Government explains off-trade inaction

By Ewan Turney

- Last updated on GMT

Related tags: Price, Excise, Pricing

Supermarkets: below-cost ban not in Bill
Supermarkets: below-cost ban not in Bill
Concerns over price fixing, commercial confidentiality and enforcement led to the below-cost ban on alcohol being dropped from the new Bill.

Concerns over price fixing, commercial confidentiality and enforcement led to the below cost ban on alcohol being dropped from the Policing and Social Responsibility Bill.

The Government said it has received a wide range of views on the subject of the promised below cost ban on alcohol with "no overall consensus".

A total of 32% of respondents preferred a defined unit price, 38% a supplier purchase cost and 29% another definition.

Representatives from all sectors acknowledged the complexity of the issue, the Government said, while they also "indicated that, generally, enforcing a ban on below cost selling is difficult".

In particular, licensing authorities expressed a scepticism as to the feasibility of enforcing a ban. A total of 33% of respondents said licence revocation would be an effective way of enforcement, 24% for the system to be policed by Trading Standards, 22% by way of invoice monitoring and 20% through fines.

One on-trade respondent said it had "real concerns" about any below cost ban that involved disclosing invoice prices. "Our concerns centre on the fact that any such system would inevitably involve a level of pricing transparency and visibility between competitors that would expose producers and retailers to breaches in pricing confidentiality," it said.

"Such an outcome would be unsustainable in a competitive and open market. We are also concerned that the inevitable complexity of a system based on individual invoices for numerous transactions would make such a system unwieldy and difficult to police.

"While such systems are operated in other member states, it is important to recognise that these systems apply to all products, not just alcohol, are designed explicitly to address predatory pricing by major retail and are not designed as a public health measure.

"We would also not welcome any system based on excise duties. Excise duty is paid by the producer not the retailer and therefore by definition does not equal retailer cost."

Over a third (35%) said it would be generally feasible to use the Mnadatory Code to introduce a below cost ban without defining cost but 32% said cost would need to eb defined first and 33% that it was generally unfeasible. Some raised concerns over EU regulations on price fixing.

"The use of the Mandatory Code provides a quick and easy mechanism for introducing such a ban into the regulatory arsenal, but it can be little more than a quick fix solution until a centrally determined definition of cost is agreed which meets the government's requirements as set out in the consultation document," said another on-trade representative.

"We would be prepared to support it on that basis but not if the intention is to introduce this as a solution in and of itself. Failure to determine a definition of cost at a central level will see the ban rendered ineffective and mire its application at a local level in legal wrangling and challenge."

The Home Office has since said it hopes to make an announcement on the below cost ban before the end of the year.

Related topics: Legislation