High-strength alcohol bans could breach competition law

Public authorities, including local government and the police, are increasingly asking retailers to help deliver social, health and other policy objectives. One high-profile example is the rise of ‘high-strength alcohol’ schemes, which aim to persuade local retailers not to sell such products. 

Businesses and public authorities are free to work together on such issues, but retailers need to be aware competition law risks can arise. The CMA has recently issued guidance and an open letter to retailers highlighting the risks of participating in a high-strength scheme.

Most retailers will be familiar with the best-known types of competition law breaches (eg price-fixing agreements between competitors), but may not recognise some other behaviour as high risk. These include resale price maintenance; market sharing; and sharing commercially sensitive information.

The last of these is the focus of the CMA’s guidance. It points out that, while an individual retailer is free to agree with a local authority not to stock certain products, that decision must be taken independently. Any coordination or even discussion between competing retailers will be a competition law breach, as will sharing plans indirectly through the local authority (using a third party conduit is known as a ‘hub-and-spoke’ arrangement). 

Even an authority making an unprompted disclosure of a competitor’s plans will put a retailer at risk. Retailers must be willing to proactively tell authorities they do not want to hear about competitors’ plans, and to leave or end a meeting if an authority attempts to disclose them.

A breach of competition law can have severe consequences, including fines of up to 10% of global group turnover; disqualification of directors for up to 15 years; brand and reputational damage; and, for the most serious breaches, five years in prison and an unlimited fine. It is not a defence to argue a public authority encouraged or facilitated an anti-competitive arrangement or even that it pressured the businesses into taking part. Retailers should take care and, if unsure, take legal advice.

Charles Livingstone is a partner in the public law and regulatory team at Brodies LLP