A battle between beer giants Molson Canada and Miller Brewing Co., about who gets to sell Miller Genuine Draft in Canada, lands in a courtroom in Toronto on Monday.
The two companies have been at loggerheads over the distribution of the popular beer since early this year when Miller said it wanted to cancel the agreement that allows Molson to market its products in Canada.
Molson has had the exclusive rights to distribute Miller products – including the key Genuine Draft brand – under an arrangement that goes back decades. But Miller wants to end the deal, because it thinks it can do a better job of selling its own beer in Canada.
Last January, Miller gave official notice that it wanted to kill the arrangement in six months' time, but Molson said that could not be done under the terms of the contract. Molson went to court in May to get a temporary injunction to keep the distribution arrangement in place until the merits of the dispute could be heard in a full trial.
In July, Ontario Superior Court Justice Herman Wilton-Siegel granted the injunction. The dispute will now be aired in a trial that is expected to last more than a week. Justice Frank Newbould will hear the case.
In his ruling allowing the temporary injunction, Justice Wilton-Siegel said Miller has the stronger case on many of the legal issues, but he also noted that either side might win in a trial.
The key issue in the dispute is the amount of Miller Genuine Draft that Molson has sold in Canada in recent years. From 2010 to 2012, the sales were far below the targets set out in the contract, and Miller says that gives it the right to terminate the deal.
Molson, for its part, says those targets were supposed to be renegotiated. In addition, Molson said in legal submissions, Miller Genuine Draft is a strategic brand in filling out its portfolio of beers, and losing it would cause "irreparable harm."
The dispute has been vastly complicated by the fact that the terms of the agreement were temporarily suspended in 2012 because the two companies were expecting an industry rule change that would have allowed Molson to brew Miller Genuine Draft in Canada instead of importing it from the United States. That would have improved Molson's profit margins, and given it more incentive to sell the beer in Canada.
But that rule change – which would have allowed Canadian beer to be brewed in clear glass bottles – never happened and the old agreement came back into effect. Miller says that means the volume targets are still in effect, while Molson says there has to be a renegotiation of the targets.
Molson and Miller are still partners in the United States, where they sell their products through a joint venture called MillerCoors as a means to compete more effectively with arch-rival Anheuser Busch InBev. One reason Justice Wilton-Siegel gave for granting his injunction – and allowing the dispute to drag on through a trial – was that the two companies are clearly "sophisticated" enough to work together despite their legal differences. That "should temper whatever personal acrimony may have arisen in the course of these proceedings," he said in his ruling.
The two companies are key players in an increasingly globalized beer industry. Miller is owned by SABMiller PLC, based in Britain. while Molson is owned by Molson Coors Brewing Co., based in the United States.
The two companies have fought before about their Canadian distribution deal, which has been in effect in one form or another since the 1980s. In 2005, Miller sued Molson to try to kill the contract, suggesting that Molson's merger with Coors had reduced its incentive to promote Miller brands in Canada. After more than a year of legal battles the two firms decided in 2007 to patch up the fight and extend the agreement.