Alcohol Pricing: Reflections on the Matrix Chambers Seminar

Matrix Chambers

I recently had the pleasure of presenting my thoughts on minimum alcohol pricing and EU law at a Matrix Chambers Seminar on Thursday 4 July. The line up was very impressive, featuring Aidan O’Neill QC, myself, Christopher Brown, and Joanna Buckley. The Seminar was chaired by Jessica Simor QC. It was a fascinating chance to discuss, with both legal professionals and representatives of the drinks industry, the issues surrounding the Scottish Government’s attempt to introduce minimum pricing and the legal response to it.

For those who are interested the materials that were used that evening, including my slides, can now be found on Matrix Chambers EUtopia law blog. You can see the tenor of the discussion on the day from those materials, with most of the discussion surrounding proportionality, but after the Seminar I have had a chance to reflect on some of the issues that were raised and I think there is one in particular that I’d like to talk about in this post.

As I noted above the main discussion point across the evening was proportionality, and the different approaches to that question in the EU and UK courts. One point was raised that night, but it was only after reflection that I realised its potential significance. Unsurprisingly, as it peaked my interest, it has a competition law angle. The alcohol pricing dispute throws up some interesting issues about the relationship/conflict between the Free Movement and Competition provisions of the TFEU. The EU case law makes it clear that where State action, in this case legislation, is involved the governing EU law is that of the Free Movement of Goods. Competition law is only relevant when private ‘undertakings’ are the subject of the rules, or the State is acting as an undertaking itself. While competition law is not applicable to the case it is clear that its spectre is still present, as it is arguable that the Commission’s preferred solution to alcohol pricing issue is as much driven by Competition concerns as it is by Free Movement.

The conflict, as I see it, in this case is in attempting to define the ‘least restrictive’ way of discouraging the consumption of alcohol, to address legitimate health concerns, by hazardous and harmful drinkers in Scotland  (at the moment I’ll ignore all the other issues in the case). To simplify the issue further I’ll only consider the option preferred by the Scottish Government, minimum pricing per unit (MPU), or the Commission’s preferred increase in excise duty across the board. I would like to suggest the choice between these two options indicates more about a what you are trying to protect, rather than being a choice between a ‘good’ and ‘bad’ restriction. Essentially I am coming to the view that this is a choice between valuing the protection of trade, or the protection of competition. Let me explain …

The Scottish Government’s MPU scheme is arguably the least restrictive on trade as it is more targeted in that it effects fewer products in total. One of the reasons the MPU is preferred is that it only comes into effect when the price per unit drops below a certain level. Even if MPU has an impact on the majority of of alcohol sales in Scotland (73% based on 2010 figures in the Scottish Ministers Impact Assessment) it will still be less restrictive than an across the board increase in excise duty; which would obviously effect all alcohol sales and therefore all imported products. If you are only concerned about access to the market and the impact on trade, surely a measure which protects health and impacts on a limited number of products is to be preferred to a measure that has the same impact on all products?

If one accepts the reasoning above, why do the Commission prefer a measure that is more restrictive of trade; in that it has a greater impact on higher priced products, many of which are imported? I think the answer to that question can be found in in the desire to protect competition over trade. While raising excise duty across the board may be more restrictive in the terms of trade, it is far less distortive in competition terms. The Commission is expressing a preference for maintaining the ‘level playing field’ on the market for alcohol rather than minimising the impact of the measure on trade in toto. You can see the desire to protect price competition across the EU in the Common Market Organisation provisions adopted in various agricultural sectors (for instance the provisions in relation to Wine). These provision allow for common organisation and co-ordination in various ways, but bar any form of price controls. The MPU distorts price competition in the alcohol market as it has a disproportionate impact on lower price products, whether they be imported or domestic, removing their competitive advantage. It appears to be this desire to avoid this distortion of competition on the alcohol market which is the driving force behind the Commission’s policy.

A distortion of competition of competition may clearly lead to a restriction on trade, but that is not the relevant question under Art 34 TFEU. Under Art 34 we have to consider whether the restriction on trade which results form the distortion of competition is greater than the restriction which would result from an across the board in crease in excise duty. Of that I am not yet convinced …

We can look forward to the SWA’s appeal against the Outer House’s judgment in The Scotch Whisky Association and Ors, Re Judicial Review [2013] CSOH 70 to hopefully clarify matters.

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