.

In November, the floor price for a case of beer in the province rose by $1.60 to $25.60 as part of government policy to help reduce alcohol abuse.

Finance Minister Dwight Duncan wrote to the chairman of the Liquor Control Board of Ontario on Oct. 7 pressing the agency to raise minimum prices, saying he was responding to industry requests.

"I am writing to inform you that the government has considered industry requests for a change to the minimum price for beer and supports an increase in the minimum price at this time," Duncan wrote to Philip Olsson.

"The target date for implementing the changes is Monday November 24, 2008…. Your assistance in implementing these changes is appreciated."

A copy of the letter was obtained by the Canadian Press under the province's freedom of information law.

The following week, board members at the LCBO acceded to the request at their meeting in Toronto, with limited debate, according to minutes of the Oct. 15 session. Materials distributed to members made no mention of the industry's interest in raising the minimum price.

The increase went into effect Nov. 24, as Duncan had asked, with no public announcement, hiking the price of about 40 low-end brands for sale at liquor board outlets and beer stores.

'Social responsibility' mandate

The minimum price for beer in Ontario had last been adjusted in October 2005, and an LCBO spokeswoman said the latest increase simply covered inflation since then.

The LCBO is supposed to set minimum prices for beer and liquor as part of its "social responsibility" mandate, established in 1993 to help guard against irresponsible drinking. The policy is based on the premise that cheap alcohol promotes overindulgence.

But the Duncan letter and other internal documents suggest such floor-price initiatives actually come from outside the agency — and involve the brewing industry itself.

A spokeswoman for Duncan acknowledged that the brewing industry has a say in floor-price decisions, but said the word "industry" in the Oct. 7 letter referred to many players, including Mothers Against Drunk Driving or MADD.

"We're talking about organizations like MADD, organizations concerned with addiction and health concerns and … beer producers, the big ones and the small ones — and even consumers," press secretary Alicia Johnston said in an interview.

"That's my read on it."

A spokesman for Ontario's brewing industry said he was not familiar with the Duncan letter, and could not comment on what "industry requests" referred to.

But Jeff Newton said in an interview his members support Ontario's minimum-price policy as more effective than tax increases in curbing excessive drinking, and the industry does provide input to provincial officials.

Suggestion rejected

"We're routinely and regularly in discussion with folks in government about all those different kinds of regulation, including the social-reference price," said Newton, president for eastern Canada of Canada's National Brewers.

"They often will ask us for our opinions on it."

Newton rejected any suggestion that the industry supports increases in the minimum price to boost revenues.

"That's certainly not the basis upon which our industry has supported the policy," he said from the group's Mississauga, Ont., office.

The federal Competition Bureau last week completed its investigation of a brewing industry merger, an inquiry that raised questions about how minimum prices are set in Ontario.

Labatt Brewing Co. Ltd. acquired Lakeport Brewing in 2007, and won a legal skirmish with the commissioner of competition in Federal Court last year.

Rare glimpse

The judge's ruling cited an affidavit from the bureau indicating its investigators were seeking information on any attempt by the brewery to increase the province's minimum price for beer.

The ruling provided a rare glimpse into the issues the bureau considered relevant in the brewing merger, though there was no evidence provided in the judgment that Labatt had attempted to influence the minimum price.

Last Friday, the bureau ended its inquiry, saying there was insufficient evidence that the merger would reduce competition.

Most provinces have some form of minimum pricing for alcoholic beverages.

The LCBO also boosted the minimum price for spirits on July 21, increasing tax revenues at the agency by about $1 million a month.