Privacy and the Liquor Control Board of Ontario

What started out as a simple privacy commissioner complaint has turned into a constitutional challenge of the validity of the Liquor Control Board of Ontario (LCBO) – and this time the Board has only itself to blame for the brouhaha, proving once again that Ontario’s LCBO is so far out of touch with the realities of today’s world, it’s downright scary. At a time when they should be thinking about transitioning out of the alcohol business, the Ontario provincial government and the LCBO seem to be clinging to its very existence with even more tenacity and verve than before. They’re like the old boxer clinging to past glories who just has to show you the right hook he can still throw – yet only ends up throwing out his shoulder. In the LCBO’s case, the word “Control” won’t be pried away from its “cold dead hands” anytime soon… or will it?  In its most recent fight, the LCBO is proving it is a government entity most in need of being on the chopping block – if not the auction block – of government institutions that should be moved over to the private sector.

Let’s look at what has transpired over the past year to put the LCBO into this Constitutional quagmire:  This past March, the LCBO overstepped its authority and embarked on a power trip far beyond what the people who own it – Ontarians – should allow. In a nutshell, the LCBO was ordered by the Information and Privacy Commissioner/Ontario (IPCO) to cease its practice of collecting the personal information of people buying wine through wine clubs and to destroy all past records of the same (Order PO-3171). The petitioner, Warren Porter of The Vin de Garde Wine Club in Toronto, along with his lawyer, Arnold Schwisberg, successfully argued that the LCBO has no right to ask for this information that it does not ask for under normal circumstances – after all, they don’t ask for that information of anyone walking in to one of their retail stores off the street to buy booze, and if you pay by cash you are as anonymous as a homeless person. The LCBO, after hearing of the judgment, had this to say on March 5: “The LCBO is currently reviewing the IPC’s Order of February 27, 2013 and, given the nature of the Order, has temporarily ceased accepting orders from wine clubs.” In essence, the LCBO has taken its bat and ball and gone home. “By not processing orders, they have essentially shut the industry down,” says Porter.

A little background seems in order for Ontario’s Privacy Commissioner. There are two ways the IPCO can deal with a breach of the Privacy Act: by recommendation or by order.  Recommendations don’t necessarily have to be complied with by the offending parties, but IPCO so far has 100% compliance for recommendations from private and public sector entities.  An order is the next level and has only been issued three times and has never been disobeyed, until now:  In IPCO’s ruling, the LCBO was ordered 1) “to cease collecting the personal information” and 2) “to destroy all personal information that has been collected.”

By mid-March, the LCBO said it would comply with the ruling, but now instead of having wine shipped to members of wine clubs by the club itself, members now have to come in with ID to pick up their orders – in essence going around the order given by IPCO and getting the information anyway.

Why the LCBO has chosen to play hardball over such a trivial matter is incomprehensible; according to reports, the LCBO has decided to appeal the order and has asked that the records be sealed in the process. This seems to contravene common sense. “A government entity has chosen to spend hundreds of thousands of taxpayers’ dollars to fight an order by the Privacy Commissioner whose sole purpose is to make these decisions,” Porter says.

Now fed up with the collection of information, Porter and his team have decided to question the entire existence of the LCBO as it contravenes the Constitution Act of 1867 by challenging the Importation of Intoxicating Liquors Act (IILA) itself – which bans the free flow of goods (including alcohol, wine and beer) between the provinces. The argument hinges on Section 121: “All articles of 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.” This challenge could, and would if successful, lead to the downfall of the LCBO. Social networks were abuzz with the news about the challenge. Alfred Wirth, president and director at HNW Management Inc., applauded the news on Facebook: “Any progress towards competition among merchandisers is to be appreciated – even if it’s for domestically-produced products. Several years ago, when I questioned why Ontario couldn’t privatize the LCBO, the then Minister of Health said that alcoholic beverages were a crucial health matter which the province had to control. Despite the risk of people (including underage youth) freezing to death during our cold Ontario winters, he did not explain why the sale of crucial winter coats could be entrusted to Sears, the Bay, etc…”  While Porter himself posted an analogy to cigarettes: “How about this one. Cigarettes are so dangerous that you cannot advertise them on TV, print, billboards or even display them behind a counter… but they can be sold at any store. Alcohol is so dangerous that it has to be sold at a government store with specially-trained people… but the government itself floods the market with advertising and even publishes a free magazine where 50 per cent of the content is about consuming the product.”

Energy lawyer Ian Blue has joined the Vin de Garde team for the action. I interviewed Blue in 2010 about the IILA, which is now under fire. Here’s what Blue had to say: “The law that gives provincial liquor commissions a monopoly and the power they have, is federal law, the Importation of Intoxicating Liquors Act; it’s highly arguable that the law is unconstitutional. It’s also pretty apparent to government constitutional lawyers, who are knowledgeable in these matters… [If the Supreme Court of Canada] takes a hard look at the IILA, and if they do an intellectually honest interpretation, the IILA probably cannot stand up to constitutional scrutiny.”

In 2009, lawyer Schwisberg commented to me when speaking about the IILA: “The very underpinning of Canada’s liquor regulatory system is unconstitutional. Isn’t that a mind blower?” Blue said: “There is nothing natural or logical about the existing system. It bullies, fleeces and frustrates wine producers and the public… If the IILA were to fall… wine producers could probably make quantum leaps of progress towards a fairer and more rational system of liquor and wine distribution in Canada.”

So what does the once minor privacy commissioner complaint mean to the rest of the population of Ontario? Blue sees a bright future ahead when the government finally gets out of the booze business: “What [a win] would mean is that if I wanted to have a private liquor store, I could set one up and I could buy directly from the wineries in Niagara or British Columbia or foreign countries. Nova Scotia restaurants could order wines from Ontario. It would just loosen up the system. [It] doesn’t mean licentiousness; the province could still legislate standards for people who work in liquor stores, store hours, security, all safe drinking training, all that stuff; it’s just that you would not need to have liquor and wine sold through publicly-funded liquor stores; being sold to you by unionized staff on defined benefit pension plans.”

Which falls right into the hands of Tim Hudak, Ontario’s Progressive Conservative leader, who seems to be the only major party leader in tune with what Ontario’s alcohol-selling policy should be. In an interview with Konrad Ejbich (March 21, 2013) for Toronto-based City Bites magazine, Hudak got right to the point about his plans for the LCBO:  “As a principle, we believe that government should stick to doing things that only government can do. It’s difficult to argue that selling wine bottles and lottery tickets falls under that heading… We’ve had this approach in government that says, if you buy a bottle of wine at Loblaws, we’ll have chaos in the streets.  The vast majority of us have been outside of Ontario, whether it’s New York, Quebec, Manitoba, Michigan or Minnesota, where you can buy a bottle of wine, a six-pack of beer or even spirits from the private sector… It doesn’t matter if the person that hands you the bottle is wearing an LCBO uniform or a Zehr’s uniform or no uniform at all, the government still collects tax revenues. We all know that alcohol is one of the most heavily-taxed products in the province, so the government gets the revenue stream through the taxes, but doesn’t incur the costs.”

Hudak also added: “If you do it all through the LCBO, it means that tax dollars that could have gone to adding new cancer-fighting drugs or other programs will go to paying for some very impressive but expensive shelving, lighting and beautiful floors in a government-owned store.”  Which makes you wonder, if the PCs were in power, would Hudak even allow the LCBO to challenge the ruling, seeing that he doesn’t even believe the LCBO should be a government entity in the first place?

Why the LCBO decided to fight the IPCO ruling on every level will never be fully understood, except by a handful of bureaucrats sitting in an LCBO office in downtown Toronto. After all, it really was no skin off their nose. The province would still collect its taxes from Wine Club-sold wines and the mark-up it put on the product would not change either – so in theory everyone should be happy. But now the LCBO finds itself in a constitutional challenge that seems like a no-win situation. The LCBO may have finally overstepped its bounds and taken on a fight it just can’t win… Paralleling Custer’s Last Stand, the LCBO is digging in for a lengthy and needlessly expensive fight to retain its big C Control. One thing is for sure, though: a freer market system here in Ontario is something we can all get behind, and something that will happen if the LCBO loses this fight.

A court date has been set for September 12.