No quick fix for minimum pricing

08 August, 2008

Among the barrage of adverse reports and comments on the licensed trade, which seem to turn up on a more or less daily basis, there have been suggestions from fairly elevated

government sources that some sort of minimum price levels should be set for the retail sale of alcoholic drinks.

This, I feel, is based on the principle that higher taxation on, for example, tobacco has led to a drop in sales, particularly among the young. Therefore, setting a higher minimum price level, so the current thinking goes, will stop young people from binge-drinking.

However, this is a false premise, because the tobacco tax was a central policy measure from the Treasury, affecting all products. It was nothing to do with a minimum pricing strategy. Raising alcohol duties across the board as a means of achieving a reduction in consumption does not seem to be on the agenda at present, although the co nstant fear remains that the Chancellor may be pushed in that direction.

Sledgehammer blows

But the minimum-pricing idea, now being actively pursued by the Scottish Executive, has certainly percolated into the minds of ministers and others at Westminster. It seems to form part of a general brain storming response to these anti-alcohol reports, so that proposals such as smaller wine glasses, banning multipacks and dedicated alcohol sales areas all find their way into the national press as a kind of

conglomeration, while the real social implications and

deeper problems are conveniently side lined.

You will gather from this that I am somewhat cynical about the whole current blitz on the trade . One trade commentator called it "sledgehammer politics", and certainly there will be many responsible retailers who will feel bemused by the

doomsday approach which sees everyone condemned in a form of collective guilt, without much evidence to show for it.

Guidance or confusion?

But there is a real legal problem about minimum pricing, which has already emerged in some areas where it has been tried. This has led to one government department producing guidance for officials in other departments and "devolved administrations", including local authorities, about anti-competitive practices.

The snappily

titled - Competition Law: Issues which arise for business when the

government o r lobby groups seek to encourage businesses to work together to deliver desired policy outcomes -

document from the Department for Business Enterprise

& Regulatory Reform (formerly the DTI) issues warnings aimed as much at themselves as at traders. While demonstrating that business cartels which seek to fix prices are definitely illegal, the brochure also clarifies the position for administrators:

"Legislation [primary or secondary] may require an undertaking to take or abstain from action. Compliance with that legislation will not place the undertaking in breach of competition law .

"However, if a

government department simply requests or encourages an undertaking to take action, in order to achieve some wider policy purpose, the undertaking will not have any protection if it breaches competition law.

The government should therefore avoid such requests or encouragement."

The document concludes with the warning: "Government departments and devolved administrations must, therefore, fully consider the competition implications of any agreements they are asking undertakings to make."

Law v gentlemen's agreement

So it would appear that,

if there is to be any movement on setting minimum prices, for example

in supermarkets, this can only be done by means of legislation and not, as has been proposed several times, by means of a gentlemen's agreement, or by the government proposing or agreeing to a specific code of practice by a trade organisation.

In recent years a practice has developed in government whereby it asks

for voluntary codes or regulations from certain trade sectors as an alternative to legislation. This self-regulation has, in many cases, been welcomed by the industries concerned as an alternative to legal sanctions and is now widespread. For example, the gambling industry produced codes on problem gambling and young people, responsibility for which has now moved to the Gambling Commission.

But it seems that whatever praise-worthy motives ministers may have for seeking compliance with a minimum-pricing policy, they will fall foul of EC competition law unless they make a clear legislative commitment, which in itself throws up


problems - to whom should it apply, to what products or offers, single or multi packs or bottles, retailing or wholesaling, special time-limited offers, free gifts, and so on.

Listening to some MPs, it is clear

they have not even considered the competition implications. Their view is that youngsters have access to cheap alcohol and this should be stopped by whatever means are to hand - a local agreement, pressure on supermarkets, government intervention or taxation. Beyond that, the complicated EC rules on anti-competitive arrangements are not really taken seriously.

But the

trade is already embroiled in a heated debate about unfair competition and still remembers the ill-fated Monopolies & Mergers Commission's report on beer supply which resulted in such big changes to the industry. Artificially

rigged prices are nothing new, but to restrict retailers from under cutting each other in an open market is going to fall foul of the Brussels bureaucrats.

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