LCBO and Beer Store ‘sweetheart deal’ lawsuit calls for $1.4 billion in damages

A secret deal signed in 2000 between the LCBO and the Beer Store, limiting competition between Ontario’s provincial and private alcohol monopolies, has resulted in a class-action lawsuit.

The retail outlets have been alleged of being part of a “conspiracy to fix, raise, maintain or stabilize prices of beer in Ontario” and “participated in illegal and secretive discussions and made agreements relating to prices and distribution areas of beer in Ontario.”

The class-action lawsuit calls for $1.4 billion in damages. It has not yet been proven in court and the lawsuits need to be given the green light by a judge before proceeding as actions.

The claim also demands $5-million in “punitive and exemplary damages.”

London, Ontario based Siskinds LLP filed the court documents on behalf of David Hughes and a company that operates a restaurant called The Poacher.

The beer store Toronto

The sweetheart deal between LCBO and the Beer Store

Earlier this week the Toronto Star reported on a secret ‘sweetheart deal’ made between the LCBO and the Beer Store in June 2000. The deal allowed the provincially owned alcohol retailer to only sell six-packs, allowing larger 12 and 24 packs to be sold at the Beer Store.

Essentially this meant that the LCBO agreed not to sell 12-packs or two-fours (cases of 24 beer) to consumers, and wouldn’t sell two-fours to restaurants and bars. Leaving only the Beer Store to sell the larger packs, which are usually cheaper by unit than six-packs.

As a result of the deal Ontarians can, for the most part, only buy larger cases of beer at the Beer Store. Prices of beer at the Beer Store are set by the three Belgian, Japanese, and American brewing companies that own the corporation. Labatt Brewing Company (AB InBev) has a 49% stake, Molson Coors Brewing Company owns 49%, while Sleeman Breweries (Sapporo) has a 2% stake.

The Canadian restaurant industry group, Restaurants Canada, demanded that the Ontario government cancel this “sweetheart deal”. It said that it has asked for an investigation to be carried out by the federal Competition Bureau.

According to Restaurants Canada, the deal limits competition and increases the cost of beer in bars and restaurants.

Ted Moroz, president of the Beer Store, sent an email to The Globe and Mail on Friday, stating that the retailer had not seen a statement of the claim.

He said that the Beer Store is “confident any such litigation is completely without merit and as a result, we will defend vigorously against it.”

Adding that the company did not fix prices, “individual brewers independently set their own prices which are approved by the LCBO on a weekly basis.”

Michael Eizenga, at a firm representing the Beer Store, said:

“This is an inaccurate and inappropriate characterization, to which my client objects”