SNP alcohol policy could give UK government a Brussels hangover Minimum pricing branded a competition law minefield By Colin Donald, Business Editor MEASURES PROPOSED by the Scottish government to establish minimum prices for alcohol carry a "significant risk" of exposing the UK government to a European legal challenge, lawyers have warned.
English and Scottish competition law specialists say that proposals for minimum retail pricing contained in the SNP government's alcohol strategy document contain potential legal snares, infringement of which would make a Westminster government answerable to European law courts.
Peter Andrews, of Shoosmiths, legal adviser to the off-license group the Wine and Spirit Trade Association (WSTA), told the Sunday Herald: "European law puts the Scottish government in a very difficult position here. It's just about possible to impose minimum pricing without breaching obligations to the European treaty Treaty of Rome, but this is a complex area and by putting any foot wrong they expose themselves and the Westminster government to fairly significant risk."
Gavin Partington, a spokesman for the WSTA, said: "If you want to have discussion around price, the government has to lead that discussion and it has to find a way around competition law. As it stands at the moment their proposals clearly run contrary to what competition law stipulates."
The problem for Scottish ministers is that the Treaty of Rome forbids any business-to-business or business-to-government co-operation that could be construed as collusion to set prices.
But experts acknowledge that it would be extremely difficult for the Scottish government to devise a minimum pricing regime without some degree of past, present or future discussion with the market.
One competition lawyer, who asked not be named, asked: "How could the Scottish government come up with a sensible number without consultation with retailers? If the government then required companies to enter into anti-competitive agreements this would put it in breach of European law and could lead to an infringement action against the UK in the European courts.
"It's a real minefield. If they get it wrong, they expose British companies to the risk of fines. Just because the government has persuaded people to do something doesn't mean the competition authorities wouldn't get involved."
Rod Lambert, the partner who leads on EU competition law for leading Scots practice McGrigors, said that the UK government would be answerable to a European court if, for example, a supermarket chain were to challenge a minimum pricing order.
"Article 81 of the Treaty of Rome is a blanket prohibition on all arrangements or strategies that have an impact on competition in the market, whether restricting or distorting it.
"An essential tenet of that has been a prohibition of retail price maintenance, whether it's in cars, perfumes or whatever. The OFT classifies this as a hard core' restriction.
"The basic principle of trying to force people's prices up in order to deal with a perceived social or health problem is certainly going to run headlong into the argument that article 81 has prohibited since 1963."
Lambert continued: "If they are trying to say that it would be illegal for Asda to sell lager at 50p a tin rather than 30p a tin that's about the most blatant form of retail price maintenance you could have."
There is not yet any legal consensus as to whether the Scottish government's widely applauded health and public order-promoting motivations, based on hard evidence of Scotland's disastrous record on alcohol abuse, could rescue a minimum pricing regime from legal challenges.
Eoghainn MacLean, a competition law advocate for the Ampersand stable said: "The answer to this problem lies in what is known as regulatory anciliarity', which says that if you promulgate a law for a legitimate objective - in this case the promotion of health and the prevention of crime - that is allowed as long as the measures are proportionate. This is something that may in time be argued, and it would be open to others to argue otherwise."
But Rod Lambert of McGrigors insisted: "There is no recognised exception in competition law for allowing minimum pricing just because of some other aspect of policy. Especially for something like alcohol that is blatantly a consumer product."
Michael Dean of Maclay Murray and Spens added that foreign drinks manufacturers, "an efficient Czech brewer for example", could challenge a Scottish minimum price regime as "interference with free trade".
A spokesman for the Office of Fair Trading said: "We are engaged in regular dialogue with the Scottish government but we are not in a position to talk about that publicly."
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Posted by: Jwil, Lanarkshire on 9:48pm Sat 21 Jun 08
We are being told about these potential problems by a company which is contracted to the drinks companies. Can we really believe what they say, or are they just pushing the policies of the drinks industry?
I would have hoped that the SNP government would already have spoken to their lawyers before pursuing this policy.
[italic]....One competition lawyer, who asked not be named........[/italic] Why didn't he want to be named if he is speaking the truth?
Why do newspapers give namless people a platform?
Are they suggesting that Governments can't take action to protect their own people?
We are being told about these potential problems by a company which is contracted to the drinks companies. Can we really believe what they say, or are they just pushing the policies of the drinks industry?
I would have hoped that the SNP government would already have spoken to their lawyers before pursuing this policy.
....One competition lawyer, who asked not be named........ Why didn't he want to be named if he is speaking the truth?
Why do newspapers give namless people a platform?
Are they suggesting that Governments can't take action to protect their own people?
Posted by: Wardog, Buckie on 10:10pm Sat 21 Jun 08
[bold]MINIMUM DRINKS PRICES[/bold]
[italic]excerpt[/italic]
Scottish Health Action on Alcohol Problems Report
Alchohol: Price, Policy & Public Health September 2007
Fixing minimum drinks prices is possible under both UK and EU competition law, provided that minimum prices are imposed on licensees by law, or by a public body exercising public functions imposed on it by an enactment. Any involvement by alcohol producers or sellers in the fixing of minimum drinks prices, however, whether it be by voluntary industry codes or local agreements between pubs, police and licensing authorities, breaches UK and EU competition law. The critical factor when it comes to setting minimum drinks prices is that the alcohol industry should not be involved in the process in any way whatsoever.
This position has been confirmed by the Office of Fair Trading (OFT) in written advice to local authorities in England. The OFT, which monitors compliance with UK competition law, confirmed that “…where minimum prices are imposed at the sole instigation of a public authority such as the police or a local authority …there is unlikely to be an agreement between undertakings that can be the subject of a challenge under the Act. (Competition Act 1998) However, it is crucial to differentiate this from a situation in which licensees actively and jointly participate in the determination of minimum prices in a meeting or other joint forum, facilitated by the police or local authorities and licensing officials.
This latter scenario is likely to fall within the Chapter 1 [anti-competitive behaviour] prohibition”. The OFT position was also clearly spelled out to the Scottish Beer and Pub Association (SBPA) who complained to the OFT in 2004 that the provisions in Licensing (Scotland) Bill would have the effect of introducing ‘linear pricing’ and therefore be anti-competitive. Rejecting the SBPA complaint, the OFT pointed out that in exercising its legislative functions the Scottish Parliament was not engaging in ‘economic activity’ and therefore was not an ‘undertaking’ for the purpose of the Act. Accordingly, the Competition Act did not apply to the Scottish Parliament acting in its legislative capacity.
Minimum drinks pricing schemes are already in existence in some local areas in England and Scotland, with the full knowledge of the OFT.
Minimum prices can be expressed either as a particular price (1) or a minimum profit-margin (2).
(1) Setting minimum drinks prices as specific monetary amounts makes monitoring and enforcement easier as authorities and the public can immediately see if a retailer is selling alcohol below a minimum price. However, deciding what the minimum price should be for categories of alcoholic beverages poses some practical and administrative challenges and legislators or public authorities may have to give some consideration to EU trade law on the matter.
In relation to EU law, if prices in the UK were set at a level which was deemed to disadvantage imported alcoholic beverages against national products, either because imported beverages could not profitably be marketed on the conditions laid down or because the competitive advantage conferred by lower cost prices was cancelled out, then a minimum pricing framework may be judged to constitute a trade barrier contrary to EU free movement of goods rules. If prices are fixed by reference to a solely national criterion without taking into account costs in other EU member states then the policy could fall foul of free movement rules. Deciding whether a minimum pricing framework did or did not constitute a trade barrier would require analysis of the relevant alcoholic beverages’ markets in Europe.
However, it’s also important to note that EU law allows exceptions to the free movement of goods rule on the grounds of public health, provided it can be shown that the prices set did not constitute a disguised trade barrier and were proportionate to addressing the problem of alcohol-related harm.
Proportionality requires a measure to be necessary to achieve the objective, and that the objective cannot be achieved by any less trade-restrictive means. On this point, health campaigners would argue that the best available evidence demonstrates direct links between alcohol price, consumption and associated harm and that action to increase alcohol price is one of the most cost-effective ways to reduce alcohol-related harm. Campaigners would therefore argue that minimum drinks pricing was both necessary and proportionate.
(2) In contrast to establishing minimum drinks prices as fixed monetary amounts, minimum pricing achieved by a minimum profit mark up would not be contrary to the free movement of goods rule. However, determining whether a trader was selling alcohol below cost would be much more difficult to monitor and enforce as compliance could not be immediately observed from the selling price.
Scottish devolution: Legislating for minimum drinks prices in Scotland
Problem drinking impacts on major areas of public policy - health, social work, law and order, which are all matters devolved to the Scottish Parliament. Under the terms of the devolution settlement, the Scottish Parliament has the authority to legislate on minimum drinks prices in a devolved area, such as licensing or health, providing the legislation is not contrary to UK competition law (which is a reserved matter) or community law.
Scottish licensing legislation gives scope to Scottish Ministers to introduce minimum drinks prices. Indeed, new Scottish Licensing legislation which is due to come into force in 2009 has already been used to tackle irresponsible promotions of alcohol in the on-trade, and the current Scottish Government has promised to extend the provisions prohibiting irresponsible promotions the off-trade as well.
The Licensing (Scotland) Act 2005 comes into force in September 2009. The 2005 Act is in part based on the recommendations of the Nicholson Committee which was mandated to review all aspects of liquor licensing law and practice in Scotland with particular reference to the implications for health and public order and to recommend changes in the public interest.
The Committee opined that any legislation following upon their report should ‘set out certain guiding principles or objectives which are to be the underlying basis for any decisions made by licensing boards’. Further to this recommendation, the 2005 Act sets out five licensing objectives that licensing boards must seek to promote and take into consideration when granting or reviewing licences. The five objectives are: preventing crime and disorder; securing public safety; preventing public nuisance; protecting and improving public health; and protecting children from harm.
These objectives are similar to those contained in the Licensing Act 2003 (which covers England and Wales), except for the reference to public health which is absent from the Westminster legislation.
Schedule 3 to the 2005 Act also contains provisions designed to control irresponsible promotions in the sale of alcoholic drinks.
Irresponsible promotions which the 2005 Act will outlaw include:
•the supply of an alcoholic drink free of charge or at a reduced price on the purchase of one or more drinks;
•the supply free of charge or at a reduced price of one or more extra measures of an alcoholic drink on the purchaseof one or measures of the drink; and
•the supply of unlimited amounts of alcohol for a fixed charge.
These provisions on irresponsible promotions currently only apply to the on-trade in Scotland. However the current Scottish Government has promised to amend the legislation by extending the provisions to cover the off-trade as well.
The Cabinet Secretary for Justice, Kenny MacAskill, has also announced that the government is considering action that can be taken within Scotland to end the deep-discounting of alcohol.
The provisions of the 2005 Act appear to be sufficiently broad to allow the addition of a further description of a drinks promotion which is irresponsible if it involves the supply of an alcoholic drink below a certain price.
The Act permits Scottish Ministers to add further descriptions of drinks promotions to those presently set out in the legislation or modify any of the descriptions and extend or restrict their application.
The Act further permits Schedule 3 of the Act to be modified by Scottish Ministers so as to add further conditions they consider necessary or expedient the purposes of the licensing objectives.
It could be argued that prohibiting the sale of alcohol below cost it was at least expedient for the purposes of the public health objective of the Act.
MINIMUM DRINKS PRICES
excerpt
Scottish Health Action on Alcohol Problems Report
Alchohol: Price, Policy & Public Health September 2007
Fixing minimum drinks prices is possible under both UK and EU competition law, provided that minimum prices are imposed on licensees by law, or by a public body exercising public functions imposed on it by an enactment. Any involvement by alcohol producers or sellers in the fixing of minimum drinks prices, however, whether it be by voluntary industry codes or local agreements between pubs, police and licensing authorities, breaches UK and EU competition law. The critical factor when it comes to setting minimum drinks prices is that the alcohol industry should not be involved in the process in any way whatsoever.
This position has been confirmed by the Office of Fair Trading (OFT) in written advice to local authorities in England. The OFT, which monitors compliance with UK competition law, confirmed that “…where minimum prices are imposed at the sole instigation of a public authority such as the police or a local authority …there is unlikely to be an agreement between undertakings that can be the subject of a challenge under the Act. (Competition Act 1998) However, it is crucial to differentiate this from a situation in which licensees actively and jointly participate in the determination of minimum prices in a meeting or other joint forum, facilitated by the police or local authorities and licensing officials.
This latter scenario is likely to fall within the Chapter 1 prohibition”. The OFT position was also clearly spelled out to the Scottish Beer and Pub Association (SBPA) who complained to the OFT in 2004 that the provisions in Licensing (Scotland) Bill would have the effect of introducing ‘linear pricing’ and therefore be anti-competitive. Rejecting the SBPA complaint, the OFT pointed out that in exercising its legislative functions the Scottish Parliament was not engaging in ‘economic activity’ and therefore was not an ‘undertaking’ for the purpose of the Act. Accordingly, the Competition Act did not apply to the Scottish Parliament acting in its legislative capacity.
Minimum drinks pricing schemes are already in existence in some local areas in England and Scotland, with the full knowledge of the OFT.
Minimum prices can be expressed either as a particular price (1) or a minimum profit-margin (2).
(1) Setting minimum drinks prices as specific monetary amounts makes monitoring and enforcement easier as authorities and the public can immediately see if a retailer is selling alcohol below a minimum price. However, deciding what the minimum price should be for categories of alcoholic beverages poses some practical and administrative challenges and legislators or public authorities may have to give some consideration to EU trade law on the matter.
In relation to EU law, if prices in the UK were set at a level which was deemed to disadvantage imported alcoholic beverages against national products, either because imported beverages could not profitably be marketed on the conditions laid down or because the competitive advantage conferred by lower cost prices was cancelled out, then a minimum pricing framework may be judged to constitute a trade barrier contrary to EU free movement of goods rules. If prices are fixed by reference to a solely national criterion without taking into account costs in other EU member states then the policy could fall foul of free movement rules. Deciding whether a minimum pricing framework did or did not constitute a trade barrier would require analysis of the relevant alcoholic beverages’ markets in Europe.
However, it’s also important to note that EU law allows exceptions to the free movement of goods rule on the grounds of public health, provided it can be shown that the prices set did not constitute a disguised trade barrier and were proportionate to addressing the problem of alcohol-related harm.
Proportionality requires a measure to be necessary to achieve the objective, and that the objective cannot be achieved by any less trade-restrictive means. On this point, health campaigners would argue that the best available evidence demonstrates direct links between alcohol price, consumption and associated harm and that action to increase alcohol price is one of the most cost-effective ways to reduce alcohol-related harm. Campaigners would therefore argue that minimum drinks pricing was both necessary and proportionate.
(2) In contrast to establishing minimum drinks prices as fixed monetary amounts, minimum pricing achieved by a minimum profit mark up would not be contrary to the free movement of goods rule. However, determining whether a trader was selling alcohol below cost would be much more difficult to monitor and enforce as compliance could not be immediately observed from the selling price.
Scottish devolution: Legislating for minimum drinks prices in Scotland
Problem drinking impacts on major areas of public policy - health, social work, law and order, which are all matters devolved to the Scottish Parliament. Under the terms of the devolution settlement, the Scottish Parliament has the authority to legislate on minimum drinks prices in a devolved area, such as licensing or health, providing the legislation is not contrary to UK competition law (which is a reserved matter) or community law.
Scottish licensing legislation gives scope to Scottish Ministers to introduce minimum drinks prices. Indeed, new Scottish Licensing legislation which is due to come into force in 2009 has already been used to tackle irresponsible promotions of alcohol in the on-trade, and the current Scottish Government has promised to extend the provisions prohibiting irresponsible promotions the off-trade as well.
The Licensing (Scotland) Act 2005 comes into force in September 2009. The 2005 Act is in part based on the recommendations of the Nicholson Committee which was mandated to review all aspects of liquor licensing law and practice in Scotland with particular reference to the implications for health and public order and to recommend changes in the public interest.
The Committee opined that any legislation following upon their report should ‘set out certain guiding principles or objectives which are to be the underlying basis for any decisions made by licensing boards’. Further to this recommendation, the 2005 Act sets out five licensing objectives that licensing boards must seek to promote and take into consideration when granting or reviewing licences. The five objectives are: preventing crime and disorder; securing public safety; preventing public nuisance; protecting and improving public health; and protecting children from harm.
These objectives are similar to those contained in the Licensing Act 2003 (which covers England and Wales), except for the reference to public health which is absent from the Westminster legislation.
Schedule 3 to the 2005 Act also contains provisions designed to control irresponsible promotions in the sale of alcoholic drinks.
Irresponsible promotions which the 2005 Act will outlaw include:
•the supply of an alcoholic drink free of charge or at a reduced price on the purchase of one or more drinks;
•the supply free of charge or at a reduced price of one or more extra measures of an alcoholic drink on the purchaseof one or measures of the drink; and
•the supply of unlimited amounts of alcohol for a fixed charge.
These provisions on irresponsible promotions currently only apply to the on-trade in Scotland. However the current Scottish Government has promised to amend the legislation by extending the provisions to cover the off-trade as well.
The Cabinet Secretary for Justice, Kenny MacAskill, has also announced that the government is considering action that can be taken within Scotland to end the deep-discounting of alcohol.
The provisions of the 2005 Act appear to be sufficiently broad to allow the addition of a further description of a drinks promotion which is irresponsible if it involves the supply of an alcoholic drink below a certain price.
The Act permits Scottish Ministers to add further descriptions of drinks promotions to those presently set out in the legislation or modify any of the descriptions and extend or restrict their application.
The Act further permits Schedule 3 of the Act to be modified by Scottish Ministers so as to add further conditions they consider necessary or expedient the purposes of the licensing objectives.
It could be argued that prohibiting the sale of alcohol below cost it was at least expedient for the purposes of the public health objective of the Act.
Posted by: wullie on 12:29am Sun 22 Jun 08
Alchol, used sensibly is something that many many of us enjoy.
However, in Scotland today it is a scourge. A scourge on health, a scourge on domestic crime and a huge contributor to crime and violence. This scourge costs our society dear.
The SNP government are trying to do something about it. Something needs to be done, and something must be done.
There are no easy answers but the government needs to be commended for trying.
The comments about competition law and legal challenge are driven by either vested commercial interests or by failed politicians who have stood idly by as our country and community is scarred by the booze epedemic.
No doubt a directorship here or an election contribution there from the captains of industry who peddle the cheap booze that sloshes through our society.
As a community we need to do something about this dire situation, and minimum pricing is a good start.
Let us therefore look to this initiative for what it is trying to achieve and let us say no to those who would sell booze at any cost to support their corporate profits.
It's time for a change.
Alchol, used sensibly is something that many many of us enjoy.
However, in Scotland today it is a scourge. A scourge on health, a scourge on domestic crime and a huge contributor to crime and violence. This scourge costs our society dear.
The SNP government are trying to do something about it. Something needs to be done, and something must be done.
There are no easy answers but the government needs to be commended for trying.
The comments about competition law and legal challenge are driven by either vested commercial interests or by failed politicians who have stood idly by as our country and community is scarred by the booze epedemic.
No doubt a directorship here or an election contribution there from the captains of industry who peddle the cheap booze that sloshes through our society.
As a community we need to do something about this dire situation, and minimum pricing is a good start.
Let us therefore look to this initiative for what it is trying to achieve and let us say no to those who would sell booze at any cost to support their corporate profits.
It's time for a change.
Posted by: Shylock Holmes, 221 c Baker Street on 12:55am Sun 22 Jun 08
Uh, uh, Alkie is posting as Wullie ... he must have had a a bucketful and forgotten who he is.
Uh, uh, Alkie is posting as Wullie ... he must have had a a bucketful and forgotten who he is.
Posted by: alan reid, NZ on 1:07am Sun 22 Jun 08
Well said Wulie
Posted by: Alkie, NYC on 6:36am Sun 22 Jun 08
Alcohol used responsibly and irresponsibly is something many Scots enjoy.
I fail to see the point in justifying the existence of something purely by the pleasure it gives people.
Alcohol kills thousands of Scots every year. It costs the Scottish society billions each year. Your enjoyment of alcohol is secondary to the vast swath of destruction that follows in alcohol's wake.
Alcohol needs to be prohibited now. It is the quick way towards changing the course of the huge ship of Scottish alcohol culture. Once the minds of the Scottish people have been repaired and see alcohol as a threat and danger, then and only then should it be legalized again, yet monitored heavily.
Alcohol used responsibly and irresponsibly is something many Scots enjoy.
I fail to see the point in justifying the existence of something purely by the pleasure it gives people.
Alcohol kills thousands of Scots every year. It costs the Scottish society billions each year. Your enjoyment of alcohol is secondary to the vast swath of destruction that follows in alcohol's wake.
Alcohol needs to be prohibited now. It is the quick way towards changing the course of the huge ship of Scottish alcohol culture. Once the minds of the Scottish people have been repaired and see alcohol as a threat and danger, then and only then should it be legalized again, yet monitored heavily.
Posted by: Alkie, NYC on 6:37am Sun 22 Jun 08
Alcohol used responsibly and irresponsibly is something many Scots enjoy.
I fail to see the point in justifying the existence of something purely by the pleasure it gives people.
Alcohol kills thousands of Scots every year. It costs the Scottish society billions each year. Your enjoyment of alcohol is secondary to the vast swath of destruction that follows in alcohol's wake.
Alcohol needs to be prohibited now. It is the quick way towards changing the course of the huge ship of Scottish alcohol culture. Once the minds of the Scottish people have been repaired and see alcohol as a threat and danger, then and only then should it be legalized again, yet monitored heavily.
Alcohol used responsibly and irresponsibly is something many Scots enjoy.
I fail to see the point in justifying the existence of something purely by the pleasure it gives people.
Alcohol kills thousands of Scots every year. It costs the Scottish society billions each year. Your enjoyment of alcohol is secondary to the vast swath of destruction that follows in alcohol's wake.
Alcohol needs to be prohibited now. It is the quick way towards changing the course of the huge ship of Scottish alcohol culture. Once the minds of the Scottish people have been repaired and see alcohol as a threat and danger, then and only then should it be legalized again, yet monitored heavily.
Posted by: awh, dumfries on 9:52am Sun 22 Jun 08
The SNP not content with making us all miserable now want to stop us drowning our sorrows. Welcome to the "new Scotland".
The SNP not content with making us all miserable now want to stop us drowning our sorrows. Welcome to the "new Scotland".
Posted by: Jwil, Lanarkshire on 10:21am Sun 22 Jun 08
awh
can I introduce you to Alkie. You may have something to discuss!
awh
can I introduce you to Alkie. You may have something to discuss!
Posted by: G Rob, Springburn on 10:27am Sun 22 Jun 08
To do nothing is not the answer.
At least the Scottish government is trying something.
To ignore it and hope it goes away has been the prevailing philosophy on the rotten underbelly of a lot of our so called culture for too long.
Pricing is a blunt tool. The fact that across Europe drink is relatively inexpensive compared to the UK and they don’t have the same problem as us, says a lot about the rotten nature of Scottish society.
Anything affecting the cost of alcohol will **** me off no end, I love my red wine.
But what **** me off even more is the smashed glass in the streets and shell suited youths swigging bottles of tonic wine that make parts of this country a no go area.
Action is required. Hand wringing and whinging gets you nowhere.
Lets commend the government for having the balls to actually try something to improve this country. Isn’t that why they are their?
To do nothing is not the answer.
At least the Scottish government is trying something.
To ignore it and hope it goes away has been the prevailing philosophy on the rotten underbelly of a lot of our so called culture for too long.
Pricing is a blunt tool. The fact that across Europe drink is relatively inexpensive compared to the UK and they don’t have the same problem as us, says a lot about the rotten nature of Scottish society.
Anything affecting the cost of alcohol will **** me off no end, I love my red wine.
But what **** me off even more is the smashed glass in the streets and shell suited youths swigging bottles of tonic wine that make parts of this country a no go area.
Action is required. Hand wringing and whinging gets you nowhere.
Lets commend the government for having the balls to actually try something to improve this country. Isn’t that why they are their?
Posted by: *_davie_*, EU on 4:52pm Sun 22 Jun 08
I was unaware ( having lived more than half my life outside Scotland) the government was trying to raise the price of alcoholic drinks but wholeheartedly agree with any attempt to reduce binge drinking by teenagers. I also agree with the comment about the rotten nature of (parts of) Scottish society.
I was unaware ( having lived more than half my life outside Scotland) the government was trying to raise the price of alcoholic drinks but wholeheartedly agree with any attempt to reduce binge drinking by teenagers. I also agree with the comment about the rotten nature of (parts of) Scottish society.
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