The government wants a ban on below-cost selling, so let’s work with it to come up with a definition, says Jeremy Beadles
With plans to impose a minimum price for alcohol in Scotland likely to be defeated, the debate over price in the UK market is at last producing suggestions that may be legal, if not easy to implement.
The coalition has made it clear that it wants a ban on below-cost alcohol sales and everyone recognises there is public concern about the price of some alcohol.
Raising prices on all beers, wines and spirits is unlikely to change the behaviour of those who misuse alcohol, but it would be foolish to dismiss widespread concerns.
We, and many of our members, have been urging government to find a way of discussing price that won't land us both in the courts for breaching competition law.
The coalition recognises it is better to discuss the issue with reassurance from the OFT than leave retailers under attack for offering the best-possible deal to consumers.
We've been talking with government about how "below-cost" could be defined. Evidence from other countries suggests policies to restrict below-cost sales can be complicated to administer and have unintended market consequences.
The WSTA supports a ban on selling alcohol below-cost, where cost is defined as duty + VAT. Duty and VAT are consumer taxes.
Our concern is that legislation in this area should not: favour any one business or market; favour own brand; require businesses to publicly disclose invoices; unduly affect the C&C/wholesale market; and restrict businesses trading in wines or selling through aged stock.
Some will argue that duty + VAT doesn't take account of the cost of production or retail. But consider countries where bans have been imposed and revoked.
Ireland introduced a ban on selling below-cost in 1987 where cost was defined as the invoice price of the goods, including VAT, carriage and insurance charges. This definition ignored off-invoice adjustments, allowances, discounts or rebates, but it set a benchmark.
Consumer campaigners pointed out that the policy inflated prices and disproportionately hit the poor. The government agreed and by 2005 had withdrawn the order.
When it was suggested a year on it be reintroduced to prevent binge-drinking, the Irish Competition Authority rejected the idea, pointing out it was bad for consumers and simply protected company profits.
Politicians pointed to the continued rise in alcohol consumption during the period when the order was in effect as evidence that price control mechanisms do not determine consumption levels.
France introduced its Loi Galland in 1996, which defined the purchase price as "the unit price stated on the invoice plus taxes on sales, specific taxes applied to the resale, and transportation costs". This excluded all "hidden margins" but within a few years more legislation was introduced, which, in effect, lowered the definition of cost price.
Discussions here have raised the possibility that duty + VAT + another fixed amount to account for cost of production, distribution and sale might be tantamount to a minimum price and therefore be illegal.
Finding a solution will be difficult but it is better for the industry to work with government on a definition that avoids the pitfalls experienced elsewhere.
Jeremy Beadles is chief executive of the Wine and Spirit Trade Association.
With plans to impose a minimum price for alcohol in Scotland likely to be defeated, the debate over price in the UK market is at last producing suggestions that may be legal, if not easy to implement.
The coalition has made it clear that it wants a ban on below-cost alcohol sales and everyone recognises there is public concern about the price of some alcohol.
Raising prices on all beers, wines and spirits is unlikely to change the behaviour of those who misuse alcohol, but it would be foolish to dismiss widespread concerns.
We, and many of our members, have been urging government to find a way of discussing price that won't land us both in the courts for breaching competition law.
The coalition recognises it is better to discuss the issue with reassurance from the OFT than leave retailers under attack for offering the best-possible deal to consumers.
We've been talking with government about how "below-cost" could be defined. Evidence from other countries suggests policies to restrict below-cost sales can be complicated to administer and have unintended market consequences.
The WSTA supports a ban on selling alcohol below-cost, where cost is defined as duty + VAT. Duty and VAT are consumer taxes.
Our concern is that legislation in this area should not: favour any one business or market; favour own brand; require businesses to publicly disclose invoices; unduly affect the C&C/wholesale market; and restrict businesses trading in wines or selling through aged stock.
Some will argue that duty + VAT doesn't take account of the cost of production or retail. But consider countries where bans have been imposed and revoked.
Ireland introduced a ban on selling below-cost in 1987 where cost was defined as the invoice price of the goods, including VAT, carriage and insurance charges. This definition ignored off-invoice adjustments, allowances, discounts or rebates, but it set a benchmark.
Consumer campaigners pointed out that the policy inflated prices and disproportionately hit the poor. The government agreed and by 2005 had withdrawn the order.
When it was suggested a year on it be reintroduced to prevent binge-drinking, the Irish Competition Authority rejected the idea, pointing out it was bad for consumers and simply protected company profits.
Politicians pointed to the continued rise in alcohol consumption during the period when the order was in effect as evidence that price control mechanisms do not determine consumption levels.
France introduced its Loi Galland in 1996, which defined the purchase price as "the unit price stated on the invoice plus taxes on sales, specific taxes applied to the resale, and transportation costs". This excluded all "hidden margins" but within a few years more legislation was introduced, which, in effect, lowered the definition of cost price.
Discussions here have raised the possibility that duty + VAT + another fixed amount to account for cost of production, distribution and sale might be tantamount to a minimum price and therefore be illegal.
Finding a solution will be difficult but it is better for the industry to work with government on a definition that avoids the pitfalls experienced elsewhere.
Jeremy Beadles is chief executive of the Wine and Spirit Trade Association.
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