It finally looks like the deeply rooted Swedish liquor monopoly, Systembolaget, will face some competition after almost 60 years of state sanctioned monopoly. According to a Government Report, producers of alcoholic beverages may obtain the right to sell alcohol directly to the consumer from their own premises - an arrangement simply labeled “yard sales” in translation, or “gårdsförsäljning” in Swedish.
In the process leading up to Sweden becoming a Member State of the EU in 1995, the retail monopoly for the sale of alcoholic beverages held by “Systembolaget” was the subject of negotiation and discussion with the EU regulator.
In order for Sweden to be able to retain the monopoly post-accession, the European Commission (the “Commission”) demanded, inter alia, that all discriminatory measures between national and imported goods would have to be abolished. In accordance with the terms of accession, the Swedish Competition Authority (“SCA”) was given the mandate to exercise supervision over Systembolaget and report bi-annually to the Commission regarding the functioning of the monopoly.
Proposal for yard sales of alcohol
In September 2007, the Swedish Government appointed an investigation in respect of the evaluation of the Alcohol Act, which governs the retail monopoly. One subject discussed in the resulting report, published 2009, was yard sales of alcoholic beverages. The SCA took a positive stance on the prospect of having yard sales of alcohol in Sweden, provided that the products sold were not part of the assortment of Systembolaget. Discussion followed in the media and among other interested parties, prompting a new investigation to be initiated. The purpose of this new investigation was to analyse the regulation and experiences from yard sales in Finland, and outline a legal draft on how to make yard sales compatible with EU law, the retail monopoly of Systembolaget and the Swedish alcohol policy, i.e. a restrictive policy on alcohol.
On 16 December 2010 the report, in the form of a Swedish Government Official Report (hereinafter the “Report”), was presented to the Ministry of Health and Social Affairs. In case the Government wishes to realise the legal draft presented, the Alcohol Act would have to be amended, and such amendments are subject to the approval by the Swedish Parliament. The Report states that if passed by the Parliament, the amendments to the Alcohol Act can take effect from 2012 at the earliest.
General contents of the Report
The Report states that there is an existing demand to buy alcoholic beverages directly from local producers. Pursuant to the Report, a commercial producer of alcoholic beverages should only be allowed to engage in yard sales after having obtained a specific license. Such license should be sought at the municipality, which would also undertake supervision of yard sales, and the process would be the same as when applying for a general liquor license.
The Report recommends that yard sales should be authorised only in circumstances as “study visits” to the place of production, lectures or similar experiences with a connection to the alcoholic beverage offered, presumably to avoid yard sales amounting to fully fledged competition with Systembolaget. Pursuant to the Report, the producer is restricted to sell only the one type of alcoholic beverage produced on the premise not to compete with Systembolaget. While the general interest of yard sales presumably refers to locally produced beverages, such a restriction would likely be contradictory to EU law. In order to comply with EU law, the authorisation of yard sales must therefore allow sales of alcoholic beverages produced locally on the premise as well as by foreign producers.
Generally and pursuant to common language, yard sales can be expected to take place in the countryside. Such a condition could, however, be inconsistent with EU law, even if it would apply to both foreign and local producers, since it could be both more difficult and less attractive for foreign producers to establish themselves on the countryside. For that reason the proposal has not limited yard sales geographically.
The aim of Swedish alcohol policy is to prevent private profit interests in retail trade and uphold public health by reducing the consumption and damage of alcohol; in other words limiting the forces of competition on these markets. According to the Government, the Swedish alcohol policy has been able to strike a balance between the restriction of the market and the interest of the public health of consumers, by solely allowing the governmental monopoly and restaurants with licenses to provide alcohol at the retail level. For yard sales to comply with the Swedish alcohol policy, the report contains a model with individual and quantitative restrictions. One condition for yard sales is that one individual cannot buy more than 1 l liquor, 3 l of wine or 5 l of beer. A second criterion is that the total sale of the license holder does not exceed 1.500 litre of 100% alcohol per year.
The report suggests that the price for the beverages should at least be equivalent to the manufacturing costs plus taxes or the purchase price with a reasonable margin.
The report concludes that the model presented is consistent with the Swedish alcohol policy and would not impinge on the retail monopoly. Moreover, it concludes that if the Court of Justice of the EU would question the Swedish Alcohol Act amended for the purpose of introducing yard sales, the consequence is not automatically an abolishment of the retail monopoly but more likely a revision of the amendments governing yard sales.
Should the current proposal in respect of yard sales become reality, the Swedish retail monopoly on alcoholic beverages will face competition from smaller producers, albeit competition on, exactly, a smaller scale.
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