12/09/2014 16:26 EST | Updated 02/08/2015 05:59 EST

LCBO, Beer Store deal limits competition in beer sales: report

The LCBO and The Beer Store, the two main outlets for alcohol sales in Ontario, signed a government-prepared operating agreement in 2000 that limited competition in beer sales, according to a document leaked on Tuesday.

The details of the agreement inflamed an already heated debate over how alcohol is sold in Ontario — whether it should be deregulated and sold in places like convenience stores or remain government-sanctioned.

A 10-page document was given to the Toronto Star detailing the level of competition — or lack thereof — between the between the Liquor Control Board of Ontario (LCBO) and Canada's National Brewers, the company which owns The Beer Store, when it comes to beer sales. (At the time of signing, Canada's National Brewers was known as Brewers Retail, Inc.)

The agreement makes clear that LCBO retail outlets would not sell or promote anything other than six packs of beer, leaving 24- and 12-packs to The Beer Store.

The cost of 24- and 12-packs is less per bottle than packages of six; giving The Beer Store lower cost beer.

The Beer Store is privately owned by three major multinational brewers: AB InBev, Molson Coors and Sapporo. It handles 79 per cent of beer sales in Ontario, according to the province.

The LCBO is government-owned and produces revenue upwards of $4.9 billion per year, with a $1.7 billion dividend returned to the government of Ontario.

Jeff Newton, president of Canada's National Brewers lashed out at the Toronto Star's report, saying it contained "false and inaccurate claims."

Newton said the agreement allowed The Beer Store to open new stores and compete in Ontario. "The LCBO was using its regulatory powers in a way that limited The Beer Store's ability to serve Ontario consumers — they were refusing to approve the opening of new Beer Store locations," he said in a statement. "[The agreement] was designed to resolve this issue and enable investment in, and the orderly expansion of, Ontario's beverage alcohol retail system — to the benefit of Ontario consumers."

But Ed Clark, the former CEO of TD Bank, who was tasked by the government to optimize its revenue-generating assets earlier this year, recommended the agreement be altered. He wanted the LCBO to sell 12 packs in addition to the sixes.

There are currently 447 Beer Store and 634 LCBO outlets operating in Ontario.