Major spirits groups including Diageo and Campari face millions in refunds
Some of the world’s biggest alcohol suppliers have lost a legal challenge against Ontario’s liquor monopoly over pricing rules. The decision leaves producers facing millions of dollars in chargebacks linked to Canada-wide lowest-price clauses.
A group of the world’s largest alcohol producers have lost a key case in Canada and face having to refund millions of dollars to the Liquor Control Board of Ontario.
The suppliers challenged a clause in the state monopoly’s contracts which required them to charge it the lowest price available in Canada for their products. They argued that it was inherently unfair and that the LCBO had not enforced its contract Section 14 for such a long while that it was no longer entitled to do so.
Judge says companies understood the rules
Cavanagh said the companies, which include Diageo, Campari, Beam Suntory and Brown Forman, knew the rules.
“The Applicants are sophisticated commercial entities. They were well aware of Ontario’s regulatory framework when they sold their products in Ontario. When they did so, they were required to comply with the Terms and Conditions of their supply contracts with the LCBO,” wrote Cavanagh, who also noted that each new order placed by the LCBO includes the same terms and conditions.
Chargebacks could total tens of millions
The companies that supply more than 70% of the spirits sold in Ontario now face having to pay “chargebacks” demanded by the LCBO running into millions of Canadian dollars.
By last April, the chargebacks had totalled CAN$35.9 million, and industry sources say that smaller suppliers who weren’t part of the suit were also hit with the chargebacks for amounts ranging from a few thousand dollars to sums over more than CAN$1 million.
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Quebec price comparisons triggered enforcement
The chargebacks were issued after the LCBO found several products on the shelves of Quebec’s state monopoly at lower retail prices than in Ontario.
The drinks companies had argued the LCBO didn’t enforce the clause for a decade, then began actively enforcing it in 2023. Continued enforcement would result in higher prices than necessary across the country, including Ontario, their suit alleged.
Industry and LCBO respond to ruling
“We’re obviously disappointed, but we look forward to building our business in Ontario, in collaboration with the LCBO,” said Cal Bricker, CEO of Spirits Canada, the industry association whose members include the seven companies that filed the suit.
“LCBO acknowledges the decision of the Ontario Superior Court of Justice. We value the strong partnerships we have built with our suppliers, which are essential to our success and to delivering the best possible customer experience for Ontarians. We look forward to continuing this work together,” the provincial liquor monopoly said in a statement.
Diageo dispute with Ontario resolved
Meanwhile, Ontario and Diageo have settled a dispute that removed its bottles from shelves in the province’s liquor stores.
Last year, Diageo said it would close its Amherstburg bottling plant this month at the loss of 200 jobs. State Premier Doug Ford reacted by ordering the removal of Diageo products from the state’s shelves.
The plant will still close, but Diageo is investing CAN$23 million in Ontario, which Ford says will help strengthen provincial supply chains and “support the local community in Amherstburg and the surrounding area.”
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