The council asked retailers to strip shelves of beer and cider with an abv of 6.5% or more, but he told the officers who visited him that it would be bad for business. He added that it would not solve the problem of street drinking because there is no evidence to show it works. But the council was persistent. “They kept coming round, quite a few times. They were saying ‘this person has signed up and that person has’,” he told OLN.
Mrs Rattan, who runs H&R News in the city, had a similar experience. “A police officer and someone from the city council came in,” she said. “They said they would like us to sign up. It’s quite intimidating. Although the policeman was nice you think, ‘oh, hang on a minute’. They say such-and-such isn’t going to sell it now so you don’t need to, and that kind of behaviour. They came back later and said another shop down the road has stopped selling it so we should stop. They are putting pressure on. Retailers are being coerced into this scheme.”
What the council officers might not have realised is that, by sharing commercially sensitive decisions among rival retailers about what they would and would not be stocking, they were pushing those retailers into breaking the law.
The council officers themselves would be all right, but the retailers are in breach of competition law and risk a big fine and a spell behind bars.
Off Licence News joined a host of MPs, leading trade bodies, licensing experts, a competition lawyer and the competition watchdog at the House of Lords for an evidence hearing this month. Our aim was to thrash out the legality of Reducing the Strength schemes, which piloted in Ipswich and have spread like wildfire to around 100 councils across the UK.
At the session, Dan Moore, director at the Competition & Markets Authority, admitted there was “undoubtedly” a risk of a breach of competition law in cases where councils held meetings during which retailers agreed to sign up as a group, or when officers visited shops individually and told them about competitors’ intentions to join the schemes.
He said: “If retailers are talking in a room about it [sharing future commercial intentions] then it gives rise to significant competition law risk. If there is a co-ordinated withdrawal of a particular product there is a competition law risk.
“If you put pressure on a licensee by saying ‘you have to do this [join a Reducing the Strength scheme] because everybody else is’, if they are using the intentions of a store’s competitors and sharing those, then you have considerable competition law risk.”
MPs are demanding to know when the CMA will take action
The website for the London borough of Hounslow, which has introduced a Reducing the Strength scheme, proudly declares: “Over 15 off-licences have signed up to a pledge not to sell cheap, superstrength beer and cider as part of a drive by the council and police to combat street drinking and alcohol harm in Hounslow.
“The local businesses agreed at a special conference held in the civic centre last week to amend the terms of their licences, which means they will no longer sell cheap beer, lager and cider over 6% abv.” (The cut-off point for schemes varies from 5% to 6.5%.)
Cllr Richard Foote and chief inspector Rob Weir go on to say how proud they are of their scheme. But the retailers they brought to the meeting – like the retailers in Portsmouth whose commercial decisions were shared – have all been coerced into breaking the law.
This carries a penalty of up to 10% of a retailer’s turnover – if it were a multiple such as Tesco we would be talking about billions of pounds – or as much as five years’ imprisonment.
At the Lords hearing competition lawyer Martin Rees said: “Limiting supply [of a product] is just as problematic as price fixing. In Hounslow the local businesses got together with the local authorities at a conference centre and they agreed to amend the terms of their licenses to stop selling beer and cider over 6% abv. That’s a collective boycott. It’s a very serious infringement of competition law. There is no defence. I would feel sorry for the licensees concerned if there are fines.”
Very few retailers want to be a part of these schemes. We polled hundreds of our readers and found that more than 90% opposed them because they are bad for business, put them at risk of breaking the law and are grounded in no evidence.
“There are serious consequences if we enter into these agreements,” said Hardish Purewal, head of licensing at Tesco and chair of the Retail Alcohol Standards Group. “We get told who’s in the scheme to encourage us to be part of it, but that’s against competition law. There is a great deal of evidence of sharing of strategy of other retailers.”
She added: “If the issue is street drinking there are other ways to deal with it. Often there will be five or 10 people with the issue of street drinking [in an area] but they want us to remove these products that may be serving thousands of our customers. Our stores know who [the street drinkers] are. For example, in Doncaster the council told us the products they wanted us to take off shelves. Street drinkers came in and bought something completely different. Our local management teams know the issues in the area and that’s far more effective than trying to come up with a blanket approach.”
Retailers don’t want the schemes – the councils are driving them – but they need clear advice, which is why we launched our United to Protect Choice campaign, which led the All-Party Parliamentary Beer Group to call the hearing at Westminster and drew support from a host of trade bodies.
Andrew Griffiths MP, chair of the influential group, who also chaired the hearing, said to Moore from the CMA: “There are clearly breaches of competition law going on, based on the evidence we have heard. The question for you is how long is the CMA going to continue to allow those breaches to continue before you take some action?”
The answer from Moore was worrying. He admitted the law is being broken, but said the CMA is suffering from a lack of resources and is failing to investigate the councils that are coercing people into breaking the law. He said the CMA is stretched, struggling to investigate competition law breaches in the banking and energy sectors.
But it is the CMA’s job to act on this issue affecting thousands of UK retailers and threatening a multibillion pound industry. While it procrastinates and fails in its job, OLN has registered a formal complaint in Brussels, seeking the European Commission’s intervention and its view on the legality of these schemes.
EU bureaucrats we spoke to in Brussels – the home of a plethora of world-famous beers above 6% abv – were flabbergasted at the notion of the schemes. We await the Commission’s response, but in the meantime, we are putting pressure on the CMA to act.
Moore said it had taken on board evidence and amended the slides it presents to councils considering implementing a scheme. “At what point do you stop amending your slides and start taking action?” demanded John Healey MP.
The CMA said it would merely continue to work with the Local Government Association and try to get the message out to councils about potential risks of competition law breaches. But the problem is that councils are not getting the message, and retailers are still being pushed into breaking competition law.
Last week, Southend council started asking shopkeepers to stop selling beer and cider with an abv of 6% or higher. It announced in its local paper that Harpans Express in Queens Road and Londis in Southchurch Road are both no longer selling “cheap, strong drink”. The council was broadcasting the stores’ commercial intentions to rival retailers, and this sounds like a breach of competition law that could see the shopkeepers jailed.
We asked the council why it was encouraging retailers to break the law, and its response displayed a complete lack of understanding about the law.
It simply said the schemes were voluntary and added that it hoped “to engage some supermarkets” in the scheme. If it does, and tells rival supermarkets, that’s another breach of the law. The CMA said it would grant us an audience in six months time to talk about the issue again. We will continue to put on the pressure to achieve legal clarity at home and in Brussels.
In the meantime, Rees, the competition lawyer, has blunt advice for any retailer visited by a council officer and put in the position of Sood and Rattan.
“I’d advise licensees not to go anywhere near one, as even potentially agreeing to it puts you in the frame,” he said. “You should say ‘sorry, it may be anti-competitive, I don’t want to hear about what you may be saying to anyone else as it may be putting me at risk’.”
Along with industry bodies and the MPs in the beer group, we will campaign to find out how retailers that have been coerced into joining a scheme can get out of it.
“Hats off to Off Licence News,” said John Healey MP. “It’s a great example of a newspaper responding to its readers and launching a really strong campaign.”
WHAT TO BEAR IN MIND: ADVICE FOR OLN'S READERS
Supermarkets have the legal nous and the clout to refuse to join these schemes, but licensing consultant Gill Sherratt said smaller retailers “are frightened to death” of them.
The competition watchdog has provided guidance for councils that want to implement schemes, but until now nothing for retailers.
Andrew Griffiths MP said he is concerned about “the thousands of corner shops across the country” that don’t have access to the CMA guidance, so the watchdog has offered this advice to our readers: “Superstrength alcohol schemes are popping up all over the UK and we are aware that many retailers are being approached by councils and the police about signing up to one.
“Some schemes may possibly carry competition law risks. However, the competition law risk of each scheme has to be judged on a case-by-case basis – ultimately by the businesses involved.
“We are therefore not in a position to say generally whether or not an individual scheme is lawful or unlawful. However, we are keen to help businesses comply with the law and have produced useful material to help you to spot the main competition law risks.
“These materials include specific guidance on high-strength alcohol schemes and handy 60-second guides giving a quick summary of the law and showing you what to look out for.
“In addition, over the past year the CMA has been actively working with local councils and industry to understand their concerns and to discuss the potential competition law implications that should be considered when setting up schemes. One of the reasons we’ve been doing this is to help to ensure that retailers like yourself are not put at risk of breaking competition law through the actions of a local council.
“However, we understand that you still may be unsure of exactly what your competition law obligations are, so here are a few points you should bear in mind when considering joining up to a super-strength scheme:
■ Don’t share competitively sensitive information with your competitors (such as whether you are going to stop stocking high-strength alcohol), including during meetings where your competitors are in attendance.
■ Don’t agree with a competitor your commercial strategy or intended commercial actions.
■ If you are in a meeting in which a competitor tries to tell you their commercial plans (or a local council tries to tell you about your competitors’ commercial plans), tell them you are not interested and that you’re not willing discuss it. If you can do so, leave or call an end to the meeting.
“Generally, these shouldn’t stop you from participating in competition law-compliant voluntary schemes where you decide unilaterally, without discussions with competitors, to participate in a scheme. However, before you do so, think about the points above.”