Minimum price fixing - a legal point of view

Minimum price fixing has been ruled unlawful by the DTI

by Richard Williams of thePublican.com's legal team of experts from London solicitors Joelson Wilson​

I have been reading with interest about developments in Scotland following the introduction by the Perth and Kinross licensing board of controversial minimum pricing schemes, which aim to ban happy hours and curb binge drinking.

These proposals are not new and as long ago as June 2001 the National Association for the Care and Rehabilitation of Offenders called for a ban on alcohol price promotions, as a way of reducing alcohol related disorder.

Artificial price fixing policies have been promoted by licensing committees in England in the past and in many cases have swiftly been dropped. For example, a policy was introduced in Middlesbrough last year to maintain minimum drinks prices, but following warnings from the Department of Trade and Industry (DTI) that such a scheme was unlawful under UK competition law, it was dropped.

While it may seem like a sensible idea to agree a local policy specifying minimum drinks prices, there is no doubt that agreements to maintain minimum prices are unlawful.

In some areas of the country, drinks discounting has got out of hand, with operators in towns where there is an oversupply of licensed premises offering staggeringly low drinks prices as "inducements" to customers.

There has also been a growth in all-inclusive venues, where all drinks are included in an entry fee, and I have no doubt that some operators will be offering drinks at prices below what many pub company tenants will be paying for them wholesale.

It is possible in this instance that the DTI may view some pricing to be "predatory" against other operators and this may also be unlawful.

The DTI has issued a recent warning that it will take action against any company or licensee who agrees to enter into a price fixing agreement.

These threats should not be taken lightly, as the DTI has indicated that it will not hesitate to take action against offending operators if the warnings are not heeded.

Competition law in England and Wales is currently governed by the Competition Act 1998, which restricts businesses from agreeing to fix prices for products. Fines can be substantial for breaches of the Act and will be imposed against licensee and pub companies and not against the licensing committees who promote the schemes.

The Government is shortly to introduce the Enterprise Act, which will replace the Competition Act and will include criminal sanctions against directors of companies who are caught breaching competition policy.

While police and licensing committees may wish to issue guidance to licensees about drinks pricing, which is lawful, where this guidance becomes an obligation rather than a recommendation then a breach of competition law may occur.

It would appear that drinks discounting and happy hours are here to stay and that individuals will have to be educated about the dangers of excessive consumption, rather than being restricted by price controls.