Saturday, 22 October 2011

Minimum pricing - still illegal

Scotland's dreadful health secretary Nicola Sturgeon has been banging the drum for minimum alcohol pricing policy at a SNP conference. As with plain packaging in Australia, the opportunity of attracting some media attention from an otherwise indiffernt world is the pathetic carrot being dangled.

The 1,300 gathering heard Ms Sturgeon say: "Delegates, I can tell you today that our minimum pricing bill will be reintroduced to parliament within the next month.

"When that bill is passed, Scotland will become the first country to introduce a minimum price per unit of alcohol. The world is watching us."

Not so much "when" as "if", since minimum pricing is almost certainly illegal under EU law. Rather than wasting time and money on this doomed policy, the Sturgeon General should listen to expert opinion, like this report from Rand Europe.

Minimum prices for alcoholic beverages, also sometimes called Social Reference Prices, are used in different ways in a number of areas outside the EU, including several Canadian provinces (Saskatchewan, Ontario, Newfoundland, New Brunswick, etc) where the regulation applies to licensed on-trade premises (Strang 2008).

But while a recent Scottish expert consultation concluded that minimum pricing is possible under EU competition law, ‘provided that minimum prices are imposed on licensees by law or at the sole instigation of a public authority’ (SHAAP 2007), minimum pricing practices have tended to be seen as trade-distorting by the European courts (as setting an artificial price floor amounts to resale price maintenance, limiting and distorting price competition), and therefore not typically put in place in the EU (Baumberg and Anderson 2008).

Minimum prices had also been considered, and even introduced through legislation in a few Member States such as Austria and Ireland, for cigarettes as a public health measure, but these moves were contested by the European Commission. This was in line with the jurisprudence of the European Court of Justice, which considers that minimum prices infringe Community law, distort competition and benefit manufacturers by safeguarding their profit margins.

Council Directive 95/59/EC states that manufacturers and importers of tobacco products have the right to determine the retail selling price of their products; according to ECJ jurisprudence minimum prices impair this right and are therefore not compatible with this Directive. The ECJ also stated that minimum prices are not necessary since their health objectives can be achieved through increases in taxation.

This report was commission by the European Commission and the sources given in this particular section include "personal communication from European Commission Directorate General Competition official."

When is Sturgeon going to take the hint?


Curmudgeon said...

Bring it on - I'll really enjoy the day when a European court strikes down Scottish minimum pricing legislation. Most pleasures are now banned or actively discouraged, but I don't think they've got to Schadenfreude yet.

Bill Gibson said...

Legal Judgement from the Netherlands in 1978

Ivan D said...

We can only hope that the Scots vote for independence and we then manage to create an effective barrier to stop the vile infection that is Sturgeon spreading to other parts of the UK

Perhaps we could build a wall?

Angus MacAskill said...

I write this from the province of Ontario, where the provincial government, the major brewers, and the liquor-retail monopoly have a 3-way stranglehold on alcohol pricing.

The pattern is: brewers tirelessly lobby for price increases (in the name of social responsibility, of course), and are joined by provincial ministries hungry for greater tax revenues. After conferring with their cronies at the government-run Liquor Control Board, the price floor is raised. Profits go up, tax revenues go up, and everyone's happy. Except consumers, of course.

It would be interesting to delve into Scotland's proposed price floor and see what similar alliance of government and industry thieves is pushing it forward.

Curmudgeon said...

Minimum pricing has been supported by the MD of Tennent Caledonian Breweries.

Brewers and retailers will love it because it's effectively just legalising a price-fixing cartel.

While volumes may dip a bit, they won't fall all that much as the demand for alcohol is relatively price inelastic, and average margins will become much fatter.