Alcohol pricing restrictions

With no announcement in the March 2013 Budget on the issue of Minimum Unit Pricing for alcohol, speculation has arisen that the UK Government may be re-thinking its approach to the issue of alcohol pricing. The proposal for Minimum Unit Pricing, originally announced in March 2012 in the Government’s Alcohol  Strategy alongside proposals such as the banning of multi-buy promotions in the off-trade, did not identify a Minimum Price point and the Government has been consulting on the basis of a recommended  45p unit minimum price. In the 2013 Budget the Government indicated that it would shortly be responding to its consultation (which closed on 6 February 2013), including proposals to deal with deeply-discounted alcohol in supermarkets and other stores, but gave no indication of its current thinking on the issue.

Background

Alcohol regulation is a hot topic at the moment and participants in the sector will be aware of the increasing pressure from the WHO, the UN and other international organisations and NGOs who are calling on governments to impose tighter alcohol control policies. These campaigns, which focus on imposing supply side restrictions, minimum pricing requirements, alcohol content restrictions, ingredient disclosure requirements, marketing and promotional bans and over-sized and/or pictorial labelling requirements, to name a few, are placing governments under pressure to act. Over the last year or so we have seen a marked increase in alcohol control regulation or proposals throughout Africa, Asia-Pacific, Europe and the Americas.  There have also been calls to exclude the alcohol industry from having any role in the formation of national or international alcohol control policies and to abandon any semblance of self-regulation or public-private partnerships in this space.      

In addition to the obvious commercial impact which would result from the implementation of alcohol control restrictions (the UK Government was unable in its Impact Assessment to estimate the cost to business associated with a Minimum Pricing Unit as a result of lost alcohol sales as well as potential losses from restrictions placed on loss-leading pricing strategies), such measures are likely to give rise to a number of legal issues for corporates operating in the alcohol industry. By way of example, alcohol control restrictions could have the potential to distort competition within the sector, and also give rise to problems associated with intellectual property rights and the free movement of goods.  There is also the possibility that implementing such regulations may place the relevant governments in violation of their international trade and investment treaty obligations. 

The Scottish experience

As we have seen in Scotland, the introduction of a minimum price for alcohol of 50p per unit which was due to come into effect in April 2013 (pursuant the Alcohol (Minimum Pricing) (Scotland) Act 2010 (the Act) has been challenged in the national courts by judicial review and at EU level. The Scotch Whisky Association, the European Spirits Organisation and the Comite Europeen Des Enterprises Vins have taken action through the Scottish Court of Session by applying for judicial review of the legislation on the grounds that the law on minimum pricing is in breach of the UK’s EU Treaty obligations relating to free trade and competition (specifically, Article 34 of the Treaty on the Functioning of the European Union (TFEU), agreements with the World Trade Organisation, GATT  1994 Article II.4 and the Common Agricultural Policy) and contrary to the terms of the Scotland Act 1998 in that it concerns matters which are reserved to Westminster, and to the Acts of Union 1706 and 1707 in relation to freedom of trade. The matter was heard by the Scottish Courts in January 2013 and on 3 May 2013 the Court of Session refused the petition, holding that:

  • The Act was not outside the legislative competence of the Scottish Parliament and that the proposed Order setting a minimum price was within devolved competence and within the powers of the Scottish Ministers;
  • The Acts of Union were not an impediment to the minimum pricing measures;
  • The measures were not incompatible with EU law and in so far as the measures had equivalent effect to quantitative restrictions on imports (Article 34 TFEU) they were justified on the grounds of the protection of the life and health of humans (Article 36); and
  • The national authorities retained competence to introduce minimum pricing notwithstanding the fact that there had been a degree of EU common organisation of the market in respect of wine, other fermented products, and agriculturally produced ethyl alcohol (Regulation (EC) 1234/2007 (as amended by Regulation (EC) 491/2009)). The measures were not prohibited by, nor did they undermine, that Regulation.

The Court of Session was satisfied that it was unnecessary to refer any question of EU law to the Court of Justice for a preliminary ruling. The petitioners have indicated that they will be appealing the decision.

Meanwhile, at EU level, the European Commission has voiced opposition to Scotland’s alcohol pricing plans, following comments from a number of Member States (including wine producing countries such as Bulgaria, France, Italy, Spain and Portugal) regarding the compatibility of minimum pricing plans under community law. In particular, there are concerns that the policy may have more impact on importers than on domestic producers (thereby being a Measure of Equivalent Effect to a Quantitative Restriction (MEEQR) on imports under Article 34 TFEU). In November 2012 EC General Secretary Catherine Day said “the measure at issue raises doubts as to its compatibility with the principle of proportionality,” and indicated that an “increase of excise duty appears to be a better option to reach the goals sought“. The Scottish Government had until 27 December 2012 to submit its response to the European Commission about those concerns.

It is not the first time that Europe has intervened on minimum pricing policies; the European Court has considered a minimum price for spirits to constitute a MEEQR (Case 82/77, Van Tiggele) and has objected to policies of minimum pricing for tobacco products on the grounds of breach of Article 9(1) of Directive 95/59 on taxes other than turnover taxes which affect the consumption of manufactured tobacco (Case C-197/08, European Commission v French Republic; Case 198/08, European Commission v Republic of Austria; Case 221/08, European Commission v Ireland).

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