1. July 2011 Legal Issues Affecting the BC Wine Industry BC Wine Grape Council Conference, Penticton, BC Mark Hicken, Vintage Law Group

2. Introduction ✤ Liquor Regulation in BC - Have to Trace Back to Prohibition ✤ June 15, 2011 - 90th Anniversary of Repeal of Prohibition and Establishment of Government Control System ✤ North American Approach. Very Different from Europe.

3. Post-Prohibition Legacy of Regulation ✤ No alcohol vs. tightly controlled alcohol ✤ 90 yr. mentality is CONTROL ✤ No distinction for wine ✤ Wine = Alcohol Alcohol = Danger Danger = Puritan Regulation

4. Structure of BC Wine Regulation ✤ Statutes: Liquor Control and Licensing Act, Liquor Distribution Act, Agri-Food Choice & Quality Act ✤ Regulations ✤ “Policy”: e.g. LCLB Manuals ✤ Terms of License ✤ Other: Contracts

5. Effects: Wine Culture ✤ Tasting Event Rules ✤ Off-Site Tasting Rooms ✤ Farmers Market Tastings ✤ Picnics ✤ Special Occasion Licenses ✤ Caterers

6. Effects: Retail Distribution ✤ Access to retailers in BC ✤ No conventional wholesale discount system ✤ Tightly restricted retail licenses ✤ Access to retailers across Canada (interprovincial shipping)

7. Effects: Retail Distribution ✤ Restaurants/Bars ✤ With respect to wine (and alcohol), operate in a regulatory environment which is very challenging ✤ Zero wholesale discounts, no off-site storage, no intra-chain transfers

8. Effects: Taxes & Regulation ✤ Hidden Taxes (Liquor Board Markup) ✤ Price Fixing ✤ Tied House Rules ✤ Advertising & Promotions

9. Effects: Manufacturers ✤ Land Based vs. Commercial Wineries ✤ Restrictions on LBW ✤ Not in Law, Comes from LDB contracts ✤ VQA, GIs, Packaging ✤ Winery Terms of License

10. Effects: Benefits for BC Wineries ✤ Tremendous growth in BC wine industry despite regulatory environment ✤ Exemptions: direct delivery system; preferential treatment on liquor board markup; VQA stores ✤ Trade issues, consumer issues, what about the future?

11. Modernize: Provincial Reform ✤ Deregulation: good or bad? Look at HK or WA. ✤ Overhaul and modernize regulatory system ✤ Remove “control” mentality ✤ Recognize benefits of wine ✤ Review distribution system

12. Modernize: Federal Reform ✤ Interprovincial Shipping ✤ Federal labeling laws ✤ Trade issues

13. Modernize: Admin Law 101 ✤ Rule of Law: Law is Statute and Regulations ✤ Policy is not Law ✤ Act within Confines of Law ✤ Policy Must be Supported by Law ✤ Fairness, Due Process, Non- Discrimination

14. Conclusion ✤ Regulatory regime affects all aspects of production, distribution and consumption of wine in BC. ✤ Growth of BC food and wine culture restricted by post- prohibition mentality.

15. Contact Info. ✤ Mark Hicken ✤ Vintage Law Group ✤ T 604 868 1375 E mark@winelaw.ca W www.winelaw.cawww.winelaw.ca