On the 3 September 2015 the legal challenge to the Scottish alcohol MUP legislation took a small, but significant, step forward: the delivery of the Advocate-General’s Opinion. In this guest post Angus MacCulloch, a Senior Lecturer in EU law at Lancaster University, explains some of the key issues that come out of that Opinion, and what it might mean for the rest of the litigation.
What is the significance of an AG Opinion?
What was the AG’s Opinion on MUP?
The AG considered two key questions in relation to MUP: 1) whether MUP was a restriction on trade contrary to the EU Treaty, and 2) whether the restriction could be justified as restriction to protect public health. I’ll look at each in turn.
Is MUP a restriction on trade?
This section of the AG’s Opinion is technical but is important for any EU Member State which might want to adopt a MUP policy in the future. The EU Treaties, specifically Art 34 TFEU, prohibit any national rule which has the equivalent effect of a quantitative restriction on trade between States in the Internal Market. That provision has been interpreted quite widely and, in a lengthy series of cases, the Court of Justice has tried to steer a nuanced path catching the most restrictive types of national rule, but allowing other non-discriminatory rules to escape the prohibition. The AG took the view that a MUP scheme would always fall within the prohibition in the Treaty. MUP was caught as it ‘impeded access to the market’ for imported products. This is because low cost imported products would no longer be able to exploit their competitive price advantage to assist them in accessing new markets. Because the measure hindered access the AG argued it was irrelevant that MUP was non-discriminatory, in that it placed an equal burden on imported and domestic products. This is significant as the AG suggests that any pricing policy which removes cost based competitive advantage from a class of products in the market should always fall within the prohibition in the Treaty, and therefore can only be permitted if it can be justified. It seems that the AG has elevated the importance of price competition within the market and given it a high level of protection.
Can MUP be justified?
The prohibition in Art 34 of the Treaty is paired with an exception in Art 36, which permits restrictive measures to be adopted for the protection of public health. The AG argues that Member States must be allowed discretion as a range of policy choices could be taken in complex areas such as health, but that Member States must adduce evidence to show that they have made a suitable, in the sense that it is an effective means of achieving the policy goal, and proportionate choice. When examining the first part of that test the AG makes an important point that it is vital that the Scots courts decide what the aim of MUP is. When deciding whether MUP is a suitable measure its stated aim is vital. Is the measure targeted specifically at ‘harmful and hazardous’ drinkers, or does it have a wider general health goal? He suggests the Scots courts should look again at the latest evidence and policy stipulations when the case returns to them as MUP is still to be introduced. I have argued for some time that it is far easier for a Member State to justify a measure which is clearly targeted at a particular policy objective. The approach suggested by the AG mirrors that view; as we shall see a general measure is much difficult to justify.
The final part of the AG’s Opinion deals with proportionality; if there is a measure less restrictive to trade which archives the policy goal, MUP would be disproportionate. The measure against which MUP is being compared is a general increase in alcohol duties; if that achieved the same health objective, but was less restrictive of trade, it should be preferred. If the aim of the measure is narrow, to deal with harmful or hazardous drinking, there will be fewer possible effective measures, and it will be less likely there will be a ‘less restrictive’ alternative. If a measure is very general, like public health, there will be more policy choices and it is far more likely that a less restrictive measure might be possible.
The AG accepted that MUP might be an appropriate response to harmful and hazardous drinking, but he was not convinced that a general increase in alcohol duties might not also be as effective, while also being less restrictive on trade. In the original case before the Scots court the judge accepted that MUP was a targeted measure and therefore discounted a general excise increase as being a suitable measure. The AG was less convinced, arguing that supporters of MUP would have to ‘adduce evidence’ that a general increase would have a negative ‘disproportionate impact’ beyond the targeted problem, such as on moderate drinkers or the on-sales trade. They would also be required to explain why a general increase would not 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 went to add that a general increase might also have an ‘additional advantages’, beyond the targeted group, by improving general heath. This, he said, might ‘constitute a decisive factor that would justify the choice of that measure rather than the MUP measure’.
Conclusions
While there is much to be welcomed in the clarity of the AG’s argument as to why MUP falls within the prohibition in Art 34 of the Treaty, I see a number of problems with his proportionality analysis.
First, it is not clear to me, although it appears to have been generally accepted in the case, that increases in general excise duty are ‘less restrictive’ on trade between Member States. To my mind a general increase in duty, in that it affects all prices, will affect all alcohol sales in the Scotland. The evidence in relation to MUP is that will affect only a proportion, even if that proportion is significant. Even a cursory examination suggests that general excise duty increases will affect a higher volume of trade. The only explanation is that the AG is concerned about distortion of competition on the market, rather than trade between Member States. As MUP only applies to retail sales there will still be healthy price competition at the wholesale level, and retailers will still be incentivised to purchase low cost stock, which, following MUP, could offer better profit margins. The only rationale for the AG’s preference for general excise duty increases must be to protect retail price competition and the ‘level playing field’ within the Internal Market.
Second, the AG appears to see much greater ambiguity in the Scottish measure’s policy objective than the Court of Session in Edinburgh. Reading the Opinion it appears that he was overly swayed by the previous case law on minimum retail pricing in the Tobacco Directive cases. The Tobacco Directives are much more specific legislation, which is explicitly designed to maintain retail price competition in tobacco while allowing Member States to increase excise duties to protect health. It is unsurprising that Court stopped Member States from going against the explicit aim of the objective to protect retail price competition. Art 34 of the Treaty is a much more general provision which, as the AG recognised, gives Member States much wider discretion in their policy goals. The problems associated with tobacco and alcohol are different. All tobacco consumption is harmful, and all consumption is essentially the same. That is not true of alcohol: consumption in bars and restaurants can pose very different problems when compared to alcohol purchased for consumption at the home or on the streets. Different types of alcohol also tend to be used quite differently. The different problems will likely require different policy interventions. The issues surrounding the exact purpose of the measure and the relative importance of targeted health outcomes, and the wider impact of the measure on the general public, will no doubt be at the heart of the ongoing litigation.
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