By Saabira Chaudhuri
The global alcohol industry is bracing for a potentially
precedent-setting court decision in Scotland this summer on whether
the government can set a floor on alcohol prices.
The semiautonomous Scottish government in 2012 passed
legislation that sets a minimum price for all alcoholic beverages
of 50 pence (about 72 cents) a unit, which is equal to 10
milliliters of pure alcohol. So-called minimum unit pricing, or
MUP, is meant to curb heavy drinking by sharply boosting the price
of the cheapest booze on the market.
A 20-pack of Foster's 440-milliliter (15-ounce) beer cans, for
instance, currently sells for GBP11 ($16) at Tesco PLC and J
Sainsbury PLC stores in Scotland. The legislation would boost the
price to at least GBP22.44.
While parts of Canada have some form of minimum unit pricing, if
Scotland succeeds in court it will become the first full country to
implement a floor price per unit of alcohol.
The alcohol industry says minimum unit pricing in Scotland would
set an international precedent that could unleash a wave of
regulation and crimp profits.
"If we lose it, I would expect that we will see MUP and similar
health-justified schemes introduced not just in Scotland but
eventually and gradually in many places around the world," said
David Frost, chief executive of the Scotch Whisky Association, an
industry trade group whose members include Diageo PLC and Pernod
Ricard SA.
Wales -- like Scotland a part of the U.K. but with the ability
to write many of its own laws -- last year began consulting on
setting a floor price on alcohol. Ireland has a
minimum-unit-pricing law making its way through the legislative
process. Estonia is considering implementing a similar plan.
Alcohol-industry executives worry that countries struggling to
contain the social and fiscal costs of heavy drinking -- like South
Korea and Thailand -- could justify harder measures if Scotland
successfully waves through minimum unit pricing.
Scotland's Parliament in May 2012 passed the law establishing a
50-pence floor on per-unit alcohol prices, with 86 members voting
in favor of the measure. The single member who voted against the
measure later said she did so by mistake.
The alcohol industry attacked the law as illegal and
ineffective, saying it wouldn't stem heavy drinking but instead
force responsible drinkers to pay more. The Scotch Whisky
Association in July 2012 filed a complaint with the European
Commission, saying a pricing floor would "artificially distort
trade in the alcoholic drinks market, contrary to EU law." It also
opposed the legislation in Scotland's highest civil court,
Edinburgh's Court of Session, saying it breached the U.K.'s EU
treaty obligations.
After years of the case bouncing between courts in Scotland and
Europe, the Court of Session will hold a hearing on minimum unit
pricing Tuesday and is expected to make a decision by August.
"We don't believe in penalizing the majority of people who drink
responsibly," said a spokeswoman for Diageo, the world's largest
drinks maker and the biggest distiller of Scotch whisky. She added
that the company believes in an approach focused on "the minority
of irresponsible drinkers."
Establishing a pricing floor "is a very crude implement," said
Pernod Ricard's U.K. managing director, Denis O'Flynn. "We think
personal responsibility and education is how you address the whole
issue of responsible drinking."
Industry moves successfully derailed minimum unit pricing in
England, where British Prime Minister David Cameron pledged in
March 2012 to introduce it.
"When beer is cheaper than water, it's just too easy for people
to get drunk on cheap alcohol at home before they even set foot in
the pub," Mr. Cameron said. He opened a consultation into the level
at which a minimum price should be set, but said a floor of 40
pence a unit could mean 50,000 fewer crimes a year and 900 fewer
alcohol-related deaths a year by the end of the decade.
The alcohol industry reacted swiftly. SABMiller PLC commissioned
three reports from think tanks questioning the efficacy of minimum
unit pricing and highlighting the importance of parents' roles in
whether children grow up to drink responsibly. The Wine and Spirits
Trade Association led a campaign called "Why Should Responsible
Drinkers Pay More" and arranged industry meetings with the Home
Secretary Jeremy Browne. The trade body also ignored the official
scope of the consultation and said minimum unit pricing was
ineffective, unfair and likely illegal under EU law, according to a
person familiar with the moves.
Mr. Browne in July 2013 announced the government was shelving
plans for minimum unit pricing, citing insufficient evidence that
it works.
Several alcohol executives credit the Scotch Whiskey
Association's European Commission complaint that summer with
helping to put England's policy on ice.
If Scotland implements minimum unit pricing, it could reignite
calls for the measure to be passed in England. "We all recognize it
could come back," said a London-based senior alcohol executive.
"Minimum unit pricing remains under review pending the outcome
of the legal case between the Scottish Government and the Scotch
Whiskey Association and any implementation in Scotland," said a
spokeswoman for the U.K. Home Office.
Variants of pricing based on alcohol strength have been
effective where they have been implemented, health researchers
say.
The Canadian province of Saskatchewan has five price bands per
beverage based on alcohol strength. A 10% increase in the minimum
price of alcoholic beverages in Saskatchewan was associated with an
8.43% reduction in total alcohol consumption, according to a 2012
analysis by Tim Stockwell, director of the Centre for Addictions
Research of British Columbia.
Alcohol is a particularly hot-button issue in Scotland, where
sales were 20% higher than in England and Wales last year,
according to data released last week by Scotland's National Health
Service. Drinking kills six Scots a day, and Scottish drinkers are
twice as likely to die of alcohol-related health problems as those
in the rest of the U.K., according to data from the Scottish Health
Action on Alcohol Problems, a government-funded group.
"I'm not a teetotaler, but I'm concerned that cheap alcohol is
ruining and costing the lives of many of my fellow countrymen,"
said Alex Salmond, who led the Scottish National Party when it
pushed through minimum unit pricing in 2012.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
June 05, 2016 05:44 ET (09:44 GMT)
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