Beer smuggling case has deep implications for health policy

Supreme Court ruling could lead to higher smoking rates, writes Rob Cunningham.

With the Supreme Court hearing arguments in the Comeau case this week, a great deal is at stake. While on the surface the case is about bringing a few cases of beer across a provincial border, the case has potentially profound public health implications regarding a provincial government’s ability to tax and regulate not just alcohol, but also tobacco, cannabis and other products.

The case involves a New Brunswick resident, Gerard Comeau, who drove to neighbouring Quebec — where government-mandated alcohol prices are lower than in New Brunswick — to buy beer. He brought 15 cases back to New Brunswick, thus engaging in the functional equivalent of alcohol tax evasion. He received a ticket, and his lawyer filed a constitutional challenge.

The New Brunswick provincial court upheld the challenge, saying provincial legislation requiring all alcohol to be purchased through the provincial alcohol monopoly, ANBL, infringes interprovincial free trade. This conclusion, however, is mistaken. The purpose of this particular provision is in no way to give preference to New Brunswick alcohol over products from other provinces. All alcohol products, regardless of province of origin, must be sold through ANBL. In fact, ANBL stores sell alcohol from across Canada and around the world.

The purpose of the government monopoly is to control a harmful product, to prevent contraband, and to maintain the required higher prices, which has the dual benefit of decreasing alcohol consumption and increasing government revenue. That higher prices decrease consumption, whether for alcohol or tobacco, is recognized by Health Canada and the World Health Organization. Youth are especially sensitive to price.

At its core, the Comeau case is about beer smuggling. If today it is 15 cases of beer, why not 15 truckloads tomorrow, or 1,500 truckloads the month after?

Government alcohol monopolies are consistent with not only free trade within Canada, but also international free trade agreements. With such agreements in place, all provinces maintain a government alcohol monopoly for wholesaling, and most do for retailing. Even in the United States, there are 17 states with government wholesale monopolies, at least for spirits, with 13 of these also exercising retail control.

Provinces should be able to control sales of harmful products. For cannabis, all provinces intend to have government wholesale monopolies, while many intend retail monopolies. For tobacco, such a controlled system should be a future possibility. What about opioids? Drug companies should not have a constitutional right to ship opioids directly to consumers in other provinces, disregarding licensed pharmacies.

Just as alcohol pricing varies by province, so do cigarette tax rates. Unless the lower court decision is overturned, there will be vast interprovincial cigarette smuggling, and the current ban on interprovincial tobacco shipments to consumers would be rendered meaningless.

In the name of “free trade,” smugglers could bring unlimited quantities of cigarettes from low-tax provinces to high-tax provinces. The wide availability of cheaper cigarettes would increase smoking.

Comeau’s lawyer, Ian Blue, writes that the constitution does not prevent “regulation of liquor stores (or) imposition of direct taxes on liquor.” This begs the question, what level of retail regulation would be acceptable — why not a government retail system? And if a direct tax is acceptable, then why is government administrative pricing through an alcohol agency — equivalent to a tax — unacceptable?

There should be no constitutional right to smuggle beer or cigarettes. The Supreme Court should protect provincial ability to tax and price products, and to control the sale of harmful products.

Provinces should be able to control sales of harmful products.