Angus MacCulloch, Lancaster University Law School

The Court of Justice has issued its judgment regarding the legality of Scotland’s minimum alcohol pricing (MUP) measure in Case C-333/14. Both the Scottish Government and the Scotch Whisky Association (SWA), which initiated the legal challenge, have expressed satisfaction with the ruling, although the SWA might be more content as the case now returns to Scotland’s Inner House of the Court of Session, which had referred it to the Court of Justice of the European Union (CJEU). The Court largely adopted a similar approach to the Advocate General’s opinion, yet its judgment raises as many questions as it answers. While it seems to strongly suggest to the Court of Session that the CJEU favors an increase in general excise duties over MUP as a “less restrictive” measure, it ultimately leaves the final decision on the proportionality of MUP to the Scottish court.

Is MUP Subject to Article 34 TFEU?

Both parties agreed that MUP falls under Article 34 TFEU (prohibiting measures equivalent to quantitative restrictions on imports), but the nature of its breach remained unclear. The Court clarified this by bypassing the complexities of classifying MUP as a “selling arrangement” under the Gourmet International analysis. Instead, it utilized the “market access” test from Trailers. Minimum pricing restricts access to the UK market by preventing lower-priced products from other Member States from leveraging their cost advantage through lower retail prices. As this removal of cost benefits triggers the market access test, there’s no need to examine the scheme’s inherent discrimination. This highlights the Court’s preference for the flexibility of the new test over the more traditional Cassis and Keck line of decisions.

The Complex Balancing Act of Proportionality

The ruling predominantly grapples with the intricate question of justifying the measure on health grounds and assessing its proportionality. While the Outer House of the Court of Session initially accepted the measure’s proportionality based on its targeting of “harmful and hazardous” drinkers who tend to consume low-priced, high-alcohol products most affected by MUP, the CJEU holds a different view. Based on the presented evidence, the CJEU sees MUP as having a dual objective: targeting these “harmful and hazardous” drinkers while also reducing overall alcohol consumption in the general population, albeit as a secondary goal. This inherent ambiguity in the measure’s purpose poses a significant challenge in determining its proportionality. While acknowledging the Scottish Government’s genuine attempt to address health issues, the Court emphasizes that measures cannot exceed what is necessary for health protection. The CJEU was faced with choosing between the Scottish Government’s preference for MUP and the argument, supported by the SWA and the European Commission, that similar health benefits could be achieved through a general increase in excise duties on all alcoholic beverages. The Court argued that increased taxation could be effective, as seen with tobacco, and that it:

“is liable to be less restrictive of trade in those products within the European Union than a measure imposing an MPU. The reason is … that the latter measure, unlike increased taxation of those products, significantly restricts the freedom of economic operators to determine their retail selling prices and, consequently, constitutes a serious obstacle to access to the United Kingdom market of alcoholic drinks lawfully marketed in Member States other than the United Kingdom and to the operation of fair competition in that market.”

The assertion that increased taxation is less restrictive than MUP is debatable. While taxation affects all products, MUP only impacts a limited number; thus, MUP could be argued to be less restrictive based on the volume of trade affected. While the volume of trade has been a factor in other Article 34 cases, like the Sunday Trading litigation, the Court addresses it more explicitly here. Its focus is not on reducing the volume of trade affected but rather ensuring the measure doesn’t hinder “fair competition,” even if it impacts a larger number of products. The Court addresses an argument by the Lord Advocate questioning the relevance of previous cases on minimum pricing in tobacco markets, rejecting it by highlighting the Tobacco Harmonisation Directives’ explicit aim to enhance single market integration through price competition. This direct protection of retail price competition is unusual under Article 34 TFEU. It seems the Court now incorporates the protection of price competition within the prohibition. Additionally, there’s a crucial difference between health issues linked to tobacco and alcohol consumption – different problems necessitate different solutions. 

The proportionality discussion also touches upon selecting the least restrictive measure and the inherent balance between restrictiveness and effectiveness in achieving the objective. This brings us back to the ambiguity surrounding MUP’s purpose. The Court states:

“the fact that increased taxation of alcoholic drinks entails a generalised increase in the prices of those drinks, affecting both drinkers whose consumption of alcohol is moderate and those whose consumption is hazardous or harmful, does not appear, in the light of the twofold objective pursued by the national legislation at issue in the main proceedings … to lead to the conclusion that such increased taxation is less effective than the measure chosen”.

Essentially, the Court suggests that since taxation can address both the general and specific aims, it’s equally effective. However, this reasoning is unclear. MUP’s targeted approach, focusing on cheap and strong products without impacting moderate drinkers or on-sales generally priced above the MUP threshold, was a key reason for its adoption. By prioritizing the secondary aim and sidelining the primary purpose, the Court describes this generalized impact as “additional benefits,” which is inaccurate if it negates the key benefit of targeted intervention. While acknowledging that the final decision rests with the referring court after examining all evidence and arguments, the Court’s preference is evident. This favoring of one aim over another contradicts the established principle, reiterated in the ruling, that Member States can determine their desired level of protection.

On the Article 36 TFEU Derogation

While the previous discussion centered on the ‘rule of reason’ within Article 34 TFEU, justifying MUP is also possible under Article 36 TFEU, which allows for derogations based on health protection. While addressing similar questions, the Court appears more lenient in its discussion of Article 36. It emphasizes the same proportionality test and the Member State’s responsibility to provide adequate evidence while stating:

“that burden of proof cannot extend to creating the requirement that, where the competent national authorities adopt national legislation imposing a measure such as the MPU, they must prove, positively, that no other conceivable measure could enable the legitimate objective pursued to be attained under the same conditions”.

This offers some hope to the Scottish Government, suggesting that it’s their turn to present the strongest possible evidence to convince the Court of Session. Alcohol policy evidence, including the recently published Nuffield Report, suggests a strong case for MUP. In that sense, both sides have much to contend with when the Court of Session revisits this issue.

Conclusions

It’s unfortunate that the Court followed the Advocate General’s reasoning and its inherent weaknesses. We now have confirmation that price competition is protected under Article 34 TFEU, and any attempt by Member States to intervene in free price-setting will likely face scrutiny under EU law. The most disappointing aspect is the lack of clarity in the Court’s discussion of proportionality, which some commentators have described as “Delphic.” While I’ve outlined some concerns, the most troubling aspect is the Court’s apparent willingness to suggest that the Scottish Parliament chose the “wrong” health objective, using proportionality analysis to “correct” that perceived error. The Inner House of the Court of Session now faces the considerable task of deciphering the Court’s ruling.

Barnard & Peers: chapter 12

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