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Another Case of Beer: Small Craft Brewers + Constitutional Battles

It seems a long way from Alberta’s basement breweries to the halls of the Court of Appeal.  But that line was connected in a long running dispute known as Steam Whistle Brewing Inc. v AGLC.  With enough reading to make any constitutional scholar thirsty, a decision was handed down in December, 2019, regarding the legal fate of the Small Brewers Development Program and Alberta’s beer mark-ups. 

We last did a beer run with our Case of Beer in the summer of 2018.

We have to go back to 2016 when the Alberta government of the day launched the Alberta Small Brewers Development (SBDP) Program, which provided eligible small brewers with grant funding.  According to government releases, the program contributed to hundreds of jobs in the craft brewing industry and the addition of over 500 new beer products made in Alberta.  Now here’s a role for government that’s worth getting excited about:  the creation of hundreds of new types of beer.  Just think of all the stouts, sours, kveiks, NEIPAs, dry-hopped pints of gose and witbier we’d be drinking from other provinces in the absence of a robust craft beer industry in Alberta!  

Anyway, the Alberta government imposed different mark-ups on sales of beer to retailers depending on where the beer was brewed.  The economic effect of the SBDP grant program was that Alberta small brewers were unaffected by the increased mark-ups.

The party was going so good that someone had to complain.  In this case, it wasn’t a noise-bylaw but a constitutional challenge.  Steam Whistle Brewing of Toronto, and Great Western Brewing of Saskatoon, took the Alberta government to court, on the grounds that the beer mark-ups and SBDP rebate were an unconstitutional restriction on interprovincial trade.

A lower-court judge found that the Alberta beer mark-up of $1.25 per litre, with an SBDP rebate to only Alberta brewers, was in effect a barrier to interprovincial trade, and was therefore contrary to the constitution.

In that decision, not only was the program found to offend the constitution, but the breweries who launched the complaint – Steam Whistle Brewing, and Great Western Brewing – were entitled to restitution of over $2 million.

That decision was appealed by the Alberta government.

The December judgement in Steam Whistle Brewing Inc. v Alberta Gaming and Liquor Commission was a partial win and partial loss for Alberta:  the 2015 mark-up and 2016 mark-up were found to have violated the constitution in part.  However, the payment of $2 million in restitution was overturned, because the mark-ups were found to be “proprietary charges” not “taxes”. 

In the end, the SBDP cannot continue as originally designed, but let’s face it the Alberta government budget of 2019 does not have much room for incentives for craft suds.  Funding for the program has been cut.  If the Alberta government wants to continue support for this industry, it will have to come in some other form, if it comes at all. 

It’s certainly arguable that one legacy of the Alberta SBDP (aside from riveting constitutional law cases) is that there are now 117 independent craft breweries in Alberta.  And that can’t be a bad thing.

Authors
,Lawyer, Trademark Agent, CLP
rstobbe@fieldlaw.com