News In Focus
5 March 2010
Court confirms ruling against tobacco minimum prices
Minimum prices for tobacco introduced by France, Ireland and Austria are an illegal infringement of competition under European law, the European Court ruled yesterday.
Judges affirmed an earlier opinion of the Advocate General that the laws in the three countries were incompatible with the Tobacco Duty Directive 95/59/EC. This obliges member states to impose excise duty on cigarettes calculated partly on the maximum selling price and partly by reference to cigarettes in the most popular price category.
The court agreed with the Commission, which brought the complaint, that the minimum pricing rules meant that the maximum price could not be lower than that minimum and were therefore capable of undermining competition. It concluded that the rules could not be regarded as compatible with the directive unless "structured in such a way as to ensure, in any event, that the competitive advantage which could result for some manufacturers and importers of those products from lower cost prices is not impaired".
Although all three countries advanced public health reason to justify their laws, the court said that the directive did not prevent member states from combating smoking because fiscal legislation was "an important and effective instrument" for discouraging tobacco consumption. And the law did not prevent member states from banning the sale of tobacco at a loss, "so long as the freedom of manufacturers or importers to determine the maximum retail selling prices for their products is not undermined".
The Scotch Whisky Association called on the Scottish Government to "recognise the legal realities" and abandon its plans for minimum alcohol pricing in the light of the judgment. However the Government maintains that the legal regimes governing tobacco and alcohol are different and the decision does not necessarily affect alcohol pricing.
Click here for a Journal article on the legal issues involved.
Click here to view the European Court's decisions in the three cases.