The compatibility of Ireland’s Public Health (Alcohol) Bill with EU law

Dr. Ollie Bartlett, Maynooth University

This month the Irish Public Health (Alcohol) Bill completed its passage through the houses of the Oireachtas, after two years and nine months of debate. The Bill introduces five main interventions: minimum pricing of alcoholic beverages; stricter labelling of alcoholic beverages; restrictions on alcohol advertising; the structural separation of alcoholic beverages from other products in retail outlets; and restrictions on the sale and supply of alcoholic beverages. Its purpose is to combat alcohol related harm in Ireland, which has reached worryingly high levels.

Health Minister Simon Harris has been obliged to defend various aspects of the Bill in the Irish press, and has described the eventual passage of the legislation as ‘groundbreaking’. This short contribution will focus on assertions that certain parts of the legislation are not compatible with European Union law. Such assertions (usually made by those with vested interests in the alcohol trade) attempt to deploy a vision of the EU internal market as a guarantor of commercial freedoms, in order to intimidate national governments into watering down public health protections. This contribution will address the inaccuracy of these assertions in relation to the Irish Public Health (Alcohol) Bill. In doing so it will identify how governments might also misinterpret European public health law and policy, and how this can lead to regulatory failure.

Opponents could argue, and have argued, that any substantive aspect of the Bill will be liable to unduly restrict trade in alcoholic beverages, and should therefore be seen as an unjustified breach of Article 34 TFEU, which prohibits measures having equivalent effect to a quantitative restriction upon trade in goods. However, Article 36 TFEU (which provides for exceptions to Article 34), together with consistent CJEU case law (for example, Aragonesa,  Bacardi France, Ahokainen and Leppik, Rosengren and Scotch Whisky Association) indicate that, provided an alcohol control measure is proportionate, it can be adopted despite the fact that it places a restriction on trade.

All five interventions in the Bill can be justified as proportionate. Minimum pricing rules can be compatible with EU law as the Scotch Whisky judgement suggested in the context of Scottish minimum unit pricing (MUP). Context is key for MUP, and Irish MUP will not automatically be legal as a result of this decision, but under the terms of the decision, and given the extensive and clear impact assessment conducted by the Irish government, as well as the already very high tax rates on alcohol in Ireland, it should not be difficult to demonstrate that MUP is an appropriate and necessary measure in this jurisdiction too.

There was a last minute and intense debate on the inclusion of cancer warnings on alcoholic beverage labels. This proposal has perhaps been the most harshly criticised, as trade restrictive, stigmatising for Irish products and detrimental to the operation of the internal market. Mandatory health warnings on alcoholic beverages have not been directly addressed by the CJEU. Having said this, labelling and information provision have regularly been viewed by the CJEU as a proportionate form of public health intervention (for example, Van der Veldt, Commission v Germany, Neptune Distribution), and indeed the CJEU has stated that ‘labelling is one of the means that least restricts the free movement of products within the [EU]’. Furthermore, it can be argued that given the remarks made by the CJEU on the carcinogenic nature of tobacco in the Philip Morris case, and the strong evidence on the carcinogenic nature of alcohol (the third leading risk factor for disease and death in Europe behind smoking and high blood pressure), it is not unreasonable that the decision to warn of the risk of alcohol related cancer on warning labels, using a method of intervention that does not impair the substance of intellectual property or business rights, would be seen as proportionate. Cancer warning labels might stretch the limits of what is necessary to achieve the objectives of public health protection, but they arguably do not - given the existence of evidence on positive effects and Member States’ commitment at WHO level to consider stronger alcohol labelling requirements - go beyond these limits.

Arguments that such labelling requirements would put Ireland at an economic disadvantage are less forceful when one considers that nine other countries around the world have introduced stricter alcohol labelling proposals. Arguments that Irish products will be stigmatised are misguided given that the rule applies to the sale of products in Ireland, not Irish exports. Lastly, arguments that stricter labelling requirements will have severe operational consequences for industries are something of a hyperbolic smokescreen, considering that there are currently no common rules on alcohol labelling due to the exemption of alcohol from food labelling regulations, the industry themselves have specifically rejected the opportunity to create a harmonised alcohol labelling scheme within the EU, and there is already diversity in EU countries’ labelling requirements, including

mandatory health warnings in France.

Targeted advertising restrictions have also been upheld as proportionate by the CJEU. The restrictions proposed by the Bill do not amount to a total prohibition on the advertising of alcohol, and indeed that is not their intention. Consistent CJEU case law has demonstrated that if advertising interventions are limited and targeted in scope, then they will be proportionate. Retail restrictions that serve public health purposes will likely fall within the exception to Article 34 TFEU that was created by the Keck decision – any non-discriminatory ‘selling arrangement’ will fall outside the scope of Article 34 TFEU altogether. Indeed, recent tobacco case law indicates that the CJEU will classify public health interventions concerning the retail of unhealthy products as selling arrangements, and do not appear especially motivated to interfere in the Member States’ legislative choices in this regard. The same argument applies to the restrictions on sale and supply of alcohol, which primarily concern price promotions, for example buy one get one free offers. Such restrictions would likely fall within the scope of a selling arrangement, and would therefore also fall outside the scope of Article 34.

Thus, is relatively clear that four of the five interventions included in the Bill are compatible with EU internal market law. Furthermore, a coherent argument can be made that the Bill’s labelling provisions will also be compatible with internal market law. EU law supports the Irish government’s prerogative to adopt such measures, and indeed in the comments issued by the Commission on the Bill, concerns were raised regarding the labelling provisions, but they were not criticised as opponents of the Bill have asserted. Rather, the Commission used the comments to reassert Ireland’s right to adopt proportionate public health measures.

Assertions regarding the incompatibility of the Bill with EU law fail to take account of the fact that the internal market is founded and has been developed upon the understanding that the responsibility of governments to protect their populations from various threats will often conflict with the commitment to protect free trade. The European Union Treaties explicitly provide that Member States can limit economic freedoms in a proportionate manner where a pressing social concern warrants intervention, and the CJEU has reinforced this time and again in the alcohol context. Moreover, both the right to health and the right to conduct a business are equally protected as a matter of EU fundamental rights law, and the CJEU has held that the right to health will outweigh the commercial rights of certain industries that contribute to public health epidemics.

Those that criticise the Public Health (Alcohol) Bill wrongly assume that the internal market requires Member States to prioritise the rights and interests of business, and to deal with social issues in a way that best suits the business community. This is not the case – the internal market guarantees free movement, but does not guarantee businesses a trump card to play when they feel their interests are being infringed. Far from preventing the Member States from protecting their populations, EU law protects the Member States’ right and responsibility to do so in a proportionate manner - even if this would lead to a certain amount of disruption to the status quo of transnational trade.  

Even Member States sometimes misinterpret the cues given by EU public health law and policy, and this can lead to instances of regulatory failure – where mutual inaction by two regulatory actors results in an issue not being addressed. For example, one of the most salient debates on the Public Health (Alcohol) Bill concerns the minimum unit pricing provisions, and their implementation. Simon Harris has until very recently repeatedly insisted that the MUP provisions enacted in the Bill would not be implemented until similar provisions were brought into effect in Northern Ireland, based upon the belief that Irish public health policy should not produce negative effects for the transnational trade in alcoholic beverages in border counties. The special nature of the Irish border and the desire of the Irish government to make public health policy on an all-island basis may make political sense, but as a matter of law the CJEU has repeatedly held that ‘the fact that one Member State imposes less strict rules than another Member State does not mean that the latter’s rules are disproportionate’.

EU law does not require Ireland to ensure that its policy choices are consistent with the policy choices in other Member States, and does not require that, once a barrier to trade has been justified, it is not implemented on account of possible trade distorting effects. The Irish government should bear in mind that internal market law permits each Member State to protect its own population in whatever way it sees fit, irrespective of choices made by other Member States, as long the barriers to trade it erects are proportionate. Simon Harris’ recent softening of his previous stance, through statements that Ireland cannot wait ‘forever’ to implement MUP, is therefore to be welcomed.

However, some elements of the Bill have not escaped the trap of regulatory failure. While the provisions on alcohol advertising are already commendably strong, they could have been even stronger. Amendments were proposed in the final rounds of Dáil debate that would have increased the protection the legislation offered to children against online alcohol advertising. This would have given effect to a considerable body of evidence that suggests that children are vulnerable to digital and other non-traditional forms of alcohol advertising, which are hardly regulated at all by any Member State. However, Simon Harris rejected these amendments. Despite fully agreeing with their sentiments, the health minister rejected them on the basis that tackling online advertising is a task best suited for EU level action, and that Ireland should therefore not act until the EU has acted. Unfortunately this logic does not take account of the fact that the EU have already recently refused to increase the stringency of online alcohol advertising regulation. The Audiovisual Media Services Directive reforms leave EU provisions governing cross-border alcohol advertising unchanged, and even relax some of the rules on the provision of advertising services, to the detriment of children’s health protection. The Commission has repeatedly insisted that it will not propose harmonising legislation to regulate cross-border alcohol trade.

In order for this to ever happen, Member States must commit to regulating the alcohol industry in their own territories. The conferral of competence upon the EU to regulate the internal market depends on the existence of barriers to trade, which can only exist if Member States have enacted sufficiently diverse regulations. Currently, regulation of online alcohol advertising is consistent across Member States in its virtual non-existence. The existence of at least some variation in national regulation would certainly put greater pressure on the Commission to adopt common rules, and would add some weight to the Member States’ political call for a European Union alcohol strategy. Thus, the Irish government’s position that Member States should wait for the EU to act has unfortunately led to a regulatory failure on an important public health issue.

In summary, the Public Health (Alcohol) Bill is a bold piece of legislation that seeks to act on the substantial evidence base on alcohol related harm in Ireland. It is within the discretion of the Irish government to adopt, and contains interventions which make justified restrictions to free movement. Assertions that parts of it are not compliant with EU law fail to take account of the fact that EU internal market law preserves the right of the Member States to protect their populations as much as it protects the freedoms of traders. Misinterpretations of this prerogative, or of the reality of EU level public health policy, can potentially lead to inaction and regulatory failure. The Irish government has taken an important step towards reducing the burden of alcohol related harm in Europe, and other Member State governments should be encouraged to follow.

Barnard & Peers: chapter 12, chapter 21

Photo credit: SpunOut.ie

Evidencing the Effectiveness of Health Interventions in Free Movement Cases

Angus MacCulloch, Lancaster University Law School

Two judgments on Articles 34/36 TFEU (concerning the free movement of goods) handed down by separate courts in the same week give stark examples of the importance of having a good evidence base before a State seeks to justify a public health intervention in the market. The first example was the judgment of the CJEU in Case C-148/15 Deutsche Parkinson Vereinigung, a preliminary reference considering the compatibility of a German measure setting fixed prices for prescription-only medicines. The second being the judgment of the Inner House of the Court of Session in Scotland in Scotch Whisky Assoc v LA [2016] CSIH 77, where the court upheld the Lord Ordinary’s finding that the Scottish Government’s plans to introduce Minimum Unit Pricing (MUP) for alcohol were not contrary to Art 34 (following the CJEU reference in Case C-333/14). Both measures involved health justifications for pricing restriction measures that fell foul of Art 34, but the results were very different.

Fixed Price Prescriptions

The German measure in DPV fixed the prices of all prescription-only medicines in Germany; restricting the ability of pharmacists to provide products at a discounted price. DPV, a self-help organisation for Parkinson’s disease sufferers, had set up an arrangement with a Dutch mail order pharmacy DocMorris (yes, that DocMorris) to put in place a bonus system for its members. That bonus system was challenged. The scheme was found to infringe Art 34 TFEU as mail-order pharmacies are limited in the services they can offer, and the ability to price competitively is the most likely means they have to access the German market directly [24]. The Court then turned to the argument that the system of fixed prices was justified in order to ‘ensure a safe and high quality supply of medicinal products’ [32]. The argument was that without set prices pharmacies may enter into ‘ruinous price competition’ which might result in the closure of physical pharmacies in rural or underpopulated areas. It was argued those pharmacies alone were well suited to offering safe high quality supplies, tailored advice, and effective checks on medicines [33]. At [35] the Court applied the test it set out in the Case C-333/14 SWA reference:

‘The reasons which may be invoked by a Member State by way of justification must thus be accompanied by an analysis of the appropriateness and proportionality of the measure adopted by that State, and by specific evidence substantiating its arguments’.

It was this final point on ‘specific evidence’ that proved to be crucial in the case, as the Court went on to explain in [36].

‘that court must examine objectively, through statistical or ad hoc data or by other means, whether it may reasonably be concluded from the evidence submitted by the Member State concerned that the means chosen are appropriate for the attainment of the objectives pursued and whether it is possible to attain those objectives by measures that are less restrictive of the free movement of goods’.

In the subsequent paragraphs the Court went through the submissions of the parties and suggested that there was ‘no evidence to substantiate the contention’ that the scheme was necessary to ensure a uniform supply of prescription-only medicines [37]. In fact nothing before the Court suggested that without the system mail order pharmacies, competing on the basis of price, would threaten essential services, such as emergency care or providing activities in the general interest; in fact competition might encourage traditional pharmacies to improve such services [39-40]. The assertion of the Court at [42] is perhaps the most telling:

‘it should be noted that the existence of a genuine risk to human health must be measured, not according to the yardstick of general conjecture, but on the basis of relevant scientific research’.

Because of the failure to provide convincing evidence of the effectiveness of the measure the Court found that it had ‘not been shown to be an appropriate means of attaining the objectives relied on’ [45]. It had therefore fallen at the 1st hurdle in the two-part test. As it was not shown to be ‘appropriate’, there was no need to consider if it was ‘necessary’.

Minimum Unit Pricing

The Inner House (IH) in SWA were tasked with applying the same two-part test, but this time the result was very different. The court’s summary of the evidence presented by the Scottish Govt runs across many paragraphs, [125]-[143], citing numerous studies, both domestic and international in scope. The Petitioner challenged the conclusions and methodology of a number of those studies, but the Scottish Government argued that the State had discretion and it was not unreasonable that it would ‘prefer one body of evidence the other, so long as the information which supported the choice was cogent’ [130]. As the IH was acting in an appeal it confined its review, in the most part, to confirming that the Lord Ordinary, in the Outer House, had correctly applied the law. The first important, and perhaps the most important, question was to confirm that the Lord Ordinary had identified the correct aim of the legislation. Both the AG and CJEU, in the reference, had noted that the legislation appeared to have a dual objective, whereas the Lord Ordinary had focused on a particular aim; the reduction of alcohol consumption by harmful and hazardous drinkers. The IH found that the Lord Ordinary’s particular view was identical to that of the CJEU. That is perhaps surprising, as many commentators had seen a different emphasis in the CJEU; suggesting that it had struck some form of balance between the narrow goal of dealing with harmful and hazardous drinkers, and the wider goal of reducing general alcohol consumption. The IH implicitly rejected that interpretation of the judgment.

In its examination of the appropriateness of the measure the IH noted the extent of the problem with alcohol consumption; the ‘societal, family, and personal effects of excessive alcohol consumption in Scotland are difficult to over-estimate’ [178]. This assertion was based on the ‘raft of statistical material [which] was produced’ [180]. It also recognised the clear view that the policy would target harmful and hazardous drinkers. It noted that it was possible to attempt to rebut figures used in support of the measure, or counter the conclusions drawn by the Govt, but that ‘there was and is ample objective material to support the proposition’ [182], and, at [183], that:

‘the Lord Ordinary cannot be faulted in finding that there was evidence from which it could be inferred that minimum pricing was an appropriate method of securing the objective by tackling the specific consumption of cheap alcohol’.

When turning to the proportionality of the measure the IH considered the Petitioners preferred measure, the increase of general taxation, which they argued would be ‘as effective’ as MUP. But that argument was rejected; ‘[t]he fundamental problem with an increase in tax is simply that it does not produce a minimum price’ [196]. The IH pointed towards evidence that retailers have sold below cost or absorbed, or off-set, tax increases. Also that price increases in the lowest cost products would ‘produce a greater reduction in sales than across the board price increases’ [199], as trading down to lower cost products was not possible. In fact a general taxation increase would have, ‘disproportionate, undesirable and unnecessary effect on moderate drinkers, who do not generally represent a significant problem in societal terms’ [200]. Finally, at [204], the IH addressed the choice of 50p per unit:

‘Such a figure, on the material produced, will reduce consumption amongst harmful and hazardous drinkers in that quintile of the population whose health is affected most by the consumption of cheap alcohol. The benefits of this are well documented’.

On that basis the Inner House, upheld the findings of the Lord Ordinary and refused the reclaiming motion.

One interesting feature of the case before the IH was that the CJEU had made it clear in its preliminary reference that a domestic court should address the proportionality of the measure at the time it gives its ruling, not at the time the measure was adopted. As the original pleadings were lodged in 2012 a significant amount of new evidence and policy material had become available in the intervening period; including new evidence since the CJEU judgment in the reference was handed down in December 2015. The IH took note of the evidence that was considered by the Lord Ordinary, and the subsequent proceedings, and decided that it was in the interests of justice that any pertinent new material should be considered. But it stressed that the new information would only be significant if it was such that it would have altered the Lord Ordinary’s view of the facts. It was apparent that the new evidence merely added to the exiting body of evidence that supported the effectiveness of MUP as an intervention.

Conclusions

In a series of recent decisions, including, for example, Case C‑639/11 Poland & Case C‑61/12 Lithuania, the CJEU has begun to stress the importance of evidence to support an attempt to justify a restriction on free movement. In DPV we see that requirement given greater emphasis, and a new focus on the type of evidence that will be required. It is not sufficient for a member State to rely on mere assertion or conjecture. They will have to produce more. The Court’s preference is clearly for hard statistical or scientific evidence, although it will accept other forms. Domestic courts are charged with ensuring that the State has good evidence to support the appropriateness and proportionality those measures. The judgment of the IH shows how that analysis can be undertaken. It also makes clear that the analysis of proportionality is not an event, rather a process. If a policy stands or falls by its evidence, it must therefore be the case that changes in the evidence base can alter whether that measure is ‘appropriate’ and/or ‘necessary’ over time.

Barnard & Peers: chapter 12, chapter 16

Art credit: “Beer Street and Gin Lane”, William Hogarth

Protecting Health, or Protecting Trade? A fine balance in the Scotch Whisky Association judgment

Angus MacCulloch, Lancaster University Law School 

The Court of Justice has now delivered its judgment in Case C-333/14 in relation to the lawfulness of the Scottish measure to introduce minimum alcohol pricing, or MUP for short. Both the Scottish Government and the Scotch Whisky Association, which brought the legal challenge, have “welcomed the ruling,” although I think that the SWA are probably a little happier than the Scottish Government as the case returns to the Inner House of the Court of Session, which had referred it to the CJEU. I’ve previously written about the AG’s Opinion and the Court has adopted a very similar approach, but in many ways the judgment leaves as many questions as it answers. It does appear to give quite a strong steer to the Court of Session that the CJEU would prefer the adoption of the “less restrictive” increase in general excise duties instead of the MUP, but it leaves the final decision on the proportionality of MUP to the Scottish court.

Is MUP caught by Art 34 TFEU?

Both parties to the dispute had accepted that MUP pricing was caught by Art 34 TFEU (the ban on measures with an equivalent effect to quantitative restrictions on imports), but there was little clarity as to how such a measure breached the prohibition. That at least has been clarified today. The Court followed the AG’s elegant solution of evading the complications of categorising a MUP as a “selling arrangement” and dealing with the matter under the Gourmet International style analysis, but rather preferring to use the Trailers “market access” test. A minimum pricing measure restricts access to the UK market as it prevents lower cost products from other Member States from exploiting that cost advantage in lower retail prices [32]. As the removal of the benefits of the cost advantage triggers the market access test there is no need to discuss whether there is any discrimination inherent within the scheme. This is another example of the Court preferring the flexibility of the new test to the more traditional Cassis and Keck line of decisions.

The Tricky Balancing Act in Proportionality

The majority of the ruling deals with the much more difficult question of the potential justification of the measure on health grounds and whether the restriction is proportionate. At first instance the Outer House of the Court of Session accepted that the measure was proportionate as it targeted ‘harmful and hazardous’ drinkers who tended to consume low price high alcohol products which were most effected by MUP, but in the CJEU ruling there is a different view taken as to the purpose of the measure. On the evidence presented to it the CJEU takes the view that MUP has a “twofold objective” [34], both targeting these “harmful and hazardous” drinkers, while also reducing general alcohol consumption in the wider population “albeit only secondarily”. It is this “ambiguity”, as the AG put it, which I think is at the heart of the problem in the Ruling. If one cannot clearly define what a measure is designed to achieve it is incredibly hard to come to a firm conclusion as to whether it is proportionate. The Court did accept, at [38], that the measure was a real attempt by the Scottish Government to address health problems within Scotland, but set out that it cannot go beyond what is necessary in order to protect health. The choice before the CJEU was between the Scottish Government’s preference for MUP, and the argument that the same health benefit could be obtained through an increase in the general excise duties applied to all alcohol products, as preferred by the SWA and the European Commission. The Court argued that increased taxation could be an effective heath protection measure, as it is in relation to tobacco, and that an increase in taxation:

“is liable to be less restrictive of trade in those products within the European Union than a measure imposing an MPU. The reason is … that the latter measure, unlike increased taxation of those products, significantly restricts the freedom of economic operators to determine their retail selling prices and, consequently, constitutes a serious obstacle to access to the United Kingdom market of alcoholic drinks lawfully marketed in Member States other than the United Kingdom and to the operation of fair competition in that market.”

The contention that an increase in taxation would be less restrictive of trade, in comparison to MUP, is one of which I have never been convinced. Taxation affects all products, and MUP would only affect a limited number; on that simple basis I contend that MUP is arguably less restrictive in terms of the volume of trade impacted by the measure. Volume of trade affected has been seen as important in other Art 34 cases, see for example the Sunday Trading litigation of the 80s, but here the Court refers to this issue much more explicitly than before. It is not concerned with reducing the volume of trade impacted, but is much more concerned that the measure does not impact “fair competition” within the market; even if a greater number of products are affected. The Court refers to an argument made by the Lord Advocate questioning the relevance of the Court’s previous cases that dealing with minimum pricing in tobacco markets. The Court rejects that position, at [45], but I am nervous about simply reading across from those cases. Those cases centred on the Tobacco Harmonisation Directives, which were explicitly designed to enhance the single market integration by using price competition as a driver of integration. The direct protection of retail price competition is not usually seen so explicitly under Art 34 TFEU. It appears that the Court is now reading the protection of price competition into the prohibition. There is also, to my mind, another important distinction between the health problems associated with tobacco consumption and the health problems associated with alcohol - different problems will require different solutions. 

The final issue in the proportionality discussion relates to the vexed question of choosing the least restrictive of the two measures, and the intrinsically connected question of the balance between restrictiveness of a measure and its effectiveness at achieving its aim. Here we return to the “ambiguity” of the purpose of MUP. The Courts states, at [47]:

“the fact that increased taxation of alcoholic drinks entails a generalised increase in the prices of those drinks, affecting both drinkers whose consumption of alcohol is moderate and those whose consumption is hazardous or harmful, does not appear, in the light of the twofold objective pursued by the national legislation at issue in the main proceedings … to lead to the conclusion that such increased taxation is less effective than the measure chosen”.

The Court appears to suggest that as taxation can achieve both the general and the specific aim it is as effective. I find that difficult to follow. One of the main reasons that MUP was adopted was it was targeted, in that it only impacted on cheap and strong products and would not have a wider impact on moderate drinkers or on-sales, which would generally be above the MUP floor. The Court is expressing a preference for the secondary aim of the measure and effectively side-lining its primary purpose. It describes this generalised impact as “additional benefits” [48], but I would argue this is not additional in any valuable sense if it removes the primary benefit, targeting, from the measure. The Court goes on to the usual statement that the final decision is, of course, for the referring court, once it has heard all the evidence and argument, but it is pretty clear where its preference lies. This preference for one aim over another does not sit well with the settled position, repeated at [35], that the Member State can decide on the degree of protection it requires.

On the Article 36 TFEU Derogation

The previous discussion was in relation to the ‘rule of reason’ within the Art 34 TFEU prohibition, but as health protection is one of the grounds for derogation in Art 36 TFEU it is also possible to justify MUP on that basis. The Court discusses Art 36 separately and while the questions are similar the Court appears to adopt a slightly more relaxed tone. It stresses the same proportionality test as above, and that it is the Member State’s responsibility to prevent the appropriate evidence, but also that:

“that burden of proof cannot extend to creating the requirement that, where the competent national authorities adopt national legislation imposing a measure such as the MPU, they must prove, positively, that no other conceivable measure could enable the legitimate objective pursued to be attained under the same conditions”.

This appears to give some succour to the Scottish Government that the ball is now in their court, and that they must present the best evidence they can to convince the Court of Session. The alcohol policy evidence, including the Nuffield Report published yesterday, tends to suggest that there is a good case to be made for MUP. In that sense there is a still a lot for both sides to play for when the Court of Session comes back to this issue in 2016.

Conclusions

It is unfortunate that the Court has followed the reasoning of the AG and the weaknesses that it exhibited. We now have confirmation that price competition receives protection under Article 34 TFEU, and any attempt by Member States to interfere with the free setting of prices is likely to be scrutinised as a matter of EU law. The most disappointing aspect of the ruling is the lack of clarity in the Court’s discussion of proportionality, it has been described as “Delphic” by some commentators. I have explained some of my concerns, but the most troubling aspect is the Court’s apparent willingness to suggest that the Scottish Parliament picked the “wrong” health aim, and use proportionality analysis to “correct” that mistake. The Inner House of the Court of Session still has a lot of work to do in unpicking the Court’s Ruling.

Barnard & Peers: chapter 12

Photo credit: www.bestdrugrehabilitation.com

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