Saturday, 5 September 2015

Minimum Alcohol Pricing: the AG balances public health, trade and competition




Angus MacCulloch, Lancaster University Law School

Background to the Opinion

Advocate-General (AG) Bot delivered his Opinion in Case C-333/14, ECLI:EU:C:2015:527, on 3 September regarding plans by the Scottish Government to introduce a Minimum Unit Pricing (MUP) for retail sales in Scotland set at £0.50 per unit. Before it could be introduced the measure was challenged by the Scotch Whisky Association. At first instance the Scottish Government successfully defended their proposal, in The Scotch Whisky Association & Ors, Re Judicial Review [2013] CSOH 70, but on appeal the Inner House referred several questions to the CJEU: Scotch Whisky Association & Ors v The Lord Advocate [2014] CSIH_38. The questions referred address the compatibility of MUP with both the single Common Market Organisation (CMO) and the free movement provisions in the TFEU. The AG’s Opinion has been hailed as a victory by both sides in the dispute, and on less partisan examination it does give insight into the importance of price competition to EU law.

The Compatibility of MUP with the single CMO

Article 167(1)(b) of the ‘single CMO’ Regulation, Reg 1308/2013, sets out that Member States must not allow price fixing for wine. But the AG notes that the provision is set out in the specific context of Art 167 which governs the laying down of ‘marketing rules’ to regulate supply [33], particularly where the rules are promulgated by stakeholder ‘interbranch organisations’. He therefore found there was no direct prohibition of retail price fixing in the CMO, and Member States retained their shared competence on this issue.

He then turned to the potential for indirect prohibition through the Member States’ obligation not to jeopardise the objectives of the CMO through Art 4(3) TFEU. The Commission argued that regulating retail prices would be contrary to the principle of the free setting of prices, by denying low cost producers the pricing advantages encouraged by the CMO. At [36] the AG set out that: ‘the free formation of prices is the expression … of the principle of free movement of goods in conditions of effective competition.’ Minimum retail pricing in a Member State would undermine low cost competitive advantage and distort competition, and is therefore incompatible with the single CMO [38 & 39]. Notwithstanding this, the existence of the CMO did not prevent Member States from adopting measures which pursue ‘legitimate objectives’ such as the protection of public health [40]. However, when pursuing such an objective, ‘the principle of proportionality requires that the national measure must actually meet the objective … and must not go beyond what is necessary in order to attain that objective’ [44]. The proportionality analysis should be the same as used under Art 36 TFEU, concerning possible Treaty-based limitations on the free movement of goods.

The Compatibility of MUP with Art 34 TFEU

The first notable aspect of the AG’s Opinion in relation to Art 34 (the ban on quantitative restrictions or measures of equivalent effect – or MEEQRs – on the free movement of goods) is that he undertakes an analysis of whether MUP is a MEEQR, even though both parties to the dispute had accepted it was. Reconciliation of the CJEU’s approaches in its previous judgments in van Tieggle, Keck, and Trailers is not easy. Can, after Keck, MUP be characterised as a ‘selling arrangement’ and fall outside Art 34 TFEU in principle, effectively rendering the finding in van Tieggle otiose? The AG avoids the problem by, at [58], adopting a hybrid approach which takes elements from all the judgments, including the ‘market access’ test in Trailers, thus: ‘a national measure may constitute an obstacle not only when, as a selling arrangement, it is discriminatory, in law or in fact, but also when, irrespective of its nature, it impedes access to the market of the Member State concerned’. If the measure hinders access there is therefore no need to consider if it is discriminatory, because it will fall within the scope of Article 34 in any event. He goes on to make clear that the loss of the ability to exploit low cost competitive advantage is in itself a hindrance to market access and brings MUP within the scope of Art 34 TFEU; effectively contemporising van Tieggle reasoning through the Trailers ‘market access’ test [60]. This is perhaps one of the most interesting suggestions in the Opinion. It gives price competition special protection as a driver of free movement within the internal market. The AG, for completeness, goes on to also discuss whether MUP might be a dynamic selling arrangement (like an advertising restriction), but his arguments [66-67], particularly those about domestic wine production, are not very convincing.

Moving on to consider the potential justification of a MEEQR under Art 36 TFEU, the AG first discusses the discretion available to Member States when deciding on the level of protection for a legitimate objective. He argues that the Member States must be allowed discretion as range of policy choices could be taken in these complex areas, but that Member States must adduce evidence to show that they have made a suitable and proportionate choice [87]. The explanation of how the analysis of proportionality should be undertaken, at [91]-[93], is, however, not particularly clear. Para [93] is the most troubling, suggesting that the national court should balance the ‘degree of impediment’ to trade against ‘the importance of the objectives pursued and the expected gains’. Should a domestic court be required to balance the benefits of trade against a public health benefit?

When the AG moves onto more direct consideration of MUP he examines a vital question in the first instance judgment, which I have previously addressed elsewhere: the identification of the particular aim of the measure. He suggests, at [116]-[117], that there is an ‘ambiguity’ whether MUP’s aim is to tackle, ‘harmful’ and/or ‘hazardous’ drinking, or protect the health of all drinkers; it is, however, acknowledged that the national court will have to take the final decision on this matter. The AG does accept that in relation to harmful and hazardous drinking, notwithstanding the complexities involved, it ‘does not seem unreasonable’ that a Member State might consider MUP an ‘appropriate means’ of attaining the objective [127]. He was also convinced by evidence presented by the Lord Advocate regarding the particular impact of MUP alongside other polices in relation to harmful and hazardous drinkers, particularly amongst the young [135]. At this point you might think that the Lord Advocate has won over AG Bot, but there is sting in the tail of the Opinion.

When it comes to the necessity of the measure the AG is less convinced, especially when MUP is compared with the alternate policy of a general increase in alcohol duty. At first instance the Outer House of the Court of Session rejected a general increase in duty because it did not effectively target the measure at harmful and hazardous drinkers, as it would also have an impact on moderate drinkers, and less problematic on-sales consumption. The AG is not convinced by the argument that the measure is more targeted [147]. The key passage comes in para [149]: ‘on the assumption that the objective of the rules … is genuinely confined to combating the hazardous and harmful consumption of alcoholic beverages … I consider that it is for the those responsible for the drafting of those rules to show that increased taxation is not capable of meeting that targeted objective.’ In itself that is not a controversial statement; the burden of proof in such an instance is well established. But he goes on to add another element: he argues the Lord Advocate would have to ‘adduce evidence’ that a general increase would have a ‘disproportionate impact’ on moderate drinkers, and that it could also have a benefit in addressing harmful or hazardous consumption in higher income groups who are less likely to be effected by MUP. He also adds that a general increase might also have another ‘additional advantage’: a contribution to general health objectives. This might ‘constitute a decisive factor that would justify the choice of that measure rather than the MUP measure’ [150].


To my mind this is a false step at the end of the Opinion. Increases in general excise duties have been the preferred measure in many of the Tobacco cases referred to in the Opinion, but the problems of tobacco and alcohol consumption are very different and suit different solutions. All tobacco consumption is bad, and all consumption is essentially the same. That is not true of alcohol, even in Scotland. Consumption in bars and restaurants poses very different problems when compared to alcohol purchased for consumption at the home or on the streets. Patterns of consumption of different types of product are also very different. I am far more convinced that the targeting of the measure serves a useful purpose. I am also still confused as to why a general increase in duty, which by definition will impact on all consumers and all trade in alcohol, as opposed to the limited impact of MUP, is seen as being less restrictive on trade. A general increase in duty must affect a higher volume of trade if nothing else. I suggest the push towards general duty increases is not really about trade at all. Again we see a policy choice designed to protect price competition in the market. The Tobacco Directives make their competition goal explicit, but it appears that the AG is using Art 34 & 36 TFEU to achieve the same result in the free movement sphere.


Barnard & Peers: chapter 12

6 comments:

  1. As to the last point, that's what I was thinking too as I was reading (see Twitter for proof). I don't see how a MUP is so much more restrictive, if at all, that it isn't within the discretion of the legislature to adopt it. (There's a separate section earlier in the opinion about the discretion of policy makers, but that notion doesn't seem to have troubled the AG.)

    Otherwise, I really don't like the suggestion that making it hard for cheaper producers to compete on price is somehow a restriction on trade. Surely that's a problem for cheap domestic producers as much as for cheap foreign ones? The fact that there is evidence that this minimum price will affect more imported products than foreign ones doesn't change that, I think. Restrictiveness is conceptual (absent evidence that a particular measure was intended to make life difficult for imports), and so restrictiveness shouldn't be determined by the conditions at the moment, which may well be different in a few years' time.

    So if I had my way, I'd allow it under Keck, or otherwise as a measure that is sufficiently justified for public health reasons. But that's just me.

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  2. Hi Steve,
    Totally off topic but can you clarify a question asked by one of my adherents. "Can you tell me, is there anything in this treaty which confirms the
    removal of the UK's Sovereignty? I'm sure it does but it is a lengthy
    document.". I would be grateful to hear your advice. Thanks in advance.
    Nic Smith

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    Replies
    1. Which treaty? The TFEU? Since the UK has the power to withdraw from the EU (and therefore that treaty) it is sovereign, in my view.

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    2. Thanks Steve,
      I was certain that was the case. It seems that there are certain people who believe that sections of the Lisbon treaty are worded in such a way that will allow removal of our sovereignty if we vote to remain in the EU. If you could, briefly clarify this for me, I would be grateful.
      Yours,
      Nic Smith

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    3. In my view the UK will remain sovereign as long as it has the power to withdraw from the EU. There's nothing in Article 50 TEU to say that such a vote could only be held once. Nor is the UK obliged to sign up to any future Treaty amendments, or the single currency, or to give up any of its other opt-outs if the UK public vote to remain in the EU. The argument that 'if we stay in, we will be bound to sign up to more EU integration' is grossly inaccurate and crass scaremongering.

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    4. Thanks Steve,
      I thought that was the case.
      Regards
      Nic

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