UK Supreme Court rules minimum pricing of alcohol products proportionate, might goods high in fat, salt and sugar follow?
The UK Supreme Court handed down judgment on 15 November 2017 (Scotch Whisky Association and others (Appellants) v The Lord Advocate and another (Respondents) (Scotland) confirming that minimum pricing is a proportionate means of achieving a legitimate aim (health).
This judgment may signal a shift away from voluntary industry measures toward formal regulation of product composition, price and advertising. The food and drink industry has adopted self-regulatory measures voluntarily around a number of products that are perceived to have links to obesity or other health and social issues. However, governments increasingly are seeking to manage public health and social issues through legislation and regulation that is intended to reduce the attractiveness of specific products to consumers. The challenge for business is to address situations where products are mischaracterised as the root cause of health or social issues or - should the criticism have any substance - to work with policy-makers in order to identify options such as investment in public education that do not have disproportionate impact on trade while generating behavioural effects in the areas targeted.
The Scottish Parliament acted to introduce legislation1 intended to address health issues said to be caused by over-consumption of alcohol. It opted to implement minimum pricing of 50 pence per unit rather than taxation or other options available to tackle the issue. This action followed a proposal made by the UK Government in 2012 that England & Wales implement a minimum unit price at a level of 40 pence per unit (which ultimately did not happen in the face of similar criticisms to those raised to the Scottish proposal) and a series of other actions by the UK Government constraining the advertising and packaging options for products including tobacco and food high in fat, salt and sugar.
The Scottish Whisky Association challenged the Scottish minimum price legislation - accepting that the objective is legitimate and that minimum pricing is an appropriate measure to pursue it BUT arguing that other less measures less restrictive on trade are also available and so should be adopted instead. The UK Supreme Court unanimously dismissed the appeal. It acknowledged the likely market distortion that would result from the introduction of minimum unit pricing but found that lower courts and the Scottish legislators had weighed this carefully against the health objective. It suggested that courts likely would be deferential in considering the weight afforded by member states to the balance between health and the market interference resulting from the measure adopted. There were, however, a number of points around the articulation of the objective set by the Scottish legislators and provisions for review of the effect of the legislation within a specified timeframe that may factor in to distinguish this result.
The 2012 Act amended Schedule 3 of the Licensing (Scotland) Act 2005 by inserting an additional condition into the license held by any retail seller of alcohol stating that an alcohol product can not be sold at a price below the minimum pricing standard. The minimum pricing standard itself was to be set out in secondary legislation so as to allow adjustment over time if appropriate and was proposed initially at 50 pence per unit.
The statute includes a requirement that Scottish Ministers evaluate and report to the Scottish Parliament on the operation and effect of the minimum pricing provision after five years. It also includes a "sunset" provision, bringing the operation of minimum pricing to an end automatically after six years unless it is determined by the Scottish Parliament that regulation should continue.
The Scottish Whisky Association challenged the legislation as inconsistent with EU law:
- First, on the grounds of interference of freedom to trade goods between member states contrary to Article 34 of the Treaty of the Functioning of the European Union (i.e. the measure constituted a quantitative restriction on trade between member states that could not be justified on public health grounds because it was disproportionate in effect, going beyond the appropriate means necessary to achieve the objective sought).
- Secondly, the application of the measure to wine is contrary to the Regulation (EU) 1308/2013 and the objectives of the Common Agricultural Policy.
The Scottish Whisky Association accepted that minimum pricing is an appropriate means to meet a health objective and focused on whether it could be attained by less restrictive measures. It is notable in this regard that the Scottish legislators did not frame the objective solely in respect of "hazardous" drinkers as had been the case in the UK but extended it to the general population's consumption of alcohol. This made it much more difficult to challenge the resulting effect as going far beyond what was required by the objective. The UK Supreme Court also accepted the rationale of the focus of the objective and that it was open to the Scottish legislators to form the view that heavy drinking in deprived communities generates socio-economic and health issues that may appropriately be addressed through legislative means.
The UK Supreme Court noted the general principle that member states could not circumvent free movement of goods obligation by exercise of legislative discretion justified ostensibly by public health concerns. However, it also noted the degree of deference a court likely would afford to a legislator in assessing the intangible value of human life and health and in then weighing that against interference with trade.
The UK Supreme Court in any case found that, while there were alternative measures available including taxation, these were not necessarily less restrictive given the potential for their broader effect to be felt across the general population more heavily than application of minimum unit pricing. The criticism that no detailed market impact analysis or consideration of proportionality had been concluded before implementing the legislation was not accepted as undermining its validity. The UK Supreme Court relied on the fact that that the "sunset" provision was in place in forming this view - concluding that this forced the authorities to take stock of the effectiveness of the legislation in five years time and justify any continuation in the light of experience.
What does this mean for you?
This decision illustrates the importance of engaging with legislators and regulators as they consider whether a product may pose a risk to public health or otherwise and - should they determine to legislate - in working to define a solution that focuses upon that risk with minimal impact on broader trading conditions.
It remains possible to challenge the imposition of such legislation as an unjustified interference with freedom to trade. Prospects of success may be higher where the legislator has formed an objective beyond the grounds they are permitted to rely on or introduced a measure that discriminates between producers in different member states on an arbitrary basis. However, courts generally will defer to the judgment of a member state on what measures are justified in dealing with public health or social ills and may only bite to ensure that appropriate steps have been taken to assess the proportionality of action by the member state in question.