Minimum alcohol pricing "likely" illegal - ECJ. What will the Irish courts do?

hatrickpatrick

The ECJ has as usual sent a rather mixed message about minimum alcohol pricing in its ruling today. Both sides are claiming victory in the media.

http://curia.europa.eu/jcms/upload/docs/application/pdf/2015-12/cp150155en.pdf

Paraphrasing:

In today’s judgment, the Court of Justice considers that the effect of the Scottish legislation is significantly to restrict the market, and this might be avoided by the introduction of a tax measure designed to increase the price of alcohol instead of a measure imposing a minimum price per unit of alcohol.

Firstly, the Court states that the regulation relating to the common organisation of the market in wine2 does not preclude the imposition of an MPU for the retail selling of wines. The Court holds that the establishment of a common organisation of the market does not prevent the Member States applying national rules that pursue an objective relating to the general interest such as the protection of health, provided that such rules are proportionate.

Nonetheless, the Court states that the fact that that measure prevents the lower cost price of imported products being reflected in the selling price and that the legislation is thus liable to impede access to the UK market of alcoholic drinks produced in other Member States is sufficient reason to conclude that the measure constitutes an obstacle to the free movement of goods. According to the Court’s case-law, such a measure may be justified on grounds of the protection of health only if it is proportionate to the objective pursued.

The Court also notes that the Scottish legislation pursues a twofold objective, namely to reduce not only the hazardous consumption of alcohol, but also, more generally, the Scottish population’s consumption of alcohol. Although the imposition of an MPU intended to increase the price of cheap alcohol is an appropriate means of reducing the consumption of alcohol, a practice such as that adopted in Scotland is not justified where it is possible for health to be protected equally effectively by less restrictive tax measures.

According to the Court, a fiscal measure that increases the taxation of alcoholic drinks is liable to be less restrictive than a measure imposing an MPU since, unlike where there is a minimum price; traders retain the freedom to determine their selling prices.

Sounds like they are fairly conclusively ruling that MUP is illegal, right? Considering the only benefit of MUP over increased tax is the protectionism of one trade sector (the on trade) over another (the off trade), which I would have imagined would be highly contradictory to EU principles of competition.

The conclusion is where the waters get muddied:

The Court states that it is ultimately for the national court to determine whether measures other than that provided for by the Scottish legislation, such as increased taxation on alcoholic drinks, are capable of protecting human life and health as effectively as the current legislation, while being less restrictive of trade in those products within the EU. The Court adds that the fact that the tax measures might more broadly secure the objective of health protection cannot justify the rejection of such measures.

The Court notes that, in the light of the twofold objective pursued by the Scottish legislature, a taxation measure that entails a generalised increase in the price of drinks and that contributes to achieving the general objective of combating alcohol misuse (affecting not only hazardous or harmful drinkers, but also moderate drinkers) would justify that taxation measure being preferred to an MPU. Further, the Scottish court will have to examine objectively all the evidence provided by the Scottish Government, and must not to that end confine itself to examining the information that was available when the legislature passed the legislation at issue.

What confuses me is this: The ECJ is effectively saying that this is a no-no, BUT, it has left it to individual member states' courts to rule separately on whether the measures are legal. In that context, is it likely that the Irish courts will simply rule that protecting the VFI while hitting offies is enough justification for MUP over increased taxation? And if the national court does rule in this manner, is there scope for a further appeal to the ECJ by the off-trade on the grounds that the national court's ruling contravenes EU competition law?

What I continue to find confusing about all this is how the ECJ is essentially making rulings on this matters, but despite issuing fairly clear and strongly worded conclusions is repeatedly diluting that by essentially throwing the issue back to the national courts.

Thoughts?

...And Justice

It's a stupid idea to set alcohol price by units. A high end bottle of cider and one made with sewer apples could be the same price if they had the same volume of alcohol (in theory).

Taxing would be an easier approach.

seamus

I think this is the key part of it really:

Nonetheless, the Court states that the fact that that measure prevents the lower cost price of imported products being reflected in the selling price and that the legislation is thus liable to impede access to the UK market of alcoholic drinks produced in other Member States is sufficient reason to conclude that the measure constitutes an obstacle to the free movement of goods.

In short, if the Polish lager is 50p a can after import and the Scottish lager is 60p a can, but both have a MUP of £1, then the Scottish public will choose the Scottish drink because there is no price difference. And in effect the ability of other member states to compete in that market has been lost, contrary to the free market rules.

Taxation, which while still punitive means that a lower import price can still be reflected in the final price.

hatrickpatrick

seamus wrote: »

I think this is the key part of it really:
In short, if the Polish lager is 50p a can after import and the Scottish lager is 60p a can, but both have a MUP of £1, then the Scottish public will choose the Scottish drink because there is no price difference. And in effect the ability of other member states to compete in that market has been lost, contrary to the free market rules.

Taxation, which while still punitive means that a lower import price can still be reflected in the final price.

And if you carry this over to wine, countries like France, Spain and Italy which must owe a significant proportion of their exports to wine production will be up in arms.

The question remains though, if the Irish courts side with the government on this despite the ECJ ruling, what exactly happens? I find it confusing that the ECJ would essentially say "this is illegal, but we'll leave it up to your own court to decide whether to enforce it or not".

BattleCorp

hatrickpatrick wrote: »

And if you carry this over to wine, countries like France, Spain and Italy which must owe a significant proportion of their exports to wine production will be up in arms.

The question remains though, if the Irish courts side with the government on this despite the ECJ ruling, what exactly happens? I find it confusing that the ECJ would essentially say "this is illegal, but we'll leave it up to your own court to decide whether to enforce it or not".

Is it not the case that the ECJ is saying that minimum unit pricing is illegal, but......but there are other things that you can do if you want to increase the price?

hatrickpatrick

BattleCorp wrote: »

Is it not the case that the ECJ is saying that minimum unit pricing is illegal, but......but there are other things that you can do if you want to increase the price?

That's basically what they're saying, but they're leaving it to domestic courts to decide in each country's case whether taxation would be as effective a measure. Which opens the door to cases in Ireland, where you run the risk of encountering judges more sympathetic to the VFI than to the off trade.

So the question is, if an Irish court rules that taxation is less effective because it doesn't specifically target the off trade, could there be grounds for an ECJ appeal on that?

BattleCorp

hatrickpatrick wrote: »

So the question is, if an Irish court rules that taxation is less effective because it doesn't specifically target the off trade, could there be grounds for an ECJ appeal on that?

I would have thought that taxation is a matter for the Government and not the courts. The courts would hardly be interested in the effectiveness of taxation as a measure to help reduce the amount of alcohol abuse.

My view is that the only way the courts will become involved is if the Government try to implement a tax increase that only applies to off-sales and not to pubs.

I can't see the Government trying that to be honest.

dubal

There is another issue as we apparently have a promise from the current government that there will be "no more new taxes in the lifetime of the current government"...

Dubal

BattleCorp

dubal wrote: »

There is another issue as we apparently have a promise from the current government that there will be "no more new taxes in the lifetime of the current government"...

Dubal

The lifetime of the current government will expire in about 12 to 16 weeks.

GerardKeating

hatrickpatrick wrote: »

So the question is, if an Irish court rules that taxation is less effective because it doesn't specifically target the off trade, could there be grounds for an ECJ appeal on that?

Apart from the fact that the Law does not really concern itself with effective mess, what is to stop them having different VAT and/or Duty rates for on/off Sales?

hatrickpatrick

It looks like Varadkar will argue that taxes don't work because of below cost selling being legal. This is a potential risk for the court allowing the law to go through, but I wonder how good an argument that will be vs the competition argument for outlawing it?

L1011

hatrickpatrick wrote: »

It looks like Varadkar will argue that taxes don't work because of below cost selling being legal. This is a potential risk for the court allowing the law to go through, but I wonder how good an argument that will be vs the competition argument for outlawing it?

He'll have severe trouble arguing that when below cost could be legally banned - and barely happens anyway

Carawaystick

Where's the evidence there's below cost selling of beer?
I can brew beer for less than the ex vat ex duty of cheap beer
A bit of economy of scale would reduce the cost of production further

L1011

Carawaystick wrote: »

Where's the evidence there's below cost selling of beer?
I can brew beer for less than the ex vat ex duty of cheap beer
A bit of economy of scale would reduce the cost of production further

There isn't any. Saw an FF shill (they're entirely on board with this publican protection also) trying to use the price of supermarket beer compared to the minimum wage in different years to "prove" below cost. All that proves is that production costs and off-trade profit margins have fallen. Pub profit margins haven't!