Abolishing The Liquor Distribution Cartel

In Brief:

  • Disband the Liquor Distribution Branch
  • Liberate tourism and hospitality industries
  • Prohibit minimum pricing schemes

In summary:

The BC Liquor Distribution Branch (LDB) generates $1 Billion annually for the provincial government by artificially raising the prices of beer, wine and spirits by up to 170% their original price before distributing it to retailers.  By law, the LDB is the only one permitted to purchase, import or distribute alcoholic beverages in the province. This unnecessary bottleneck creates inefficiencies that have additional added costs to consumers and taxpayers. We propose to eliminate the Distribution Branch, to tender any assets it has for sale, and to set a timeline of 6 months for the sale or closing of all BC Liquor stores.  The BC Liquor Control Board will continue in its role of regulating the sale of alcoholic beverages. PST would be the only tax that applies to alcohol.

Our archaic liquor laws are starting to have major impacts on the viability of the tourism and hospitality industries, as sky-high compliance costs and alcohol costs mean continually higher menu prices for all items.  Small, independent restaurants are particularly hurt by regulatory compliance costs. Specialty restaurants or distilleries are also being victimized by having their craft liquor confiscated if it does not happen to be on an approved list.  Restaurants should be free to purchase directly from sellers local or abroad at the wholesale price they agree on (like any other good). They should be free to sell their products at whatever price they feel will be competitive. And they should be free from burdensome regulations that distract them from running their business.  Other jurisdictions heavily subsidize their tourism industries. BC can compete with them as long as we are not handicapping ourselves with artificial prices on liquor which get filtered into every other cost. A competitive industry will see more cruise ships, more tourism jobs and more economic activity which will replace lost revenue from liquor taxes.

At length:

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We will repeal the Liquor Distribution Act through an act of the legislature.  By doing so, private distribution and logistics firms will be able to begin warehousing and distributing alcohol like they do any other consumer product.  The site at 2625 Rupert St, Vancouver will be sold (valued at $33M), and any leases for warehousing will be terminated or assigned to a private distributor.  

The LDB mandates minimum pricing.  Retailers cannot sell product for less than the below per litre (2016): Wine – $6.44, Spirits – $27.88, Liqueurs – $20.39, Packaged Beers (bottles and cans) – $3.19, Draught Beer (kegs 18 litres of greater) $1.97, Ciders and Coolers – $3.7.   Suppliers will work backward from the minimum price minus the tax, to arrive at a wholesale price that is expensive enough to be sold in BC. If they normally wholesale wine at $3/L, the tax would only make it $5.67 – not the minimum price. So they will instead adjust their wholesale price to $3.41.  A bottle of vodka that wholesales at $6.00 would only come to $13.44 – the wholesale price will instead be raised to $12.45. This is price gouging targeting specifically poor people that purchase the cheapest product. The benefactor is primarily the mass producers which reap a windfall profit on their BC sales.  Any advantage the LDB has in mass purchasing is essentially forfeited with minimum pricing.

Liquor consumption has proven to be something that is resistant to significantly higher demand from lower prices.  Countries in Eastern Europe have high, but falling rates of alcoholism, despite prices as low as non-alcoholic beverages.  Liquor consumption in Canada appears to be more closely linked with economic prosperity than prices. The LDB says itself that it’s minimum pricing and taxation strategies are in place “to help ensure that liquor with very low wholesale prices is not retailed as prices that may encourage abuse or over-consumption.”  The BC Libertarian Party disagrees with this tactic. Our suggestion is to instead remove government from the position of moral authority and restore that role to our local communities, where those who suffer from alcoholism can access the mental health system – and those who do not are not categorically targeted as deserving of payments to the government in the $1000’s annually.  The government should not be in the business of running rackets.

It is unknowable what the total cost that the anti-market pricing schemes of the LDB are to our economy.  But they are not zero. We do know that in 2017 it cost $338M to deliver profits of $1.41B to the provincial government coffers.  They consume 24% of tax revenue just to deliver the funds to the government. Operating costs are also expected to rise with the projected $114M spending plan for the BCLDB to “modernize” its operations.  Private distributors can operate with far lower expenses, and with sufficient competition will further lower prices for consumers. These are tangible economic benefits that will be felt by every British Columbian upon abolishing this institution and will subtract from the $1.08B hole that its removal will leave in the budget.  Other ministerial administrative cost reductions will make up for the balance.


2. Legalization of Cannabis

In Brief:

  • The Cannabis Act is a missed opportunity for marijuana legalization.
  • Avoid adding to federal regulations and rules.
  • Allow decentralized distribution to continue, keep regulations as simple as possible.
  • Apply no new marijuana taxes, provincial sales tax only.
  • Allow communities to make relevant regulations surrounding marijuana businesses.


A Light Touch

The Cannabis Act attempts to create a new state-enforced oligopoly in the production of marijuana, in direct competition with local, established businesses. Accordingly, a BC Libertarian government would maintain a light-touch in implementing the proposed legal market. We would apply only the PST as a provincial tax on marijuana and would adopt the minimum federal regulations without adding to them. These federal regulations:

  1. prohibit the sale of marijuana to any person under 18;
  2. prohibit marketing to this demographic;
  3. place a limit of 30 grams for personal possession; and
  4. place a limit of growing 4 plants per person.

Regarding distribution licenses, any resident who applies pays the licensing fee, and complies with the proposed regulations would be issued a  license to distribute or sell the federal product. The licence fee would merely cover the cost of administering and issuing licences.

Municipalities would use existing authority to regulate the sale, use, and distribution of marijuana in local communities.  

Police forces across the province are well-prepared to identify the signs of driver impairment for a number of drugs, including THC. It is already illegal to drive impaired whatever the reason, whether by alcohol, marijuana, or a legal prescription drug. Drivers who cannot safely operate a vehicle are a danger to other drivers and consequences should remain severe. Neither new policing powers nor restrictions on drivers should be advanced until there is clear evidence that legalization negatively and materially affects road safety.

At Length:

The Proposed Cannabis Act – A Missed Opportunity

The BC cannabis market is an international economic juggernaut, responsible for upwards of $3.5B in annual economic activity.  This does not include downstream products and services. By exporting to our full potential, the cannabis industry could eventually rival our softwood lumber industry.  Economic growth on that scale would drive conventional tax revenues far beyond what a regime of “sin taxes” could possibly deliver. Ancillary markets for processing, cannabis-related tourism, edible goods, paraphernalia, growing supplies and more will naturally congregate around friendly jurisdictions producing at the largest scales.  Successfully gaining a first-mover advantage in a market this large could add 1.5% to BC’s GDP annually.

Unfortunately, the proposed federal Cannabis Act ensures the legal market for marijuana will remain relatively small, expensive, and corrupt.  The regulatory regime sets up a battle between established, local producers and politically-connected national and international corporations. British Columbians will be the losers under the proposed regulatory regime. We expect:

  1. revenues from legal sales to be significantly offset by increased enforcement costs in policing, municipal enforcement, and judicial process;
  2. a marginal increase in violent crimes as the legal market attempts to upset the existing, stable marijuana market;
  3. more, not fewer, effective restrictions on individual liberties and the use of marijuana;
  4. A lower quality product and service at a higher cost for consumers.

Cannabis Taxes

The BC Libertarian Party would not impose any additional taxes to the cultivation, distribution or retail sale of cannabis or it’s derivatives, beyond PST.  A significant tax burden or complicated tax scheme would limit the growth of the legal market and ensure the black market continues, with all of its associated problems.  For this reason, implementing a punitive tax rate would not significantly increase government revenues from cannabis over a simple sales tax applied to the entire market. Likewise, creating a state monopoly for the distribution of cannabis will guarantee significant rejection of the legal product by consumers and vendors alike. We would allow retailers to source their product from any wholesaler of their choice. A large and vibrant cannabis market will enable the success of both a mass producing industry primarily for export, as well as a craft industry well-positioned for the domestic and medical markets.  No new or existing laws or price controls will preclude the participation of any entrepreneur that wishes to compete with incumbent producers, ensuring a free market without political interference.

Cannabis Production

We would not add to the federal regulations or restrictions on the production of cannabis.  Regulations that restrict the type, size and quantity of cannabis growing operations provide too great an opportunity for large corporations to use their scale to gain a disproportionate advantage over smaller local producers.  Transferring profits from local small business owners to big, politically connected corporations should not be the legacy of cannabis reform. The BC Libertarian Party will defend the local craft cannabis industry, whether individual growers or retailers.

Cannabis Sale and Distribution

The province would maintain a registry of license holders.  Licensing fees would be based only on the cost of maintaining and administering the registry.  We would not add provincial-level barriers to the federal regulation of the sale or distribution of marijuana, or the acquisition of a licence.  

Municipalities and local communities would employ their existing authority to implement the regulation of dispensaries, processing facilities, and agricultural operations.  A one-size-fits-all approach is not what is best for the marijuana industry or consumers. Local communities are the best ones to judge what level of regulation is required; whether dispensaries, smoke lounges, and compassion clubs should exist in close proximity to each other, schools, or at all.  They are also better able to determine what sorts of signage and advertising they can display, what other items they may or may not offer, whether cannabis can be consumed on the property, or even whether retail sale of cannabis should be limited to dispensaries or be sold at other points of sale.

Cannabis Marketing

The BC Libertarian Party would not add provincial regulations to the existing federal regulation of product safety, quality control, and accurate labelling.  These important issues would be best addressed by individual vendors and consumers, in conjunction with industry-related associations such as the Canadian Association of Medical Cannabis Dispensaries, the Cannabis Trade Alliance, and the Craft Cannabis Association of BC.  This approach is more effective than a top-down government regulator, will come at a fraction of the cost to taxpayers, will promote the local craft-cannabis industry, and will ensure that end-user prices do not drive consumers to the point of re-enabling a thriving black market.

Impaired Driving  

There is no evidence that legalization will increase marijuana use. Further, the effects of marijuana impairment on driving are not well understood.  Existing methods and enforcement levels are sufficient until such a link is established. Impairment for any reason is sufficient basis to prevent a driver from continued operation of a motor vehicle. More research needs to be done on determining a definitive, objective correlation between cannabinoid concentration in the blood or saliva and level of impairment.  If such a correlation exists, a means of measuring impairment beyond a reasonable doubt needs consensus. New policing powers or restrictions on individual freedoms should only be implemented in the face of clear and overriding evidence of harm.

Provincial Health and Safety Rules

Provincial occupational health and safety rules would have to be updated to account for the medical use of marijuana.  Companies with employees and contractors in safety-sensitive positions should still be within their rights to require their employees and contractors to prove they are fit for duty and not impaired by the recent use of marijuana, medical or otherwise, as they are with any pharmaceutical.