> they can negotiate ruthlessly and drive prices down to maximize profit for the people of Ontario

They do. However there's an odd situation that has arisen at least once. The underlying strategy of the gov't is one of social responsibility... essentially not pricing booze cheap enough that you end up with a lot of public drunkenness. This means that the gov't sets a minimum retail price and the LCBO ensures they don't sell below that. The gov't also sets a maximum retail markup (which is odd, one can only assume that at some point this was an olive branch to folks upset about how expensive booze is... sort of a 'we will not charge more than x% markup' promise implemented as regulation/legislation).

Faced with a minimum retail price and a maximum markup the LCBO had to ask a wine seller to raise their prices because even after applying the maximum markup the retail price was below the minimum. Sounds crazy for cheap plonk... but that's exactly what what they're trying to avoid... winos drunk on the street from cheap Thunderbird.

Note I think this only happened the once. It made the news at the time... but I haven't heard of it happening again.