Committee Transcript 1994-Apr-26 | Legislative Assembly of Ontario

LIQUOR CONTROL AMENDMENT ACT, 1993 / LOI DE 1993 MODIFIANT LA LOI SUR LES ALCOOLS

MINISTRY OF CONSUMER AND COMMERCIAL RELATIONS

CONTENTS

Tuesday 26 April 1994

Liquor Control Amendment Act, 1993, Bill 113, Ms Churley / Loi de 1993 modifiant la Loi sur les alcools, projet de loi 113, M^me Churley

Ministry of Consumer and Commercial Relations, J-1212

Angela Longo, director, agency relations branch

Don Bourgeois, legal counsel

Noel Duignan, parliamentary assistant to the minister

Doug Mander, senior policy analyst, agency relations branch

Kittling Ridge Estate Distillery

John Hall, president

Ontario Restaurant Association

Paul Oliver, president

STANDING COMMITTEE ON ADMINISTRATION OF JUSTICE

*Chair / Président: Marchese, Rosario (Fort York ND)

Vice-Chair / Vice-Président: Harrington, Margaret H. (Niagara Falls ND)

Akande, Zanana L. (St Andrew-St Patrick ND)

Bisson, Gilles (Cochrane South/-Sud ND)

*Chiarelli, Robert (Ottawa West/-Ouest L)

*Curling, Alvin (Scarborough North/-Nord L)

*Haeck, Christel (St Catharines-Brock ND)

*Harnick, Charles (Willowdale PC)

*Malkowski, Gary (York East/-Est ND)

Murphy, Tim (St George-St David L)

Tilson, David (Dufferin-Peel PC)

*Winninger, David (London South/-Sud ND)

*In attendance / présents

Substitutions present/ Membres remplaçants présents:

Duignan, Noel (Halton North/-Nord ND) for Mr Bisson

Hodgson, Chris (Victoria-Haliburton PC) for Mr Tilson

Wiseman, Jim (Durham West/-Ouest ND) for Ms Harrington

Also taking part / Autres participants et participantes:

Hansen, Ron (Lincoln ND)

Clerk / Greffière: Bryce, Donna

Staff / Personnel: McNaught, Andrew, research officer, Legislative Research Service

The committee met at 1543 in committee room 1.

LIQUOR CONTROL AMENDMENT ACT, 1993 / LOI DE 1993 MODIFIANT LA LOI SUR LES ALCOOLS

Consideration of Bill 113, An Act to amend the Liquor Control Act / Projet de loi 113, Loi modifiant la Loi sur les alcools.

MINISTRY OF CONSUMER AND COMMERCIAL RELATIONS

The Chair (Mr Rosario Marchese): Today we'll be dealing with Bill 113, An Act to amend the Liquor Control Act. Given that we have enough representation from all three parties and that the ministry staff are here, we'd like to begin. I'd like to welcome all three of you. Angela, nice to see you.

Ms Angela Longo: Nice to see you.

The Chair: Ms Angela Longo, Mr Doug Mander and Mr Don Bourgeois, welcome. We have approximately an hour for you to make the presentation to us.

Ms Longo: I won't talk for an hour, though; I promise.

As stated by the minister when she introduced the bill, the primary purpose of Bill 113 relates to Ontario's trade obligations under the General Agreement on Tariffs and Trade.

During negotiations last year on the beer trade issue, Ontario committed to passing legislative amendments which would give the government the ability to ensure national treatment for imported products at the Brewers Retail or Beer Store system.

To that end, the regulatory amendments before you expand the Lieutenant Governor's regulation-making jurisdiction under the Liquor Control Act, section 8, and clarify the Liquor Control Board of Ontario's ability to set terms and conditions with respect to store authorizations, liquor delivery and warehousing.

The legislative amendments before you will be followed by regulations requiring Brewers Retail to give imported beer national treatment.

Negotiations with the United States were difficult. Last August, Canada and the US were able to agree to a memorandum of understanding on provincial beer practices. The memorandum included an annex on Ontario practices, which opened up the beer stores to imported beer by September 30, 1993.

Since that time, Brewers Retail has accepted imported beer, subject to the terms of the agreement, on a voluntary basis. However, these amendments today are necessary to ensure the province can guarantee the MOU's conditions in the long term and also to give the government the power to investigate to ensure compliance.

We would emphasize here that it is not that Brewers Retail Inc is not providing national treatment. On the contrary, the domestic beer industry and its unions have worked very closely with us during the trade negotiations. They also worked closely with us in developing changes to our policies, which are consistent with the GATT.

Throughout this process, we have received generally outstanding cooperation from BRI, the beer industry in general and its workers, but from a GATT perspective the final responsibility for ensuring national treatment rests with the province, not Brewers Retail, so we have to proceed with this legislation even though we are reasonably sure BRI will continue to honour the agreement with the United States. This means not just passing a regulation with respect to national treatment, but also showing that we can ensure compliance. That is where the inspection powers come in. We have to be able to indicate we can deliver national treatment throughout the whole distribution and retail system, which also includes access to licensees.

There was concern expressed in the Legislature that the beer deal was on shaky ground and a request for an update on its current status. Canada and the United States have been discussing beer issues recently, but those discussions have not involved Ontario or Ontario practices.

As I stated earlier, the earlier agreement with the United States included an annex related to Ontario practices and spelled out in some detail how it would work, but it did not contain much detail on other provincial government practices. The recent discussions this winter with the United States have focused on implementation policies in other provinces, particularly Quebec and British Columbia. While those negotiations are not quite complete, I think both the United States and our federal government hope soon to have a resolution of outstanding issues, and hopefully we'll have a continuation of peace in the beer wars this summer.

From Ontario's perspective, we are living up to our trade commitments. The further good faith associated with the passage of this legislation will be a sign to our foreign trading partners that Ontario is committed to the changes which have been made. Some concerns were also expressed in the Legislature that Ontario is not treating out-of-province beer better than it treats foreign beer. Unfortunately, this request would be a violation of national treatment provisions found under the GATT. We are treating out-of-province beer exactly the same as out-of-country beer. I should point out that the beverage alcohol sector is only one of the 11 sectors currently under discussion in negotiations concerning the Canadian internal trade agreement which is scheduled for completion at the end of June 1994. So we are talking with other provinces on the issue of interprovincial trade in beverage alcohol products. Hopefully, we will have an agreement by June 30.

I can say that Ontario is one of the most open beer markets in the country. We were the first province west of the Maritimes to have Moosehead beer available and it has been selling in our stores for nearly two years now. No other out-of-province brewers have formally requested access to the Ontario beer store system. We feel we are offering pretty good treatment to out-of-province beer now, but the amendments contained in this bill, just as they paved the way for ensuring national treatment for imported beer, will strengthen Ontario's ability to ensure that out-of-province beer is treated fairly.

I know that there were a number of concerns raised in the Legislature about the inspection powers contained in the bill and I'd like to talk about this aspect of the amendments for a few minutes. Don Bourgeois, our legal counsel, will answer any detailed questions you have about these clauses. I'd like to address the policy intent of those powers and touch on some of the issues raised.

As I mentioned, the inspection powers relate to the general policy intent of the bill, which is to broaden the LCBO's authority and regulation-making power under the act to ensure national treatment for imported products. Part of passing a regulation with respect to national treatment includes the ability to enforce or ensure compliance. To do that, we need the ability to track the transactions throughout the beverage alcohol and retail system. This is particularly true in the case of beer, where we have a third party, the BRI, which sells most of the beer in the province.

Given that beverage alcohol products are moving through private channels in a number of instances in Ontario, some inspection powers are necessary. We do have some inspection powers under the Liquor Licence Act already, but they are specific to the LLA requirements. We did not feel they were broad enough to be used effectively with respect to the national treatment requirement. The LCA inspection powers, on the other hand, have been broadened to cover the Liquor Licence Act and the Wine Content Act, because one requires a fairly broad jurisdiction in determining compliance with a requirement as general as national treatment.

The other aspect of the regulatory framework which required this is that in some cases, certain issues which for domestic manufacturers are dealt with under one piece of legislation may be for foreign manufacturers dealt with under a different piece of legislation. Giving the Liquor Control Act inspectors broad authority under all three acts means the regulatory requirements can be dealt with efficiently by one body. Liquor Licence Act inspectors will continue their regular functions, but issues with respect to national treatment will be handled by the liquor control board.

Some concerns were also expressed by the Ontario Restaurant Association and the Ontario Hotel and Motel Association concerning double inspections and inspections of restaurants by the LCBO. I trust these groups will be able to speak to their concerns on this issue. But we'd simply like to say that it's not the intent of these clauses to have the LCBO repeating the work currently done by liquor licence board inspectors. We will not have duplicate inspections.

We have offered to consult with the Ontario Restaurant Association and the Ontario Hotel and Motel Association on a memorandum of understanding concerning the inspections between the LLBO, the LCBO and the ministry, to avoid any problems associated with double inspections and deal with other potential concerns. We think it's more appropriate to address their concerns through this kind of practical memorandum than by attempting changes in the legislation. Our legal advice is that it's very difficult to draw the line in legislative terms.

The inspection powers contained in these amendments may also have some benefits with respect to smuggling issues and illegal liquor manufacturing. Having broad inspection jurisdiction gives the LCBO greater flexibility in investigating smuggling-related issues, and should allow it to focus its resources in this area a little more efficiently.

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Concerns were also expressed in the Legislature about the possible search of resident premises without a warrant. Our legal advice is that this is generally not possible under the amendments as worded. Inspectors can only enter premises where liquor is sold, served, manufactured or stored, or premises at which books or records related to liquor sales are kept or are required to be kept. If a licensee takes some records home on the weekend, it does not in most instances give a liquor inspector the right without consent to enter those premises without a warrant.

In practice, if a bar owner keep records at home, the liquor inspector simply makes a request to have them available at the licensed establishment at a particular time. It's the accepted practice for random or routine inspections to examine the records on the business premises.

With respect to the timing on the return of seized documents, which was also an issue raised in the Legislature, we think it is simply sound regulatory practice to do this as quickly as possible. The amendments do require that an inspector who takes documents to copy promptly return those documents. This places an onus for reasonable behaviour on the inspector.

The problem with the specific time frame is that what constitutes a reasonable time frame will vary with the amount and type of documentation. Circumstances can vary widely from case to case, and what is a reasonable time for copying and return will vary as well.

There are also some other issues which have been raised which do not relate directly to the substance of the legislation, but I wanted to just touch on them briefly.

The Ontario Restaurant Association raised an issue with respect to the interpretation of minimum pricing policy on beer as it relates to transactions between Brewers Retail outlets and licensees. This is an issue which we are reviewing with the ORA. This is not a policy change which will require an amendment to the LCA. The Liquor Control Board of Ontario already has the power to set minimum prices and we feel a legislative amendment may reduce the board's flexibility in dealing with minimum pricing issues. In the last few years, we've required some flexibility in dealing with those issues. We think that factors such as trade issues and potential marketplace changes make it necessary to retain that flexibility.

In addition to that, the other aspect is that there may be some implications for other industries in the beverage alcohol sector which have to be consulted. We will be talking to all those people in the consultation process.

A final issue which was raised by some members during second reading was that of the environmental levy. I'd like to say that no amendments to the Liquor Control Act are required to amend the environmental levy, although amendments to the Liquor Licence Act regulations would be required.

The opinion has been expressed that the levy was discriminatory and a tax on US beer cans. The levy, of course, has not been without its share of controversy. A number of times, we offered as a ministry to defer the issue of the levy to GATT for arbitration during our dispute with the US. The US declined to accept these offers but also accepted the levy as part of the trade package once the beer dispute was settled. We feel that supports our position.

The rationale behind the levy's introduction was that it was felt very strongly that in the absence of a policy which encouraged refillable bottles, domestic beer producers would over the next five to 10 years convert primarily to can production. This would have meant as a result that the excellent product stewardship exhibited by the current Brewers Retail system would be jeopardized.

The domestic beer industry during the 1980s began the drift to cans from refillable bottles. In 1983, 99% of packaged beer was sold in refillable bottles. By 1992, that percentage was down to 78% and cans, which had been 1%, were up to 22%. The levy has been extremely successful in reversing that trend. Refillable bottles now represent packaging for 91% of the domestic packaged beer market. So we regard the levy as very successful.

The bottom line on the environmental levy is that we have a system at Brewers Retail which has been strongly supported by the industry, the unions and the public. It involves very little in the way of waste management costs to the government and it has been fair to all suppliers.

The final issue I should mention with respect to the bill is that these changes will allow the LCBO to authorize onsite stores for manufacturers to sell their own products. As most of you may know, wineries and breweries in the province have had that privilege for some time. It's been a very successful tourism-related initiative, particularly in the Niagara region. These amendments give distillers the same ability. It will put them on an equal footing with wineries and breweries in that regard.

Thank you for the opportunity to make these remarks. Both my colleagues and I will be happy to answer any questions.

Mr Robert Chiarelli (Ottawa West): When I go through the bill and I hear your presentation, I obviously get an overview, which you would normally expect from a senior policy analyst or a counsel from a legal branch or a director, agency relations branch, but I'm trying to get a handle on how the bill is actually going to work on the ground. If I have to go out and talk to the owner of a restaurant or another establishment that's licensed and I have to tell them what this bill means, I'm not sure what I should be telling them.

In other words, when I look at the explanatory note and the words of the act where it says the bill also provides for inspections of premises "at which liquor is sold, served, manufactured, kept or stored" for the purpose of ensuring compliance with applicable legislation, I'm not sure if the explanatory note and the sections of the bill are simply arming the government so that it has the authority if it needs it, or if indeed there is a government policy which says, "We are proactively going to appoint inspectors and do inspections in order to be ready for a complaint should one arise."

To get more specific with my question, how many inspectors do you contemplate appointing and/or how many inspectors in the field now will be given instructions to try to get compliance with this bill? Do you have any idea of numbers? Anybody can answer it.

Ms Longo: We don't have at this time any intention of appointing new inspectors for these purposes. The liquor control board has, I think, six inspectors at this time who cover a whole range of duties.

Mr Chiarelli: So they would be authorized under this particular legislation to do inspections, by order-in-council? If you have an inspector in place now -- when I look at the bill here, it says, "The chair of the board may designate any person as an inspector to carry out inspections for the purpose of determining whether there is compliance with this act." You obviously have new legislative authority to appoint inspectors. Who are you going to be appointing?

Mr Don Bourgeois: The chair presumably would be appointing those individuals who are currently employed by the liquor control board and who do conduct some inspections pursuant to the existing legislation.

Mr Chiarelli: Why did you need a new bill?

Mr Bourgeois: With respect to the inspections generally?

Mr Chiarelli: Yes.

Mr Bourgeois: The inspectors have powers under the Wine Content Act, for example, to conduct audits with respect to wineries. Those inspectors do not have the statutory authority to enter the premises of Brewers Retail, for example, nor do they have the statutory authority to enter the premises of the manufacturers.

Mr Chiarelli: Given the nature of inspections that inspectors can do now and given the rationale for this legislation -- in order to comply with GATT -- what will be done differently by inspectors who are authorized under this legislation on a proactive basis? What will they be looking for?

Mr Bourgeois: They'll be looking for assurance that national treatment is accorded to foreign manufacturers selling beer through the LCBO onwards to you or me.

Mr Chiarelli: Could you give me a specific example of what they'd be looking for and what a contravention would be?

Mr Bourgeois: For example, the cost of service, to ensure that the cost of service that's set out in the appendix to the --

Mr Chiarelli: Sorry, I didn't hear that. What service?

Mr Bourgeois: The cost of service. There is in the appendix to the beer trade agreement a schedule setting out cost of service; for example, how much it will cost for delivery from a BRI store, how much per pallet for handling of the beer within the BRI and so forth. The inspectors would be able to demonstrate or ensure that there is compliance by conducting the inspections --

Mr Chiarelli: What is a BRI store?

Mr Bourgeois: Brewers Retail.

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Mr Chiarelli: How will this impact on a restaurateur?

Mr Bourgeois: In all likelihood, in the normal course, I would not anticipate that there would be a substantially significant number of inspections conducted on a regular basis by LCBO inspectors of licensees. That authority is necessary, however, in order to be able to track the beer itself or the wine or the spirits or any other product.

Mr Chiarelli: In terms of complying with the GATT provisions, is it your opinion that you have to have an inspection infrastructure available if there's a complaint, or is there an obligation to proactively inspect to ensure compliance on an ongoing basis?

Mr Bourgeois: I think probably the best bet for anybody in an international trade situation is to prevent complaints from arising and one method of preventing complaints from arising is to be able to demonstrate very quickly that there has been compliance and continues to be compliance.

Mr Chiarelli: Let's sort of flip it around a bit and put myself hypothetically in the place of Moe Attalah, who runs the Newport Restaurant in my riding of Ottawa West. He asks me, "What does this bill mean for me?" What should I tell him?

Mr Bourgeois: In all likelihood, for him, as an individual licensee, there probably will be very little impact upon him.

Mr Chiarelli: To the extent that there's little impact, what would that little impact be?

Mr Bourgeois: If there's a requirement to be able to track the beer as part of law enforcement and to ensure that there has been compliance by Brewers Retail or, in the case of wine, by a winery retail store, which is also a government store, there may be a request to look at books and records related to a particular transaction. But I don't anticipate that there would be a regular impact upon any of the licensees.

It's similar to the type of routine inspection powers that the ministry has under the Real Estate and Business Brokers Act, for example, or the Travel Industry Act. Most travel agents on a day-to-day basis will not come across a ministry inspector. They will occur and there are some routine inspections done on a set policy basis, but for the most part, most people aren't bothered by the inspectors.

Mr Chiarelli: Presumably, as you indicated, additional authority will be given to existing inspectors. Will they, as a matter of course in their responsibilities, be asked to monitor on a daily basis the requirements of GATT or the instructions from the chair with respect to monitoring GATT, or will they be receiving more specific, targeted instructions?

Mr Bourgeois: I'm not sure I could answer that question because that's part of an enforcement policy that I haven't been part of in the development.

Mr Chiarelli: But it's possible under this legislation that all existing inspectors could be authorized to regularly look for and report on provisions of concern under GATT?

Mr Bourgeois: Liquor control board inspectors?

Mr Chiarelli: Yes.

Mr Bourgeois: Again, it depends upon what enforcement policy is decided upon.

Mr Chiarelli: If there are people on the ground out there running businesses, they should have some understanding or there should be some government communications policy at the present time which says to these people, "This is what you can inspect." I gather, from what you're telling me, that we're arming some inspectors here with power but we don't know what we're going to tell them to do with that power at this point.

Mr Bourgeois: No, I don't think that's what I mean to be saying. What I mean to be saying is that in the development of an enforcement policy which the liquor control board, once this -- and assuming this legislation is passed, they will develop an enforcement policy and, based upon the resources that they have available, they can make a determination, presumably in consultation with others, as to what is the best approach to ensure that there is compliance throughout the system with national treatment and other international requirements and, at the same time, to be able to demonstrate that should it be necessary.

Mr Chiarelli: I guess one of the things I'm concerned about is the enforcement aspect of it, the extent to which these inspection powers might end up being considered, rightly or wrongly, by some people as harassment or additional red tape. I know that you've probably heard a lot of comment from people who run small businesses across the country and the province about the nature of doing business these days, particularly with red tape, inspections etc. Is there any additional red tape or any additional work required for small businesses to deal with the inspections?

Mr Bourgeois: No, I wouldn't anticipate that there would be any. The regular liquor licensing inspections will continue, of course, and that's based upon an enforcement policy that the liquor licence board has, based upon a risk management. But the average restaurant owner probably will not see one of these liquor control inspectors. It's only there should it be necessary in order to be able to ensure compliance with GATT requirements and to be able to demonstrate it.

Mr Chiarelli: Is there any particular concern from any other countries, other than the United States, at the present time vis-à-vis our compliance with GATT?

Ms Longo: The European Community was party to this too, but it has the same access under the MOU that we gave to the US when we did the deal last year. We've applied it to everybody.

Mr Chiarelli: There seems to be a sense that we're responding more to the Americans than to other countries. Is that a proper perception?

Ms Longo: That's what the MOU was about last year, because we had essentially what you would call a trade war. They had tariffs against us and we had tariffs against them, as two nations, because they weren't satisfied with the way we were handling beer. We came to a commercial negotiation and resolved it through the MOU, and we extended the process, then, to all of our trading partners. It would apply to any other trading partner; there just haven't been any others so far in beer.

Mr Chiarelli: So we're responding basically to the Americans with it.

Ms Longo: Yes.

Mr Charles Harnick (Willowdale): I have a brief question, and it really relates to the inspection issues.

When I first came to this place I saw all these bills. Anybody who's called an inspector can just walk right in; nobody needs warrants any more. I gather that appears to be the way of the world, not just in this act but in a number of other acts. So I really can't complain about that any more, as I used to, because it's fighting a losing battle.

But this act goes one step further in that if you take a look at section 4.5 on page 5 of the bill, subsection (3), where they talk about the answers that someone who is being inspected must give, when I get to subsection (3) it says, "An answer given by a person mentioned in subsection (2) may be given orally or in writing and, if the inspector so requires, the answer shall be given on oath." That's extraordinary.

All of a sudden we're going to hire people and we're going to send them out with a Bible, and they're going to go in and ask people who own and run restaurants questions about the liquor that they've purchased and that they're serving. Then they're going to say to them: "Here's the Bible. We want you to swear on the Bible before you give your answer." That's absolutely outrageous.

I quite frankly have not seen this in any bill that the government has produced since I've been here. I've seen these outrageous inspections where you don't need warrants and you don't have to announce that you're coming, and that's the way of the world today, but this issue of having some person all of a sudden elevated not just to the position of inspector but they become judge and jury as well as executioner and they start asking for answers under oath is rather extraordinary. I wonder if you might give me your impression about that. Why is it there?

Mr Bourgeois: There's also another ministry legislation, a similar provision for investigators, for example in legislation that dates back to the 1960s and 1950s in the Real Estate and Business Brokers Act and other statutes in which an investigator has the authority to the Public Inquiries Act. It is comparable to those sections as well in which an investigator conducting an investigation under one of those statutes, like the Real Estate and Business Brokers Act, the Travel Industry Act and so forth, can require people to give similar information.

Mr Harnick: Police officers investigate, I suppose, by comparison, far more serious issues than what liquor inspectors are going to be investigating. Don't you find it rather intimidating that the way this is worded, someone can be running a restaurant and then be told: "I'm an inspector. Here's the Bible. Swear under oath, and I want to hear your answer"?

The Chair: We're actually going to have to go and vote, so rather than having you complete that thought, you'll complete it after the recess is over.

The committee recessed from 1612 to 1632.

The Chair: We'll move straight to Mr Duignan. When Mr Harnick comes back, we'll simply get back to him to finish his question and get the answer.

Mr Noel Duignan (Halton North): I just have a couple of points of clarification around the whole question of allowing on-site stores and distilleries in the province.

Clause 2(1)(e) states, "to authorize manufacturers of beer and spirits and wineries that manufacture Ontario wine to sell their beer, spirits or Ontario wine in stores owned and operated by the manufacturer...." Does that mean, for example, that Hiram Walker could sell other products that are not manufactured on that particular site in that retail store?

Mr Doug Mander: We're currently reviewing the criteria and conditions upon which we'll authorize the on-site distillery stores. That's something we're looking at in consultation with the LCBO and the distilling industry and haven't quite finalized, but we'll do so in the very near future.

Mr Duignan: That would also include whether these on-site stores could open on Sunday, for example, and use credit cards or debit cards in their particular stores?

Mr Mander: Yes. All those would be included in terms of the review. On the Sunday issue, the precedent in the other areas -- it's probably going to hold true for the distillery stores as well, but we haven't made a final determination. Right now the on-site stores for wineries and breweries are open on Sundays subject to municipal approval.

Mr Duignan: For example, I don't know whether Kittling Ridge Estate Distillery plans to also sell wine or sell wine on the site. For example, they could have wine being sold on Sunday and the distillery part closed on Sunday, allowing use of credit cards on the wine aspect but not on the distillery aspect of it. Hopefully, we won't get into that type of situation.

Mr Mander: Yes. We'll try to keep things consistent with the operation of the stores in the other industries.

Mr Duignan: Any idea when those decisions will be made?

Ms Longo: Hopefully later this spring, depending on passage of the bill.

Mr Duignan: Okay. I don't have any more questions.

The Chair: We're going to see if Mr Harnick is on his way back. If he is, we'll finish with his question. If not, we'll simply go on. We'll just wait a few seconds.

Mr Chiarelli: Maybe we could just stand down his time, and if he comes back, we'll give him his time.

The Chair: You're staying around?

Ms Longo: We'll stay.

The Chair: Very well, that's what we'll do then. We thank you for your presentation and we'll probably have you back very shortly.

KITTLING RIDGE ESTATE DISTILLERY

The Chair: Mr Hall from Kittling Ridge Estate Distillery, welcome. We have a half an hour for your presentation. I suggest you leave time for questions.

Mr John Hall: Good afternoon, Mr Chairman and honourable members of the standing committee on administration of justice. I would like to thank you for providing me with the opportunity to address you this afternoon regarding Bill 113, An Act to amend the Liquor Control Act.

I am speaking today on behalf of Kittling Ridge Estate Distillery, with the support of the Association of Canadian Distillers. I also have the full support of my industry colleagues from Hiram Walker Distillery, who are in attendance today.

First of all, I would like to briefly introduce myself and my company. My name is John Hall. I am president and CEO and a shareholder of Kittling Ridge Estate Distillery, located in Grimsby, Ontario, which was previously known as Rieder Distillery prior to my involvement with that company.

I am a member of the board of directors for the Association of Canadian Distillers. As well, I am a member of the board of directors of the Wine Council of Ontario. While past chairmen of that board developed and launched the highly successful Ontario wine industry campaign "From the wine regions of Ontario, we're ready when you are," I have over 25 years of domestic beverage alcohol industry experience.

Our company, Kittling Ridge Estate Distillery, is the only Canadian-owned distillery left in Ontario. We utilize Ontario-grown cherries, peaches, plums, apples, pears, strawberries, raspberries and grapes. While considered a small business, we presently employ 40 people in the Niagara community and can be considered a significant contributor to the peninsula, the Niagara fruit growers and the economy.

While comparing ourselves to the wineries in Ontario, our economic influence would be similar to that of Inniskillin winery or Hillebrand winery, placing us in the midsize range, except that our product is distilled spirits, which are primarily made from Ontario-grown fruit, and we utilize a significantly broader range of Ontario-grown tender fruit than the wineries do.

Over the past 24 months, we have been repositioning our company as a small estate distillery, producing unique spirits from Ontario-grown fruit. We believe our role as an estate distiller can be extremely effective. The industry enhancement that has occurred in both the Ontario wine and beer sectors by cottage wineries and micro-breweries can be replicated in the Ontario spirits industry. But in order for this enhancement to occur, we need the same level playing field. We need the same tool and the same opportunity that is enjoyed by Ontario wineries and breweries, that being a retail store at the manufacturing site.

Bill 113 addresses this discriminatory practice and provides us with the opportunity towards a more level playing field; an opportunity that will benefit the entire spirits industry; an opportunity that is one small step in the right direction for industry recovery and growth; an opportunity to create more jobs; an opportunity to purchase more Ontario-grown fruit and grain; and an opportunity to facilitate tourism enhancement and promote responsible use of our Ontario-made products. Bill 113 will assist us to contribute more to the Ontario economy.

I am here today to support Bill 113, which will provide us with the opportunity to operate an onsite retail store. I am also here to urge you to instruct the government of Ontario to move as quickly as possible to receive royal assent for Bill 113 and, once received, instruct our regulators to ensure the regulations applied to an onsite store are non-discriminatory. A regulatory model already exists and is operating very successfully for Ontario winery stores. The same regulatory model can be used. The Ontario distillery stores should operate under the same conditions.

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Our business at Kittling Ridge can be considered a full-cycle model or a closed loop, one that is unique and rare in these times. It is one of the only businesses I know that provides real value to the Ontario community.

First of all, Ontario farmers grow the fruit and grain. We buy the fruit and grain from the Ontario farmers. We employ Ontario people to process, ferment, distil, age, blend and bottle the product. We utilize, wherever possible, Ontario-made labels, caps, cartons and bottles. The finished product is then distributed and sold to consumers, and then the entire cycle begins again with the Ontario farmers. As well, there is an added benefit. The governments of Ontario and Canada reap 83% of the value of our retail price on each bottle sold.

This fragile loop must not be broken. Our industry must be provided with the same opportunities and non-discriminatory regulations that exist for Ontario wineries and breweries.

Many of the Ontario wineries and micro-breweries survive and grow because they have an onsite retail store. It is legal for them to make their product and it is legal for them to sell their product from their manufacturing store. Presently, it is legal for us to make our product but it is illegal for us to sell it in the same manner.

At Kittling Ridge many of our products are unique, just like many of the products produced by the cottage wineries. These products can be considered niche products and do not receive LCBO full-store distribution, and in some cases none at all. Even though the LCBO is extremely cooperative with us, there are over 600 stores in the province and some of our products will not sell that much in any given year. Consequently, we have fine-quality products made and bottled, but nowhere to sell them.

Many consumers in Ontario do not know that our brandy is the only brandy made in Canada and the only brandy made with Ontario grapes. Many consumers in Ontario do not know what an eau-de-vie is. We, as Canada's only eau-de-vie and brandy producer, have won international acclaim by winning many world gold, silver and bronze medals from such prestigious competitions as the Monde Sélection, the premier of all world taste competitions.

Our brandies and eaux-de-vie have won Europe's highest honours. It takes 30 pounds of Ontario grapes to make one bottle of Ontario brandy, it takes 16 pounds of Ontario cherries to make one bottle of Ontario kirsch, it takes 15 pounds of Ontario pears to make one bottle of pear brandy and it takes about 20 pounds of Ontario grain to make one bottle of Canadian whisky.

Over two thirds of our products that we make in Grimsby, Ontario, are not sold in Ontario, and we have to say to our Ontario consumers who eagerly want to buy our specialty products, "Sorry, you cannot buy them."

Many consumers in Ontario do not know how to use and responsibly enjoy our products. With the passage of Bill 113, our Ontario industry will have the same opportunity afforded to Ontario wineries. Ontario consumers will be able to tour our distillery, attend our cooking demonstrations, learn how to use our products responsibly and begin to appreciate the art of distillation.

Research has proven that if a potential customer tours our facility, they will be more knowledgeable about our products, they will learn how to use our products responsibly, and when they return home, they will begin to create a demand for our products in their local LCBO stores.

We have repositioned as an estate distiller, just the same as a cottage winery or a micro-brewery, but we are unable to benefit from our new direction without the ability to market our line of estate spirit products in a similar onsite fashion.

With the onset of yet another tourist season -- one key season has already been lost since this legislation was first introduced one and a half years ago -- we are unable to provide our customers with a full educational picture of our unique presence in the Niagara region.

It is critical for us, as the last remaining small Canadian-owned distillery in Ontario, and indeed it is critical for the entire industry to be able to utilize an onsite retail store to market our spirits with the opportunity to enhance the distilling industry in Ontario, provide additional sales in LCBO stores, increase employment and positively impact tourism and agriculture in the Niagara region.

In the past 10 years 17 distillers have closed down in Canada. Seven distillers have closed in Ontario alone, with a loss of 1,500 Ontario jobs. We do not want to be the eighth in Ontario, nor do we want to be the 18th in Canada.

We have the support of the government of Ontario, all three political parties, the LCBO, the distilling industry and the fruit growers of Niagara. On behalf of Kittling Ridge, the entire Association of Canadian Distillers and all of our supporters, I request your support in this initiative and request your expertise with the government to quickly expedite passage of this bill in order that we may quickly implement an onsite store to begin enhancing our new position with the Ontario tourist and customer.

Over the past few years Ontario wineries have flourished, in part because of their onsite retail activities. We can flourish as well with the government allowing us the same opportunity. The passing of Bill 113 and the establishment of operating policies similar to those applied to Ontario wineries and breweries will be a welcome and positive step towards the levelling of the playing field. All we are asking for is fair and equal treatment.

Would you please instruct the government of Ontario to move as quickly as possible to receive royal assent for Bill 113 and ask the regulators to act quickly and fairly to provide a non-discriminatory environment for us to operate within.

I would like to personally invite all of you to visit our distillery to appreciate the necessity of an onsite retail store. Again, I thank you for providing me with the opportunity to speak to you today and I will be pleased to answer any questions you may have.

Mr Ron Hansen (Lincoln): Mr Hall, welcome to Queen's Park. You're from Lincoln, I know, and I've met with you before. I think there's one question I'd like to ask, and I think there was some discussion. I didn't see it in your brief. You opened a wine store with a limited amount of product. What did that do to your sales in wines when you actually opened the onsite wine store?

Mr Hall: Actually, we're probably having a bit of a problem right now because we're disappointing customers. They do come to visit us and they are purchasing wine from us. We're operating under the same regulations as the Ontario wineries because we do hold an Ontario winery licence. But many of our customers are extremely disturbed that we are not allowed to offer our spirits also.

Mr Hansen: But did your wine sales increase as soon you opened your wine store?

Mr Hall: Oh, absolutely. We opened up two weeks before Christmas, and we're into our third or fourth bottling of our wine because of the retail store. Many of our customers are not only from the immediate area. We get customers that are travelling throughout Ontario.

This has been the lowest season right now. The tourist season starts in June and carries through into the fall of the year. I suspect that we will get customers from further afield, which means that when they go back to Sudbury, London, Windsor, they'll go to their local LCBO store and they will ask for our product.

Mr Hansen: Your location is on the service road to the Queen E. I understood that you felt you would have excellent sales of your product to American tourists coming in. Is that correct?

Mr Hall: I certainly hope so, because there are a fair number of American tourists that travel up from the Buffalo and Niagara Falls area to Toronto. The QEW has a traffic pattern, I'm told, on the average of about 60,000 cars a day. The peak season obviously, again, is the tourist season. Hopefully, many of them will stop in the area, have lunch and visit and tour the distillery.

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Mr Chiarelli: First of all, thank you very much, Mr Hall. You're certainly a good advocate for your business and your industry. I'm sure that you feel as though you've had one hand tied behind your back to try to do business over the last little while.

One thing I would like to know from you is, while you have a captive audience here of legislators and public policymakers and while all the parties are supporting this legislation and hopefully it will pass very soon, do you have any other suggestions you might give us to assist your industry and your business?

Mr Hall: I was asked to come here today to simply speak directly to this particular issue. There are many, many other issues that are being dealt with through the Association of Canadian Distillers. I could probably go on ad infinitum on some of those. Our product is the highest-taxed product in Canada, at 83%.

So there are many other issues, but this particular issue is very dear to my heart because of the fragility of the whole Niagara Peninsula and because of the care that's given by the Niagara food farmer who is growing all of this fruit down there, whether it's the grapes or the cherries or the peaches. This issue is extremely important.

I think that all of the other issues that I know many of you may be briefed upon are extremely important also. I believe the distilling industry in Canada has a bright future, if we can begin to level the playing field. Moving quickly on Bill 113 is a very short step, but it's a step in the right direction, a beginning to level that playing field.

Mr Chiarelli: You've indicated a connection to the whole economy of your area, from the farmer to the manufacturing and so forth. Presumably you will get that multiplier effect if the industry's overall sales could be enhanced, particularly to tourists and export and people who are travelling through the province.

You mentioned almost under your breath the question of taxation. Do you have a sense that government revenue would be enhanced or at least maintained by a reduction of the taxes, by increased volume?

Mr Hall: Absolutely. When you look at a third of the market that is illegal, that are spirits being purchased through illegal channels, there is no doubt in my mind that a tremendous amount of government revenue is being lost. We're asking our potential customers to create criminal acts. I'm very customer-oriented, and you try to treat customers with good service and good sense. We're asking our customers to commit criminal acts.

I'm also hoping that if Bill 113 passes and we are allowed to operate a distillery store at our retail site, we will be able to help educate customers too and show them the value of buying products that are made in Canada and made in Ontario. But there is no doubt that the excessive taxation is dramatically hurting the industry.

Mr Chiarelli: You heard some comments earlier when you were sitting in the audience, some concerns about inspections and additional inspectors. Do you feel that using those provisions to cut out smuggling would help the industry? Do you think they might be useful in restricting the amount of smuggling that's going on?

Mr Hall: I don't know exactly the ramifications and implications of the inspection except to say that I understand they are there to be able to provide the LCBO with additional powers. I must say that I support that 100%. We have laws in this country, and in order to implement those, people in this country should be abiding by the laws of the country.

It is certainly hurting our Canadian industry by having a third of the market being smuggled into this province. Therefore, I'm 100% in support of being able to provide the LCBO and the various regulators the tools to assist in curtailing the smuggling activity.

The Chair: Mr Hall, we ran out of time. Thank you for coming today and making this presentation to us.

MINISTRY OF CONSUMER AND COMMERCIAL RELATIONS

The Chair: I'd like to call Ms Longo and Mr Mander and M. Bourgeois to come back again so that Mr Harnick can complete his question.

Mr Harnick: Thank you very much. I appreciate the indulgence. My question really was, do you think it's justified that inspectors have this rather extraordinary power to accomplish what you want to accomplish?

Mr Bourgeois: The section was drafted in accordance with the accepted draft and provisions for this type of inspection power at the time. In my experience, in several years of doing prosecutions and advising inspectors and investigators and so forth, this type of provision has not been actively used, although its existence has been of assistance in some cases in conducting an investigation or an inspection.

I'm not aware of it being used by actually requiring somebody, and most, to swear an oath and so forth, and I think it's that provision that you're concerned about, not the first half of that clause --

Mr Harnick: No.

Mr Bourgeois: -- if I'm correct. I'm not aware, again, of it actually being used in practice over four or five years of experience in practising law.

Mr Harnick: You'd agree with me, though, that could be pretty intimidating.

Mr Bourgeois: I'm not sure I would be in a position to agree or disagree without a fact situation presented.

Mr Harnick: I just put it to you that if an inspector shows up on my premises, where I'm trying to run my restaurant, and says, "I have the power to make you answer me, and furthermore, to swear on the Bible that you're telling the truth," that can be a pretty intimidating thing for something that you say you've never seen cause to even use.

Mr Bourgeois: As I say, I'm not aware of it ever being used in that fashion.

Mr Harnick: I'm glad that I have the recommendations of the Ontario Restaurant Association. I now see their brief for the first time. What they say is that to a very significant degree, the investigatory powers set out in section 4 are duplications of what the Liquor Licence Act permits, and they are concerned that inspectors under the Liquor Licence Act will be inspecting their premises with virtually the same powers.

Now you are permitting another body, as I understand it, the liquor control board, to do the same thing. I can certainly see where they would be somewhat concerned about now having to deal with two different sets of inspectors who are essentially, in their eyes anyway, inspecting for the same issues. I have no doubt you've seen their brief and --

Mr Bourgeois: I haven't seen their brief, although we did meet with representatives of the Ontario Restaurant Association and the Ontario Hotel and Motel Association.

Mr Harnick: I'm a little surprised that in providing us with your brief today, or your presentation, you have not seen fit to respond to the recommendations that they make. In fact you've almost totally ignored the concerns that they have.

I think it would be incumbent upon you, now that they are here and about to give their brief, to tell us why they are wrong and you're right, so that when they come up to present their brief, they might be in a position to respond and maybe convince you that the act is too onerous with regard to the particular areas they enumerate. I wonder if you might deal with that as I think you probably should have in your initial discussion with us.

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Mr Bourgeois: I have only seen their brief just now, when the copy was provided to me.

Mr Harnick: But no doubt you've met with them and they've expressed all these same concerns.

Mr Bourgeois: We did meet with them, and it was mentioned at the meeting and I believe in the introductory remarks as well, if I recall correctly, that some of these issues can be dealt with through a memorandum of understanding between the ministry, the liquor control board and the liquor licence board. If it wasn't mentioned I'm raising it now: that that is the place, rather than the legislation, to deal with some of these issues.

Mr Harnick: But that's cold comfort to them if such a memorandum doesn't end up existing.

The Chair: Mr Harnick, I'm going to allow them to finish off and then we're going to have to move on.

Mr Harnick: I think it's the very least, Mr Chair, that you can do. The restaurant association certainly deserves, if it's come here and it's got all these concerns, to get a comprehensive answer. We should spend the extra time we need so the restaurant association can then at least --

The Chair: No. Mr Harnick, we're not going to do that. You've asked your question. We're going to get whatever answer we get from the technical staff here and then we'll move on.

Mr Bourgeois: I believe it was covered in Ms Longo's presentation that we did consult with them, and what we have agreed to do is consult with them in the preparation of the memorandum of understanding to deal with those enforcement issues and the inspection powers.

As I think was indicated to Mr Chiarelli earlier, in all likelihood, the chances of any of their members being inspected by two sets of inspectors is not very great. That's not going to, in all likelihood, happen.

Ms Longo: I think the other thing I'd just add to that is that it's not intended to have double inspections, and that's why we would like to work with the agencies and with the ORA to work out a practical mechanism to make sure that's not the case.

Mr Harnick: Why don't you just accept the amendment that they've suggested and delete the Liquor Licence Act?

The Chair: Mr Harnick, I'm sorry. We're out of time.

Mr Harnick: Well, it is an important question.

The Chair: You're quite right, but we have allowed plenty of time on this. If there is anything further by way of discussions that we can have in this committee or in dealing with clause-by-clause, there's an opportunity for that for the members to discuss later.

Mr Harnick: Can I ask for unanimous consent of the committee to see if we can have that question answered?

Mr Chiarelli: Why don't we just assign to Mr Harnick the time that the government didn't use up?

Mr Harnick: Can I ask for unanimous consent?

The Chair: Is there unanimous consent on this? No. Okay, there isn't. I'd like to thank the staff from the Ministry of Consumer and Commercial Relations for their technical briefing. It was very useful, and I guess you'll be around to listen to the other presenter.

ONTARIO RESTAURANT ASSOCIATION

The Chair: I'd like to invite the Ontario Restaurant Association, Mr Paul Oliver and Ms Rachelle Solomon.

Mr Paul Oliver: Thank you. I'm Paul Oliver, president of the Ontario Restaurant Association. On behalf of the association I'd like to thank you for having the opportunity to appear before you today to discuss some of the concerns of the hospitality industry and licensee community regarding Bill 113. We're particularly pleased that the bill has been referred to this committee for thorough review and, hopefully, modification.

While supportive of many of the overriding principles of the legislation, the Ontario Restaurant Association believes that a number of fundamental changes are needed to Bill 113 before it receives third and final reading.

The concerns of the hospitality industry can generally be broken down into three distinct areas. The first one is, however, our most important and most pressing: the expansion of the LCBO powers and overlap with existing LLBO responsibilities.

It is our association's understanding that the provisions of Bill 113 are intended to expand the powers of the liquor control board so that they mirror or reflect those powers already granted to the liquor licensing board. These pertain to entering and searching licensed establishments, the offices of licence holders and seizing corporate records.

While the ORA is concerned about the application of the search-and-seizure requirements, more importantly we're concerned about the fundamental transformation of the LCBO from a retailer of beverage alcohol in Ontario to that of a body empowered with enforcement and inspection capabilities. The ORA is concerned that granting these powers to the LCBO is a major and fundamental departure from the current as well as historical practices of regulating adult beverages in Ontario.

Relative to the licensee community, we do not see Bill 113 as minor housekeeping legislation. Instead, it represents a fundamental departure in the way we regulate Ontario's hospitality industry.

The ORA is concerned that what will be created by departing from the traditional role of the LCBO as retailer is a double regulatory burden on licensed establishments. The potential exists that a licensee will face an inspection from both the liquor control board as well as the liquor licence board coming in and inspecting for the same purposes. While we agree with the ministry that this may not be a common occurrence, we do recognize that it is a possibility and our concern is that it be addressed so that we don't have those at all.

The ORA sees that this is simply duplicating the existing regulatory services, which in turn will use up scarce resources and place an additional administrative burden on small business operators, which comprise the large majority of the licensee community. As well, Bill 113 will eliminate the clear distinction, which is very important, which exists between the liquor control board and the Liquor Licence Board of Ontario, one being a retailer and one being a regulator.

The ORA is also concerned that this departure from the traditional role for the liquor control board may in the long term gradually eliminate the need for the Liquor Licence Board of Ontario. If the current powers that reside in the liquor licence board are replicated or duplicated, the suggestion could easily be made that there is no longer a need for two separate, distinct boards. If this is truly the intention, which we don't believe it is, then the ORA would strongly urge that it simply be eliminated immediately. We don't believe that this is the goal of the government and we believe that it should be clearly reflected in legislation.

The ORA is particularly concerned that duplicating of regulatory powers will substantially increase the administrative and regulatory burden placed on the more than 14,000 small business operators who comprise the licensee community. The government of Ontario has already stated that reducing the regulatory burden on small business is a top priority. Bill 113 does not accomplish this task. Instead, it only enhances the already excessive regulatory burden placed on small hospitality operators.

The ORA is also concerned about the competitive implications of the liquor control board receiving these powers currently residing within the liquor licence board. Since the LLBO is not a retailer, there is not a competitive issue when it inspects licensed establishments. There are, however, competitive issues when the LCBO would be exercising those powers.

Licensees currently purchase adult beverages from the Liquor Control Board of Ontario as well as from Brewers Retail. In this relationship, Brewers Retail and the LCBO are in fact competitors. We are concerned that if the LCBO is allowed to regulate licensed establishments and inspect confidential business documents of a competitor, such as Brewers Retail, a major competitive advantage could be inherently granted to the LCBO. This situation would be similar or akin to the CRTC granting the CBC the power to inspect private broadcasting stations in Ontario. We don't believe that this would ever happen and we don't think it should happen with the adult beverage retailing sector.

The association does not see a beneficial need for expanding powers of the LCBO and anticipates many downside, negative impacts of such an action. We therefore are encouraging this committee to amend Bill 113 with the recommended changes we've included in appendix A.

We're also concerned about other provisions in this legislation. While not currently addressed in Bill 113, Bill 113 is the enabling legislation for the Canadian-American beer agreement. In previous submissions to the Minister of Consumer and Commercial Relations, the ORA has stated that the licensed community in Ontario is concerned about some of the provisions contained in the Canadian-American beer agreement and how these provisions will be interpreted and applied relative to the licensee community. In particular, our concerns revolve around the interpretation of social minimum pricing and whether licensees will be treated as consumers or retailers of beer in Ontario. We have strongly argued that licensed establishments are retailers and should be treated as such.

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Since Bill 113 is the enabling legislation which will allow Ontario to implement its obligations under the Canadian-American beer agreement, the ORA believes that this important issue of the interpretation of minimum pricing relative to licensed establishments should be resolved before 113 is proclaimed. We're therefore encouraging the standing committee to strongly urge the Minister of Consumer and Commercial Relations to resolve the outstanding issues relative to minimum pricing and its application to the licensee community.

Finally, the Ontario Restaurant Association believes that Bill 113 should be used by the government of Ontario as an opportunity to expand its regulatory powers to cover vendors of adult beverages in Ontario who are currently exempt from regulations. In particular, we are referring to you-brew establishments, retail wine-making and home-delivery establishments.

The ORA is extremely concerned that approximately 250 of these establishments are making adult beverages and are competing with licensed establishments. However, they are not regulated. We believe that since we seem to have extra regulatory capabilities, to the point that we are double-regulating some sections and not regulating others, those resources should be reallocated to sectors of our retail industry that are not covered.

The association believes that the power to regulate these establishments should be included within 113. At minimum, we believe that the liquor control board should be granted the power to inspect and test products that are being produced in these establishments, in particular those products which are being produced and served at major special-occasion-permit functions. Our members are extremely disturbed that there are no means by which to test wine produced in these retail establishments which is in turn served to hundreds of people at wedding receptions and social functions that are sanctioned by the liquor licence board. We therefore believe that there is a need for additional regulation of this sector.

We thank you for the opportunity of appearing here today, and in particular we draw your attention back to our first and most pressing concerns.

Ms Christel Haeck (St Catharines-Brock): I'd like to actually ask a question of the parliamentary assistant, and he might want to refer it one of the staff.

With regard to the item mentioned on page 5, number 3, the expanded responsibilities of the LCBO and the LLBO in relation to special occasion permits, as someone who represents one of the wine-growing regions, I have a number of wineries that have also brought forward some of these concerns with regard to product that might be used at, say, a wedding reception which may not comply with all of our regulations.

With regard to the testing of these products, I had made the assumption, however wrong, that the LCBO or the LLBO was in the position of making some tests if they discovered such an item. Could you correct my assumption if need be?

Mr Duignan: I know that the ministry is currently reviewing the practicality of implementing the ORA request at this particular point in time, but I would be glad to ask the ministry staff to expand on your particular question, either orally or in a written response possibly next Monday when we meet to do clause-by-clause. Or if they wish to answer it now, that would be up to them.

Ms Longo: We've had the request from the ORA and we've been looking with the LLBO at how to do this. We're trying to make sure that we can balance the interests of people who may make home-made wine and want to serve it at a wedding in their own family, be able to balance that interest out with the issues that have been raised with the ORA.

Ms Haeck: If I may expand, locally, the wine council in particular has raised the issue that at a family function, not necessarily that a home product is being used, but that there might be a smuggled product that has found its way into this particular event. The ORA makes the comment at the bottom of that first paragraph that it's not tested by the liquor control board, and I'm just wondering to what degree there is the ability within the current structures that may exist between the two organizations to follow through on the testing of those products.

Ms Longo: I guess I have to answer that in two ways. Home products that are made legally at home and served, if they have an SOP licence, at a wedding or something like that don't have to be tested by the LCBO. Smuggled products ought to be tested, but it's hard to get them tested because they're being smuggled.

Ms Haeck: If there is a suspicion that they are, what is the mechanism? Do you have a mechanism at this point for testing this?

Ms Longo: We've asked everybody in the wine community and everywhere else, where they've got anecdotal evidence, where they think something's happening -- because that's been the source of much of finding the smuggled or illegal activities -- to let the LLBO know as quickly as possible. As soon as they can get there, then they will be able to find out what they're dealing with.

Ms Haeck: Ms Longo is making a response to a concern that's very much in my riding, and the way Mr Oliver has raised it is definitely mirroring some concerns relating to my wine community.

Mr Chiarelli: I'm particularly appreciative of the fact that you do have suggested technical amendments which will be very helpful to us when we get to clause-by-clause. But I'm concerned about your comments that it's not a minor housekeeping bill and that it can generate some fundamental changes in the hospitality business. Could you be a little more specific on some of the changes, perhaps give me the order of magnitude of your concern and tell me how it's going to impact negatively on the average restaurateur, if you could define one?

Mr Oliver: It's difficult to define an average restaurateur in these days. I guess the average one is the one that stays open, keeps the doors open.

Our concern is that we don't know the direction this legislation is going. We don't know what the mindset of the government will be two years or five years down the road. If it's simply where the government is saying it's going today, we wouldn't have as big a concern, but what we're doing is entrenching it in legislation and we don't see a need to put it into legislation.

For the average restaurateur, they know exactly who regulates them. We now have the liquor licence board. If they have a question about hours of operation of their establishment, they deal with the liquor licence inspector or the board, and when they have someone coming in the front door, they know it's the liquor inspector.

What we have potentially down the road are duplicated services. It would be the equivalent of Ontario setting up two police forces, the confusion it would create for a resident in Toronto to know there is a provincial police force and then a provincial police force 2. You wouldn't know who to call or how to deal with it. Those are the concerns we're hearing back from members.

For Ontario to comply with its obligations under the Canadian-American beer trade agreement, we don't believe this needs to be contained in it. All Ontario needs to do is demonstrate it has an ability to check the entire distribution chain, but it doesn't have to have that residing all within one ministry or one department.

Mr Chiarelli: I'm not sure I got the full import of what you were indicating with respect to competitive issues related to inspections by LCBO. Could you indicate what your concerns are in that area?

Mr Oliver: Currently a licensed establishment purchases its product from both the Brewers Retail as well as the LCBO. What could potentially happen is that if a LCBO store in a small town noticed that sales at their licensed establishments were dropping, they in theory under this power -- whether they would do it or not is a second thing -- could say, "We think they are getting special prices from BRI," and send in an inspector from head office or even be appointed as an inspector themselves to come in and check the confidential business invoices between BRI and the licensee, even though they're competing for that same business.

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Mr Chiarelli: So you're saying basically they would be in a potential conflict of interest.

Mr Oliver: Exactly, and what we want to do is make sure that there isn't even a perception of a conflict.

Mr Chiarelli: And of course we're talking here about government tax revenues as well, government income.

Mr Oliver: Yes. Government income is dictated by how much the LCBO sells as opposed to how much the Brewers Retail sells.

Mr Chiarelli: The other point you covered was the burden on small business that might be generated as a result of this. Could you be a little more specific on that, other than the duplication of inspections?

Mr Oliver: It's predominantly the duplication, but one of the concerns we have is that the LCBO will use this as an opportunity to request information from licensees. Currently, if you get a request for information on sales or anything like that, it goes to the LLBO and they use that just for enforcement. There is a potential that you'd get a whole series of different questionnaires coming from the LCBO. Would they be trying to evaluate market share or trying to evaluate their sales or trying to evaluate whether American product is coming through the normal channels or something like that? That's where the confusion arises. Confusion is an administrative burden.

Mr Harnick: You heard the discussion I had with the ministry people. It doesn't appear they're going to accept the amendments you've provided, although I wasn't permitted to ask them and get an answer. But it appears that they believe a memorandum of understanding between all the government agencies that are involved in regulating the sale and distribution of spirits, beer, wine will suffice to avoid the duplication that you fear. Does a memorandum of understanding, which may one day develop or may never develop, as a solution satisfy you as to this issue of duplication of inspections?

Mr Oliver: We've certainly had discussions subsequent to the second reading of the legislation with the ministry officials regarding a memorandum of understanding, and our position would be that a memorandum of understanding can address the problems as a secondary. But we have the opportunity to fix the legislation now. What we're really doing is passing something and saying, "Oh, but we're not going to use it." It just doesn't make sense to pass something and say, "But we're going to take this out and piece out," when you have the opportunity now to address those problems so you don't have to rely on a memorandum of understanding.

A memorandum of understanding is only as valid or as enforceable as whoever is in power today or whoever is the signatory on that. There's nothing that would require public scrutiny if a memorandum of understanding is amended two years down the road or three years down the road. Our concern is: We have legislation, we have the opportunity to fix it now. Let's do it.

Mr Harnick: I couldn't have said that better myself. I wonder whether the ministry wants to comment on that.

Mr Bourgeois: There's been a great deal of emphasis placed in the ORA on duplication as well as in effect the potential for a bad-faith inspection. I think that's the underlying concern, that the LCBO or the government in some fashion will have bad-faith inspections. That's my understanding of the competitive issue.

Mr Harnick: That's not the issue at all. The issue is duplication of inspection. Nobody said anything about bad faith or anything of that nature at all.

Mr Bourgeois: I was trying to express my understanding of the concern about the competitiveness issue and the conflict-of-interest issue. If my understanding is incorrect, I apologize.

In any event, with respect to the duplication issue, as I indicated before, the primary purpose is for the liquor control board inspectors to ensure compliance under the legislation with respect to the GATT and the beer trade agreement. It's the legal advice that has provided that there will be a necessity to be able to track beer and other products, as well as to ensure that a national treatment has been accorded throughout the regulatory structure and throughout the retail structure as well, and to be able to demonstrate that to the trading partners with Canada and Ontario. The legal advice to the ministry is and has been that such provisions are necessary.

Mr Harnick: Does that answer satisfy the ORA?

Mr Oliver: In our interpretation of the Canadian-American beer agreement, the onus is placed on the government of Ontario to track product. They may need to track it through two or three ministries or even two agencies of one ministry. The liquor control board can track it through the manufacturing and distribution system and the liquor licence board can track it through the licensee community. But principally, most of the concerns for the Canadian-American beer agreement would be at the distribution system between BRI and LCBO and not pertaining to the licensee. How much we purchase our product at is not relevant to treatment of nationality.

The Chair: Thank you, Mr Oliver and Ms Solomon.

On Monday, May 2, at 3:30, we'll be dealing with clause-by-clause.

The committee adjourned at 1727.