In the new edition of Inside Policy, the magazine of the Macdonald-Laurier Institute, lawyer Ian A. Blue says a particularly egregious case in the Maritimes demonstrates the absurdity of internal trade barriers in Canada.
But, he argues, it’s going to take a concerted effort to overhaul our backwards interprovincial trade legislation – one New Brunswick man caught up in a legal tangle over transporting beer from Quebec won’t be enough.
(Footnotes are in brackets).
By Ian A. Blue, Nov. 19, 2014
Pity Gerard Comeau of Tracadie-Sheila, New Brunswick. He was in Quebec one Saturday afternoon and happened to buy some beer and liquor at the SAQ. In an investigative tour de force, the RCMP, who just happened to be outside the SAQ, watched him put it in his car, followed him back across the New Brunswick border and charged him with contravening s. 134(b) of the New Brunswick Liquor Control Act, that is having or keeping liquor not purchased from the New Brunswick Liquor Corporation.
This incident should be of interest and concern to anyone impatient with the barriers against interprovincial liquor sales like s. 134(b) that every province has erected. They make no sense to consumers in an age of Internet commerce. Why cannot someone in New Brunswick buy beer and wine in Quebec or order a case of wine from British Columbia or Ontario?
At Mr. Comeau’s upcoming trial, the court will likely be told that first, provincial liquor control and s. 134(b) are necessary for socially-responsible alcohol consumption, and to keep liquor from those under 18; and, second, that any purchase not from the liquor corporation is deemed an unacceptable loss of provincial revenue.
How could Mr. Comeau respond? He could counter that the social-responsibility rationale does not require restrictions on interprovincial sales, and that, as well, there is professional disagreement that they are necessary to protect provincial revenue (1).
He also should make a more fundamental point. Restrictions on interprovincial sales of liquor like s. 134(b) and provincial liquor monopolies themselves are unconstitutional. Provincial liquor monopolies are the children of the ninety-year-old federal Importation of Intoxicating Liquors Act (IILA) which requires any liquor entering a province to be sold to the provincial corporation (2). In 1926, this federal law was seen as necessary because Canada’s then highest court, the Judicial Committee of the Privy Council, had held not once, but twice, that provincial law could not affect bona fide transactions in liquor between a person in one province and a person in another (3). That remains our law today.
He could also point out that the IILA itself was unfortunately built on legal quicksand. It ignored section 121 of the Constitution Act, 1867 (s. 121) which requires all articles of the growth, produce, or manufacture of any one of the provinces to be admitted free into each of the other provinces. Since wine, beer and liquor are articles of produce or manufacture, they should be admitted into a province free from trade barriers such as s. 3 of the IILA.
He would show that the Supreme Court of Canada (SCC) created the conditions that allowed the IILA to be written. In 1921, it had delivered an expedient decision to save a bungled proclamation of a federal law (4). In doing so it collaterally damaged s. 121, profoundly, by restricting it to protecting Canadians only against customs duties at provincial borders. This decision was demonstrably wrong on the s. 121 point, and Mr. Comeau could observe that ordinary Canadians have been paying the price ever since (5).
To advance this defence effectively, Mr. Comeau would have to argue that s. 134 (b) is a restriction on interprovincial trade in liquor that violates the wider interpretation of s. 121 (6) stemming from the analysis above. To attempt this defence would be to embark upon as daunting a quest, and face an opponent as formidable, as any in myth or literature.
First, the court would need to be persuaded that s. 134 (b) is a colourable attempt by the province to regulate interprovincial trade in liquor. There would be sufficient manoeuvring room that the Crown might escape that argument. Next the Court would need to accept the wider interpretation of s. 121 and choose not to follow old precedent.
Persuading the court to arrive at these holdings is certainly doable but it would be a very expensive and demanding exercise, even if there was no opposition. But there would be opposition from the Liquor Corporation supported by other provincial corporations, and unfortunately they have limitless resources to fight this issue. Furthermore, if Mr. Comeau were to win, the matter would undoubtedly be appealed all the way to the SCC, and trying to predict what will happen there is entirely speculative.
If however Mr. Comeau does not challenge the constitutionality of s. 134 (b), Canadians are going to continue to be prosecuted and persecuted unconstitutionally for interprovincial liquor purchases.
What should he do? Without big battalions, it is this writer’s view that Mr. Comeau should not attempt to fight this charge constitutionally. It seems that paying the fine and getting on with life is the best route for him to follow even if it may not be the right thing to do. In theory, Mr. Comeau should be able to fight this charge in court but, given the resources liquor corporations can mobilize, neither he nor any other individual in Canada has the means to do so successfully.
Until an entity with resources that match those of the liquor corporations is prepared to step up and challenge the constitutionality of these antiquated laws, they will be kept in place by the powerful interests that profit from them at the expense of every-day Canadians. These include large wineries and distillers who enjoy a free distribution system provided by the provincial corporations, labour unions which represent corporation employees, the employees themselves, and politicians who tax us through liquor mark-ups without seeking prior legislative approval (7).
Only a major corporation or consortium of companies armed with a budget and a team of determined counsel will be able to reform Canada’s liquor system. Until then, anyone who wants private beer and wine sales or hassle-free interprovincial liquor purchases may receive superficial interest from provincial officials and liquor corporation executives, but little more.
The current liquor regime in Canada suffers from constitutional abuse and needs to be rescued.
Ian A. Blue is senior counsel and adviser on energy and electricity law at Gardiner Roberts LLP in Toronto. He is the author of the 2011 MLI publication Free Trade Within Canada: Say Goodbye to Gold Seal.
1 See: Anindya Sen, The Beer Store, Monopoly Profits and the Potential for Government Revenue: An Economic Analysis; Anindya Sen, An Economic Analysis of Increasing Competition in Retail Liquor Sales in Ontario, Part I of a Two-Part Study Conducted for the Ontario Convenience Store Association; Anindya Sen, An Empirical Analysis of Beer Price Differentials between Ontario and Quebec, Part II of a Two-Part Study Conducted for the Ontario Convenience Store Association
2 Importation of Intoxicating Liquors Act, RSC 1985, c. I-3., s. 3
3 Ontario v. Attorney General for the Dominion,  A.C. 348 (.J.C.P.C.) (Local Prohibitions); Attorney General of Manitoba v. Manitoba Licence Holders’ Association, 62.  A.C. 73 (J.C.P.C.) (Manitoba Licence Holders)
4 Gold Seal Ltd. v. Alberta (Attorney General) (1921), 62 S.C.R. 424
5 I have told the story of why the SCC was so wrong elsewhere and do not need to repeat it again here. See: Ian A Blue, Q.C., Free Trade within Canada: Say Goodbye to Gold Seal (June 15, 2011) MLI; Ian A. Blue, Long Overdue: A Reappraisal of Section 121of the Constitution Act, 1867, (2010), 33 Dalhousie Law Journal No. 2, 161; Ian Blue, On The Rocks? Section 121 Of The Constitution Act, 1867, And The Constitutionality Of The Importation Of Intoxicating Liquors Act, (2009) The Advocates Quarterly; Ian Blue, On The Rocks; The Gold Seal Case: A Surprising Second Look (2010) 36 The Advocates Quarterly 363;
6 The wider interpretation of s. 121 is based on the decision of Rand, J. in Murphy v. CPR,  SCR 626 at 641. It is an interpretation of s.121 that that prohibits levying customs duties or charges or imposing any restriction that places fetters on, raises impediments to or limits the free flow of Canadian goods across Canada as if provincial boundaries did not exist, prohibits the regulation of the free flow of Canadian goods except in subsidiary features and prohibits the imposition of any obligation on the movement of Canadian goods that in its essence and purpose is related to a provincial boundary.
7 As they are required to do constitutionally before taxing us. See: Eurig Estate(Re),  2S.C.R.