HEARING BEFORE A PANEL OF THE BOARD OF THE
ALBERTA GAMING AND LIQUOR COMMISSION
IN THE MATTER of the Gaming and Liquor Act
Revised Statutes of Alberta 2000 Chapter G-1
current as of November 1, 2010 and the Regulation
and
IN THE MATTER of Diageo Canada Inc.
o/a Diageo Canada
800, 401 The West Mall
Etobicoke Ontario
M9C 5P8
concerning an alleged contravention
___________________________________________________________________________________________
DATE OF HEARING: October 9, 2013
HEARING PANEL:
Hon. T, Chair
Mr. H, Panel Member
Ms. G, Panel Member
Mr. S, Panel Member
LICENSEE/REPRESENTATIVES:
Ms. S, Legal Counsel, McCarthy Tetrault
Ms. B, Director and Senior Counsel, Diageo Canada
COMPLIANCE AND SOCIAL RESPONSIBILITY (CSR):
Mr. M, Hearing Officer
Mr. W, CSR Resource
___________________________________________________________________________________________
DECISION OF THE HEARING PANEL
___________________________________________________________________________________________
I. Jurisdiction and Preliminary Matters
As a result of receiving a report dated June 13, 2013, the Board of the Alberta Gaming and Liquor Commission (AGLC) at its June 20, 2013 meeting convened a hearing into alleged contraventions of Section 81(e) Gaming and Liquor Regulation (GLR) by Diageo Canada Inc. o/a Diageo Canada with offices in Etobicoke, Ontario. A Hearing Panel of the Board met to hear the following alleged contravention:
Liquor supplier/agency or officer, director or employee of a liquor supplier/agency, directly or indirectly making or offering to make a loan or advance or give or offer to give money, a rebate, a concession or anything of value to a liquor licensee or to an employee or agent of that licensee, Section 81(e) GLR
Diageo Canada Inc. and the Hearing Panel were provided with a hearing file containing an amended incident report dated July 17, 2013 and various documents pertaining to alleged incidents occurring between the dates of July 1, 2010 and November 30, 2012, inclusive. Mr. M. presented the case on behalf of the CSR Division. Ms. S represented Diageo Canada Ltd. with the assistance of Ms. B.
II. The Issue
Did Diageo Canada Inc. directly or indirectly make or offer to make a loan or advance or give or offer to give money, a rebate, a concession or anything of value to a liquor licensee or to an employee or agent of that licensee between July 1, 2010 and November 30, 2012?
III. Joint Submission
Mr. M. indicated AGLC and Diageo Canada Inc. had reached a joint submission which he proposed to present to the Panel. He firstly asked that the hearing file be entered into evidence as an exhibit. The Chair entered it as Exhibit 1. He proceeded by reading the joint submission to the Panel.
On June 24, 2013 the Board of the AGLC issued a Notice of Hearing to Diageo Canada Inc., a liquor agency holding registration 300072, which he proposed to refer to as Diageo, if acceptable to the Panel. The Notice of Hearing advised Diageo of a hearing to be held in respect to incidents occurring between July 1, 2010 and November 30, 2012 inclusive.
By way of background, a letter was sent in January 2012 by the then CEO of AGLC to all liquor agencies, liquor suppliers and liquor licensees reminding them of the relevant legislation and AGLC policies regarding the provision and acceptance of inducements, as well as advising that the AGLC would be increasing enforcement to ensure compliance.
In October 2012 the Inspections Branch of AGLC established an Inducement Task Force (ITF) to investigate allegations of prohibited inducements within the liquor industry. Based on information received by ITF inspectors in Calgary, an investigation relating to the activities of Diageo was undertaken, which included interviews from February 14, 2013 to February 28, 2013 and on March 28 2013.
This led the AGLC to request Diageo to provide it with all expense account information for all Diageo’s Alberta representatives. This requested information was provided by Diageo in a timely manner. Following examination of the material provided, the AGLC delivered to the Senior Counsel and Director of Diageo a June 3, 2013 letter advising of the results of the investigation, specifically that it had determined that Diageo had provided during the period from July 1, 2010 to November 30, 2012 inducements relating to menus and business card printing and to entertainment, furnishings and fixtures and sponsorships and that an incident report would be submitted. Such a report was subsequently submitted and a hearing was called by the Board.
Following the Notice of Hearing, discussions continued between representatives of the AGLC and Diageo whereby further information and detailed disclosure was provided. A subsequent review of the material resulted in the removal by the AGLC of the sponsorship allegation.
Over the past 6 weeks both the parties have been working towards reaching an agreed statement of facts to present to the Board hearing that had been called. The disclosure material provided by the AGLC to Diageo contained binders of information respecting alleged contraventions respecting 157 liquor licensees. The alleged contraventions outlined in the initial disclosure amounted to $327,494.20. Diageo thoroughly reviewed the information provided by the AGLC and responded with additional detailed disclosure of creative samples. Following receipt and a review of the binders of additional material provided by Diageo, both the AGLC and Diageo concluded that some of the materials that were initially disclosed did not in fact contravene the applicable sections. Given the significant amount of materials reviewed both parties were of the belief that undertaking a line-by-line, licensee-by-licensee analysis to determine which specific allegations contravened Section 81(e) GLR would be an exceptionally complex undertaking, but that reaching agreement on a fair penalty to recommend to the Board would be more appropriate under the circumstances.
At this point he sought specific approval of the Panel to speak to the specific amount of the penalty proposed and was granted approval by the Chair. Diageo and the AGLC respectfully recommended that the Board impose a penalty in the amount of $150,000 respecting the violation of Section 81(e) GLR. The AGLC and Diageo in recognizing that case-by-case consultation may be required to determine the permissibility or otherwise of certain promotional materials and events, endeavour to work together with respect to the parameters of the GLR, specifically the AGLC will work closely with Diageo to provide it with seminars, meetings, and direct contact respecting the applicable requirements of legislation and policy relating to the marketing of Diageo brands and to the provision of inducements.
Further, in light of the AGLC’s mandate to provide a level playing field within the industry the AGLC is also committed to providing industry communication to assist in the application of AGLC’s policies and guidance related to the prohibitions of menu printing and the provision of entertainment within a licensee’s premises.
As mitigating factors in the Panel determining a penalty, the parties submit that Diageo has been fully cooperative during the investigation by the ITF, has held a good faith belief that its activities did not constitute contraventions of the GLR, and has no previous contraventions under the GLR. In addition, this joint submission removes the necessity for what reasonably would have been a lengthy hearing.
Diageo will work with the AGLC to remove promotional materials from licensed premises that the AGLC considers inappropriate. To the extent that the AGLC discovers additional promotional items that were missed in the investigative process, and predate this hearing, the AGLC will provide Diageo with the opportunity to remove those promotional items without further investigation or penalty.
This constituted the conclusion of the joint submission from AGLC and Diageo, however, he respectfully requested that the Panel hear from Diageo on certain matters that Diageo feels are significant to its business activities in Alberta and he turned that matter over to Ms. S.
Ms. S.
Ms S. is a partner in the law firm of McCarthy Tetrault and appeared today on behalf of Diageo. She thanked Mr. M. for presenting the joint submission and deferred to Ms. B. the opportunity to speak for Diageo particularly in respect to the allegations in the incident report.
Ms. B.
Ms. B. is Director and Senior Counsel at Diageo. Diageo is before the Panel today as a result of the incident report dated July 17, 2013 in which it was alleged that Diageo contravened Section 81(e) GLR. As they have expressed on numerous occasions throughout the investigation process, Diageo has a strong culture and commitment to compliance and their reputation in this regard is of primary importance and as such they are in agreement with the joint submission outlined by Mr. M.
As a supplement to Mr. M.’s submission and to provide further insight to the Board from Diageo’s perspective she offered the following comments.
It was their intent and belief that the activities that they conducted in Alberta were to provide consumer-focused product promotions within the licensed premises. They were not willfully and knowingly contravening the rules or offering inducements to licensees. Throughout the process they discovered that some of their promotional activities were being interpreted by the AGLC under its handbook as prohibited. In addition, it is their view that there continues to be a number of promotional items where further clarity is necessary for them to continue to promote their brands. They recognize that the handbook cannot capture a detailed or exhaustive list of all of the items that might be permitted or not permitted and that they really must be considered on a case-by-case basis taking into account a variety of factors.
As mentioned by Mr. M., they have agreed to move forward with the AGLC to engage and consult in the process relating to how some of their product promotions may be interpreted. This consultation may lead them to some further suggestions or requests for policy amendments. However, today they want to outline and illustrate to the Board some of the difficulties that they have had in interpreting requirements. She proposed to refer to a few sections in the Liquor Agency Handbook if the Panel was agreeable.
The first section of importance is Section 5.2.5(iv) of the handbook, which is the section that starts “A liquor agency may not offer a licensee...” and iv. refers to menu printing. Appendix A to the Acknowledgement and Undertaking, which is a form later on in the handbook prohibits full menu printing, yet neither the handbook nor the appendix define what a menu is. Then turning back to another section in the handbook, Section 5.2.11, there are a number of items here that are included as being permissible and noted as non-essential items. They include a variety of items, the last one on the list being tent cards. It is Diageo’s submission that these provisions and the lack of a defined term for menu have led Diageo to believe that several of its promotional materials were actually permissible.
Secondly, they understand that liquor licensees are required to maintain a liquor menu identifying all of the liquor products that are available to be sold within that licensed establishment and that includes information such as the name of the product, the serving size and the price for the product. Some of Diageo’s product promotions contain some of this very same information that is required to be placed on a liquor menu. She has brought a few examples that she wished to share. The Panel was provided a one page handout described as an example of a product promotion that they believe is permissible under Section 5.1.3, which is the section that states “A licensee may participate in a liquor agency’s local, regional, provincial or national corporate or brand promotion with the following conditions a) product promotions must be directed to consumers or patrons of a licensed establishment with the exception of tasting and sampling” and “b) The promotion must take place in a licensed premises.” So this particular item was used as both an insert and a poster and they understand from their discussions with the AGLC that if a licensee holds up this item as their liquor menu because it contains the same information as she indicated earlier is required for a liquor menu that it may be a violation by Diageo. So the fact that a licensee’s use of promotional items can transform what is permissible into something that is prohibited highlights the difficulties that Diageo faces in ensuring compliance. They know that this is just one example and they acknowledge that it is not representative of all of the creative samples that they gathered and presented to the AGLC, but it is provided for purposes of illustration to show one particular example of the challenges that they face. There are a number of other items within the sampling that they collected that constitute product promotions that have a similar challenge.
The issue of what is permitted and what is prohibited under the regulation is further challenged in practice by the required determination of what form the product promotion takes. So the same content can be permitted in some forms while prohibited in other forms. So returning back to the example she provided, this promotion could appear as a tent card on a table, which is what she alluded to earlier as being a non essential item that is permitted under the handbook, whereas the same promotion if inserted into a licensee’s menu could be interpreted by the AGLC as being prohibited.
Based on their review of the allegations in the incident report and their subsequent discussions with the AGLC they have identified three main categories where they believe Diageo and the industry could benefit from further clarity and these include the following.
The first is product promotions in the form of an insert, similar to the example she just provided, which often contains information such as product information, price and serving size.
The second category is feature lists – this would relate, for example, to seasonal features or individual drink specials that feature a brand within the premise.
The third area is entertainment – in their discussions with AGLC they learned that the AGLC interpreted the regulation and the handbook as prohibiting agencies and suppliers from paying for entertainment inside the licensee’s premise. Based on the statement in Appendix A to the Acknowledgement and Undertaking, Diageo believed it was permitted and they believe others in the industry have also been under the same assumption. It states that liquor suppliers are prohibited from providing to licensees all forms of entertainment that would normally be paid for by the licensee. So based on this wording and the product promotion policies that she referred to and are outlined in the handbook, Diageo believed it was permitted to pay for certain branded events, such as fiddlers for example on St. Patrick’s Day or branded promotions of that nature, entertainment that would not normally be paid for by a licensee. However, after discussions with the AGLC they have learned that this is not the interpretation that is being given to this section of the handbook.
So a successful outcome for Diageo is clarity and a level playing field. They believe that this is aligned with the goals of the AGLC. For this to occur they believe there is an opportunity for the AGLC to provide Diageo clarification of its interpretation of the items just discussed and as set out in Mr. M.’s statement and by way of industry communication. They believe that this investigation and the discussion that has ensued since that time between Diageo and AGLC has been helpful in bringing many of these issues to light in circumstances that they believe Diageo had been operating under a different interpretation of the handbook.
In conclusion, she took the time to thank the Panel for considering their joint submission and Diageo’s comments and subject to any questions the Panel may have, declared those her submissions.
IV. Finding
The Panel makes a finding of a contravention of Section 81(e) GLR: Liquor Supplier/agency or officer, director of employee of a liquor supplier/agency, directly or indirectly making or offering to make a loan or advance or give or offer to give money, a rebate, a concession or anything of value to a liquor licensee or to an employee or agent of that licensee.
The Panel accepts the joint submission of the AGLC and Diageo. The providing of inducements by a liquor supplier or an agency to a licensee is an extremely serious contravention. However, Diageo has acknowledged its contravention and worked with CSR to achieve a joint submission.
The Panel can find no reason to deviate from the joint submission with respect to the contravention.
V. Penalty
Normally the penalty for the contravention in this case would be considerably higher. However, given the early acknowledgement of the contravention and Diageo’s co-operation, the Panel is prepared to accept the joint submission with respect to penalty.
In accordance with Section 91(2) GLA, the Hearing Panel imposes the following penalty for a contravention of Section 81(e) GLR:
Penalty: A $150,000 fine. The fine is to be paid by December 31, 2013.
Signed at St. Albert this 22nd day of October 2013
_______________________________________
Hon. T, Hearing Panel Chair