Angus MacCulloch, Lancaster University Law School
Two recent rulings concerning the free movement of goods (Articles 34/36 TFEU) highlight the critical importance of strong evidence when governments attempt to justify public health interventions in the market. The first example, a judgment from the Court of Justice of the European Union (CJEU) in Case C-148/15 Deutsche Parkinson Vereinigung, addressed the legality of fixed prices for prescription medicines in Germany. The second, a ruling from the Inner House of the Court of Session in Scotland in Scotch Whisky Assoc v LA [2016] CSIH 77, upheld the Scottish Government’s plan to introduce minimum unit pricing (MUP) for alcohol, finding it compatible with Article 34. Although both cases involved health justifications for pricing restrictions that initially appeared to restrict free movement, the outcomes differed significantly due to the strength of the supporting evidence.
Fixed Price Prescriptions
In the DPV case, Germany’s fixed pricing system for prescription medications restricted pharmacies from offering discounts. DPV, a Parkinson’s disease patient advocacy group, had partnered with a Dutch mail-order pharmacy, DocMorris, to offer a bonus scheme to its members. This scheme was challenged and found to violate Article 34 TFEU because it hindered mail-order pharmacies, whose competitive pricing is crucial for accessing the German market. The court then assessed the argument that fixed prices were justified to ensure safe and high-quality medicine supplies. Germany argued that without fixed prices, “ruinous price competition” could force physical pharmacies in rural or less populated areas to close. These pharmacies, they claimed, were uniquely positioned to provide safe and high-quality supplies, personalized advice, and effective medication checks. However, the court emphasized the need for specific evidence to support these claims, requiring an objective analysis based on statistical data or other means to demonstrate the appropriateness and proportionality of the chosen measures. The court found no evidence to support the claim that a uniform supply of medications was contingent upon fixed prices. There was no indication that competition from mail-order pharmacies would jeopardize essential services. In fact, competition could incentivize traditional pharmacies to enhance such services. The court ultimately decided that the fixed-price system was not an appropriate means to achieve its stated objectives because it lacked a foundation of relevant scientific research demonstrating a genuine risk to human health.
Minimum Unit Pricing
The Inner House (IH) in SWA applied the same two-part test as in DPV, but with a different outcome. The Scottish Government presented extensive evidence, including numerous domestic and international studies, to justify its MUP policy. While the petitioner challenged the methodology and conclusions of some studies, the court recognized the government’s right to prioritize certain evidence over others, provided it had a reasonable basis for doing so. Significantly, the IH agreed with the lower court’s interpretation of the policy’s objective: to reduce alcohol consumption specifically among harmful and hazardous drinkers. This was notable because some had interpreted the CJEU’s position as supporting a broader goal of reducing overall alcohol consumption. The IH highlighted the overwhelming societal, familial, and individual consequences of excessive alcohol consumption in Scotland, drawing upon substantial statistical evidence. The evidence demonstrated that MUP would effectively target harmful and hazardous drinkers, and the court found no fault in the lower court’s conclusion that it was an appropriate method to achieve the policy’s objective. Regarding proportionality, the IH rejected the petitioner’s proposed alternative of a general tax increase, finding that it would not establish a minimum price and that retailers could potentially absorb or offset such increases. Furthermore, the court recognized that price increases on the cheapest products would be more effective in reducing sales as consumers would be unable to switch to even cheaper options. A general tax increase, therefore, would disproportionately and unnecessarily impact moderate drinkers who do not pose a significant societal problem. The chosen minimum price of 50 pence per unit was deemed justifiable based on evidence demonstrating its effectiveness in reducing consumption among harmful and hazardous drinkers in the most affected population segment, leading to well-documented benefits. Consequently, the IH upheld the lower court’s decision and rejected the appeal.
The IH case was particularly interesting because the CJEU had specified that proportionality should be assessed at the time of the ruling, not when the measure was initially adopted. Since the original pleadings in 2012, a substantial amount of new evidence and policy material had emerged, including information published after the CJEU’s preliminary ruling. The IH, while acknowledging the new evidence, stressed that it would only be significant if it altered the lower court’s factual assessment. Ultimately, the new evidence only reinforced the existing support for MUP’s effectiveness.
Conclusions
Recent CJEU decisions demonstrate a growing emphasis on the importance of evidence in justifying restrictions on free movement. The DPV case underscores the need for robust statistical or scientific evidence and moves away from accepting mere assertions or conjecture. Domestic courts play a crucial role in ensuring that states can back up the appropriateness and proportionality of their measures with solid evidence. The IH’s judgment provides an example of how this analysis should be conducted. Importantly, the assessment of proportionality is not a one-time event but an ongoing process. Since the effectiveness of a policy can change over time with new evidence, it follows that its appropriateness and necessity must be continuously reevaluated.
Barnard & Peers: chapter 12, chapter 16
Art credit: “Beer Street and Gin Lane”, William Hogarth