Minimum pricing branded a competition law minefield
By Colin Donald, Business Editor

MEASURES proposed by the Scottish government to establish minimum prices for alcohol carry a "significant risk" of exposing the UK government to a European legal challenge, lawyers have warned.

English and Scottish competition law specialists say that proposals for minimum retail pricing contained in the SNP government's alcohol strategy document contain potential legal snares, infringement of which would make a Westminster government answerable to European law courts.

Peter Andrews, of Shoosmiths, legal adviser to the off-license group the Wine and Spirit Trade Association (WSTA), told the Sunday Herald: "European law puts the Scottish government in a very difficult position here. It's just about possible to impose minimum pricing without breaching obligations to the European treaty Treaty of Rome, but this is a complex area and by putting any foot wrong they expose themselves and the Westminster government to fairly significant risk."

Gavin Partington, a spokesman for the WSTA, said: "If you want to have discussion around price, the government has to lead that discussion and it has to find a way around competition law. As it stands at the moment their proposals clearly run contrary to what competition law stipulates."

The problem for Scottish ministers is that the Treaty of Rome forbids any business-to-business or business-to-government co-operation that could be construed as collusion to set prices.

But experts acknowledge that it would be extremely difficult for the Scottish government to devise a minimum pricing regime without some degree of past, present or future discussion with the market.

One competition lawyer, who asked not be named, asked: "How could the Scottish government come up with a sensible number without consultation with retailers? If the government then required companies to enter into anti-competitive agreements this would put it in breach of European law and could lead to an infringement action against the UK in the European courts.

"It's a real minefield. If they get it wrong, they expose British companies to the risk of fines. Just because the government has persuaded people to do something doesn't mean the competition authorities wouldn't get involved."

Rod Lambert, the partner who leads on EU competition law for leading Scots practice McGrigors, said that the UK government would be answerable to a European court if, for example, a supermarket chain were to challenge a minimum pricing order.

"Article 81 of the Treaty of Rome is a blanket prohibition on all arrangements or strategies that have an impact on competition in the market, whether restricting or distorting it.

"An essential tenet of that has been a prohibition of retail price maintenance, whether it's in cars, perfumes or whatever. The OFT classifies this as a hard core' restriction.

"The basic principle of trying to force people's prices up in order to deal with a perceived social or health problem is certainly going to run headlong into the argument that article 81 has prohibited since 1963."

Lambert continued: "If they are trying to say that it would be illegal for Asda to sell lager at 50p a tin rather than 30p a tin that's about the most blatant form of retail price maintenance you could have."

There is not yet any legal consensus as to whether the Scottish government's widely applauded health and public order-promoting motivations, based on hard evidence of Scotland's disastrous record on alcohol abuse, could rescue a minimum pricing regime from legal challenges.

Eoghainn MacLean, a competition law advocate for the Ampersand stable said: "The answer to this problem lies in what is known as regulatory anciliarity', which says that if you promulgate a law for a legitimate objective - in this case the promotion of health and the prevention of crime - that is allowed as long as the measures are proportionate. This is something that may in time be argued, and it would be open to others to argue otherwise."

But Rod Lambert of McGrigors insisted: "There is no recognised exception in competition law for allowing minimum pricing just because of some other aspect of policy. Especially for something like alcohol that is blatantly a consumer product."

Michael Dean of Maclay Murray and Spens added that foreign drinks manufacturers, "an efficient Czech brewer for example", could challenge a Scottish minimum price regime as "interference with free trade".

A spokesman for the Office of Fair Trading said: "We are engaged in regular dialogue with the Scottish government but we are not in a position to talk about that publicly."