Usually, parties would raise the regulated conduct defence when facing criminal prosecution under the Competition Act, but, in this case, it was used to defend against a civil action that was relying on the cartel provisions of the Competition Act, says Antonio Di Domenico, a partner and co-leader of the antitrust competition and marketing group at Fasken Martineau DuMoulin LLP.

“This is the most recent example, and, I may say, a very provocative example of how the defence can be used to defend class action litigation arising out of allegations that the criminal provisions of the Competition Act have been violated,” he says.

After prohibition was repealed in Ontario in 1927, alcohol sales have been regulated through the provincially owned LCBO — under the Liquor Control Act, Liquor Licence Act, Alcohol and Gaming Regulation and Public Protection Act and the federal Importation of Intoxicating Liquors Act. At the birth of the LCBO, the Ontario government established a single distribution system for Ontario beer — now called Brewers Retail Inc. and known as The Beer Store. The respondents Labatt Breweries of Canada LP, Labatt Brewing Company Limited, Molson Coors Canada Inc. and Molson Canada collectively own 90 per cent of Brewers Retail Inc.

In 2000, an agreement between the LCBO and The Beer Store arranged that the LCBO would not sell beer products larger than a six-pack and would not sell beer that was exclusively sold by The Beer Store — though this agreement merely articulated what had been standard practice for decades, said the decision.

Hughes argued that the framework agreement amounted to a conspiracy to divide the beer market between the respondents and went against s. 45(1) of the Competition Act. He claimed that a licensee surcharge imposed on operators holding liquor licences meant he was charged an extra five per cent for beer in violation of the uniform pricing requirement of the Liquor Control Act. Hughes sought damages from the LCBO, alleging their involvement in the framework agreement amounted to the “novel tort” of misconduct by a civil authority.