SCC Upholds Inter-Provincial Liquor Trade Restrictions: One Man’s Goodbye to Constitutionally Guaranteed Cheap Quebec Beer and the Broader Implications

April 19, 2018

On April 19, 2018, the Supreme Court of Canada (SCC) released its much anticipated decision in R v. Comeau, i.e. the “beer case”.1

There is no doubt that the implications of this case were enormous. Not only did the decision have the potential to undermine provincial control over liquor trade but, as pointed out by the SCC, the decision could have undermined as unconstitutional various agricultural, public health and other regulatory measures that incidentally impede upon inter-provincial trade.

The result of the decision: The SCC overturned the New Brunswick Provincial Court’s decision below and held that New Brunswick’s restrictions upon the import of beer and liquor from other provinces are constitutional, and therefore valid and enforceable. As a result, the status quo in inter-provincial trade has effectively been maintained.

Background

Gerard Comeau, by all accounts a good man living on the Acadian Peninsula in New Brunswick, enjoyed making the trip into Quebec and taking advantage of cheap beer prices to stock up and return home across provincial lines.

The problem? The New Brunswick Liquor Corporation (NB Liquor) enjoys control over liquor in New Brunswick, and wasn’t happy about losing some brisk business to Quebec liquor outlets.

Backing up NB Liquor’s control is New Brunswick’s aptly named Liquor Control Act which, under section 134(b), prohibits anyone in New Brunswick from having or keeping alcohol not purchased from NB Liquor, except as expressly permitted. In turn, the Liquor Control Act only permits an individual in New Brunswick to have one bottle of liquor or 12 pints of beer purchased in another province.

NB Liquor and the RCMP were on to Mr. Comeau, among other like-minded beer bargain hunters, and surveilled his activities. On October 6, 2012, Mr. Comeau was pulled over crossing home from Quebec with 354 beers and three bottles of liquor – suffice to say, more than permitted under the Liquor Control Act. As a result, Mr. Comeau was issued a ticket with a fine that came in just under $300.

This all set the stage for Mr. Comeau’s constitutional challenge of section 134(b) of the Liquor Control Act. Mr. Comeau went to court arguing that the Liquor Control Act’s restrictions upon the import of beer and liquor into New Brunswick from Quebec and other provinces are contrary to section 121 of the Constitution which states:

All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.

On August 29, 2016, the New Brunswick Provincial Court issued its decision in this matter, finding in favour of Mr. Comeau and holding that section 134(b) of the Liquor Control Act violates section 121 and is therefore an unconstitutional inter-provincial trade barrier.

Not willing to let this go, however, New Brunswick’s Attorney General appealed the decision which, after the New Brunswick Court of Appeal declined to hear the matter, found its way to Canada’s top court.

The Supreme Court of Canada Decision

As indicated above, the SCC disagreed with the Provincial Court’s decision and sided with the Attorney General, finding section 134(b) of the Liquor Control Act to be constitutional.

To begin, the SCC found that the Provincial Court had erred in declining to follow the SCC’s 97-year-old decision in Gold Seal v. Alberta, in which the SCC held that section 121 of the Constitution, requiring goods between provinces to be freely admitted, does not prohibit all restrictions upon inter-provincial trade, but only prohibits tariffs being placed upon that trade.

While finding the Provincial Court’s decision would fall on that point alone, the SCC went on to provide added guidance on section 121 of the Constitution and ultimately determine whether section 134(b) of the Liquor Control Act is in contravention.

After a lengthy consideration of historical context, case law and the nature of federalism itself, the SCC came to the conclusion that two things are required for a law to be in violation of section 121 of the Constitution, and therefore constitute an unconstitutional inter-provincial trade barrier:

  1. The law must impact inter-provincial movement of goods between provinces through something in the nature of a tariff or outright prohibition; and
  2. The primary purpose of the law must be to restrict inter-provincial trade.

In applying these criteria to the case at hand, on the first question, the SCC found that the Liquor Control Act does function effectively like a tariff. Individuals who buy their liquor outside the province face a fine, and thus increased cost, and also potential confiscation.

On the second prong of the inquiry, however, the SCC found that section 134(b) of the Liquor Control Act, and New Brunswick’s restraint of liquor trade, does not have as its primary purpose the restriction of inter-provincial trade. In particular, the SCC held that, while the effect of section 134(b) is to restrict trade, the restraint of trade is not its primary purpose. Rather, section 134(b) is aligned with the broader liquor regulation scheme in New Brunswick, the purpose of which is to regulate how liquor is managed in the province, including enabling “public supervision of the production, movement, sale, and use of alcohol within New Brunswick”. The fact that section 134(b) restrains inter-provincial trade is simply an ancillary effect to accomplishing those valid purposes.

As a result, section 134(b) of the Liquor Control Act stands once more, and Mr. Comeau will either need to pony up and pay NB Liquor’s prices or make more frequent and limited purchases in Quebec.

Commentary

This is no doubt a disappointing day for both consumers and businesses interested in loosening the red tape and cost of moving beer and liquor across provincial borders, particularly small businesses, including craft brewers and distillers, who don’t necessarily have the deep pockets and developed distribution networks of the major companies.

While this decision only specifically applies to a New Brunswick law, there is little doubt that the same reasoning will be carried over to save similar restrictions under other provincial liquor control schemes. Indeed, while section 134(b) was found to only incidentally restrain trade within the broader legislative context, it is difficult to contemplate a specific legislative provision more clearly aimed at restricting the import of beer from other provinces.

That being said, this decision should not be taken to mean that every restraint of inter-provincial trade and every piece of liquor control regulation is valid. Every piece of legislation must be considered in its substance and context and may be fallible for any number of reasons. Furthermore, nothing in this decision affects public pressure and the ultimate will of the public. Accordingly, while today’s SCC decision is perhaps disappointing, it should not be taken as the end of the push for fair and common sense liquor regulation across Canada.

 


1 2018 SCC 15

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