Can there be a minimum price for alcohol?

By EASL September 24,2015

Earlier this month, Advocate General (AG) Bot of the Court of Justice of the European Union (CJEU) delivered his opinion on the legality of the Minimum Unit Price (MUP) for alcohol. This case is seen as a landmark case for alcohol control measures.

The opinion has dismissed some of the arguments used by the alcohol industry against the measure. As pointed out by AG the question of whether taxation could achieve the same objective will be key to deciding the legality of the matter. The CJEU is expected to provide a final decision within the next 3 months. Often the Court’s final opinion follows the advice of the AG.

National and European laws collide- background on the MUP case

In 2012 the Scottish Parliament passed the Alcohol Act. Its aim was to reduce the consumption of alcohol. The Act prohibited the sale of alcohol at a price below a minimum unit price calculated on the basis of the content in alcohol.  In 2013 the price was fixed at 0.50 GBP per unit. 

Three associations of alcohol producers, namely the Scotch Whisky Association, SpiritsEurope and the European Confederation of the wine producers (CEEV) took the Scottish Government to court and challenged the legality of the MUP.  

The case was examined by the supreme civil court in Scotland (the Court of Session), which asked the CJEU for a preliminary ruling on whether the establishment of the minimum price is compatible with European law. A preliminary ruling is a measure a national court can take in order to ensure that the national legislation is compatible with the EU law. If a national court is in doubt about the interpretation or validity of a EU law, it can ask the Court for clarification.

The alcohol producers challenged the measure on the grounds that it breaches an EU regulation on the common organisation of the markets in agricultural products, namely wine (Regulation No 1308/2013) and Articles 34 and 36 of the Treaty on the Functioning of the European Union (TFEU). Art 34 precludes any provisions which could restrict trade within the EU. 

By setting a minimum price on alcohol the Scottish government places an obstacle for certain producers or importers of alcoholic beverages as it limits the extent of the commercial advantage that may result from lower cost prices. In other words foreign producers cannot compete through price to enter the Scottish market.

Such measures however can be justifiable on the grounds of protection of human health under Art 36 TFEU. The opinion delivered earlier this month by the AG is crucial in determining whether this is the case in the Scottish MUP.

Would taxation be better?

In order the assess whether a measure such as the MUP is justifiable, the CJEU and national courts will have to decide if it is proportionate to achieve the stated objective and if it does not go beyond what is necessary in order to achieve that objective. 

The AG in his opinion seemed to reject the point brought by the alcohol producers that MUP infringes the common wine regulations. 

He further acknowledged the relevance of the measure for the protection of human health 

When it comes to the proportionality test, the AG stated that MUP is capable of preventing heavy drinkers from seeking less expensive alternatives. He went on to say that targeting cheap alcoholic beverages may be justified by the fact that hazardous or harmful drinkers, including young people,  to a large extent consume that category of drinks.

However, the AG remained uncertain whether MUP should be used instead of taxation. He stated that it is for Scottish government to prove that increased taxation would not meet the same targeted objective. The AG seems to be dismissing the argument that taxation would unnecessarily increase a price also for moderate drinkers (and have disproportionate impact of penalising them). He states that an additional impact achieved by taxation on the population level drinking should not be considered as an argument against it. 

As indicated by the AG the final judgment will be on whether the MUP is better than taxation. An important caveat to this case is that Scotland does not have taxation powers devolved to it from the United Kingdom.  Even if it wanted, it could not introduce higher taxes instead of the MUP. There also seems to be a fundamental political difference in the way the Westminster government approaches reducing alcohol harm and the Scottish one. 

The AG is referring in his opinion to tobacco cases, however he fails to see the difference between these two products in a way they are consumed. It could also be questioned how a general increase in taxation which would impact a higher volume of trade is seen in the eyes of the AG as less restrictive on the EU single market than a targeted measure like the MUP.

The CJEU will deliver its opinion possibly by the end of the year and the matter will be then referred to national court for its final judgement. 

If successful this case could be an encouraging signal from the CJEU that European countries can and should introduce more measure to protect health of their citizens.