A Burlington pub owner says he launched a potential class-action lawsuit against the LCBO and Beer Store after hearing customers and colleagues cry in their suds over getting soaked by a secret pact between the retailers.

“Over the past few days, I have heard much anger and concern from both my colleagues in the restaurant business and my customers about these revelations,” David Hughes, owner of The Poacher, said Saturday.

He made the statement through his lawyer, Ron Podolny, whose firm Siskinds LLP filed a notice of action in the Ontario Superior Court a day earlier.

The claim seeks $1.4 billion in general damages and $5 million in punitive and exemplary damages on behalf of Hughes, his pub and “other persons in Canada who are similarly situated.”

Toronto Star Queen’s Park columnist Martin Regg Cohn last Tuesday broke the story about the secret deal that limits competition between the provincially owned Liquor Control Board of Ontario and the privately owned Beer Store.

The 14-year-old pact allows the Beer Store to profit from its effective retail monopoly by limiting the LCBO from competing on products, pricing and territory.

Under the scheme, the LCBO agreed it would sell only six-packs of beer — not 12- or 24 packs — to consumers. It also agreed not to sell two-fours to restaurants and bars.

Only the Beer Store can sell the larger packs, which have lower per-unit prices.

The LCBO can only sell beer brands carried in its regular stores to restaurants and bars, leaving them with few beer options not brewed by the Beer Store owners.

The Beer Store is owned by three foreign mega-breweries: AB Inbev of Belgium, U.S.-owned Molson-Coors and Japanese-owned Sleemans. They have a virtual monopoly on beer sales in Ontario and maintain 80 per cent of the market share.

The LCBO has 20 per cent of the market share.

In smaller communities where there is no Beer Store, the LCBO can sell 12- or 24 packs. But if a Beer Store opens up, the nearby LCBO store must cut its beer offerings back to six-packs.

In the end, it means LCBO customers pay higher prices, the province gets less revenue and consumers are restricted in what they can buy.

Hughes, 61, has operated his neighbourhood pub for 29 years. He’s dismayed that the 14-year-old scheme has only just now come to light.

“It was particularly upsetting that this agreement was not made public, and was only revealed through the media,” he said.

His notice of action claims that the LCBO and Beer Store violated the Competition Act by interfering with economic interests.

“The action arises from a conspiracy to fix, raise, maintain or stabilize prices of beer in Ontario,” it reads.

“During the conspiracy period, the defendants participated in illegal and secretive discussions and made agreement relating to prices and distribution areas of beer in Ontario,” it continues.

The allegations have not been proved in court.

Hughes said he is taking the legal action on behalf of consumers and businesspeople like himself.

“I believe it is my duty as an Ontario citizen and a business owner in the province to vindicate the rights of consumers and help ensure free competition and fairness in the market,” he said.

Rino Bortolin, a Windsor restaurateur and city councillor, said he would consider joining the lawsuit to support Hughes’ cause. He’s looked into launching a lawsuit himself, but says the “David and Goliath” nature of the fight discouraged him.

Loading... Loading... Loading... Loading... Loading... Loading...

“It’s a big fight to pick, but at the same time it’s necessary,” said Bortolin, 41, who has worked in the business for 22 years and owned restaurants since 2000.

He stopped carrying product from The Beer Store last year and deals exclusively with craft brewers.

“We were just getting gouged pricewise,” said Bortolin. “We wanted to make the statement that it wasn’t acceptable.”

Beer Store president Ted Moroz said the retailer plans to vigorously defend itself against the lawsuit.

“The Beer Store hasn’t reviewed a statement of claim. But this suggested lawsuit is complete nonsense. Anyone who suggests otherwise is deliberately misleading Ontario consumers. We will fight it with full force,” he said in a written statement.

Moroz argued that the Beer Store does not set prices.

“Each brewer who sells in the Beer Store independently sets their own prices, which are approved by the LCBO on a weekly basis,” he said.

He went on to say that every province in Canada has the legal right and jurisdiction to regulate alcohol sales, which is what Ontario has done in this case.

The LCBO is not yet prepared to comment on the legal action, said spokesperson Heather MacGregor.

“Our legal counsel has not yet had the opportunity to review it,” she said.

The deal was struck by the former provincial government led by Mike Harris. The Liberal government has allowed it to continue.

Finance Minister Charles Sousa said he is looking into the deal and could decide to scrap it.

Restaurants Canada, which represents about 30,000 food service businesses, has asked the federal Competition Bureau to investigate.