Hughes and 631992 Ontario Inc. v. Liquor Control Board of Ontario et al.

A restaurateur takes Brewers Retail to court over charges of price fixing

On December 12, 2014, a notice of action captioned David Hughes and 631992 Ontario Inc. v. Liquor Control Board of Ontario, Brewers Retail Inc., Labatt Breweries of Canada LP, Molson Coors Canada and Sleeman Breweries Ltd. No. CV-14-518059-00CP was commenced in Ontario.

Brewers Retail Inc. (operating as the Beer Store) and its then shareholders, as well as the Liquor Control Board of Ontario (“LCBO”), were named as defendants in the action. The plaintiffs (a beer consumer and the restaurant he owns) alleged Brewers Retail Inc. and the LCBO improperly entered into an agreement to fix prices and allocate markets for the sale and distribution of beer in Ontario, to the detriment of licensees and consumers. The plaintiffs further alleged that Brewers Retail Inc. and its brewer shareholders were unjustly enriched for breach of the Uniform Price Rule of the Liquor Control Act. The plaintiffs sought to have the claim certified as a class action on behalf of all Ontario beer consumers and licensees and, among other things, sought damages in the amount of $1.4 billion.

Brewers Retail Inc. operates according to the rules established by the Government of Ontario for the regulation, sale and distribution of beer in the province. Prices are independently set by each brewer and are approved by the LCBO, the Crown agency empowered by provincial legislation to control virtually every aspect of the sale and delivery of liquor in Ontario. As such, all of the defendants believed the claim was without merit.

Motions for summary judgment were heard in the Ontario Superior Court of Justice in February of 2018.

On March 15, 2018, the plaintiffs’ motion for summary judgment was dismissed. The defendants’ motions for summary judgment were granted, and the action was entirely dismissed.

The Ontario Superior Court held that, pursuant to the regulated conduct defence, “the plaintiffs’ various competition law claims were without merit,” even before the Province enacted retroactive legislation that expressly authorized the LCBO and Brewers Retail Inc. to specifically enter into the 2000 framework that was the basis for the plaintiff’s claim. The Court found that “there was no illegal civil conspiracy associated with the 2000 Beer Framework.”

In reaching this finding, the Court rejected the plaintiffs’ argument “that there was some absence of formality to the authorization of the 2000 Beer Framework.” The Court held that “the defendants were operating under a regulated provincial regime governing commerce in alcohol” and that entering into the framework was authorized conduct within the scope of the regulated conduct defence. Further, the Court made clear that, despite the plaintiffs’ assertion to the contrary, the regulated conduct defence is not limited to defending criminal proceedings, but is also available to defend civil claims under the Competition Act.

With respect to the plaintiffs’ unjust enrichment claim, the Court determined that the claim must fail for a number of reasons: “(a) as a matter of interpretation there never was a breach of the Uniform Price Rule; (b) if there was a breach, then it was erased or cured by the 2015 amendment to the Liquor Control Act, … (c) if there was an uncured breach of the Uniform Price Rule, then, nevertheless, the Defendants have a juristic reason for being enriched …”

Brewers Retail Inc. was led by Vice-President of Legal, Jeff Zabalet. Bennett Jones LLP was external counsel to Brewers Retail Inc., with a team including Mike Eizenga, Randal Hughes, Ranjan Agarwal, Preet Bell, Adam Kalbfleisch, Art Peltomaa and Ilan Ishai.

Siskinds LLP was counsel to the plaintiffs, with a team that included Linda Visser, Ronald Podolny, Tyler Planeta, and Paul Bates Barrister.

Counsel to the Liquor Control Board of Ontario was Davies Ward Phillips & Vineberg LLP, with a team including Kent E. Thomson, Matthew Milne-Smith, Michael H. Lubetsky, John Bodrug and Anthony M. C. Alexander.

Blake, Cassels & Graydon LLP were counsel to Labatt Brewing Company Limited with a team that included Jeff Galway, Catherine Beagan Flood and Nicole Henderson.

Counsel to Molson Coors Canada and Molson Canada 2005 was McCarthy Tétrault LLP, with a team including Paul Steep, Adam Ship and Katherine Booth.

Dentons Canada LLP represented Sleeman Breweries Ltd. with a team that included Marina Sampson and Ara Basmadjian.