Cigarette pricing rule a 'risk' to free competition

 

THE POLICY of setting a minimum price on tobacco products distorts competition, a preliminary opinion to Europe’s highest court has said.

The imposition by the Government of binding prices restricts manufacturers’ freedom to set prices, thereby posing a risk to free competition, according to Juliane Kokott, advocate general of the European Court of Justice.

The opinion of the advocate general is not a final judgment, although the court, to follow next March, follows it in the vast majority of cases. Costs in the case were awarded against Ireland.

The Department of Health said it was examining the opinion. “This opinion is at an intermediate stage in the process and the judgment of the court is still awaited,” a spokeswoman said.

The European Commission took Ireland to the court in 2008 over its policy of setting a minimum price on tobacco products to protect public health. Under an agreement with the Irish Tobacco Manufacturers Advisory Committee, the department has a minimum price for 20 cigarettes of about €1.30. This was set using information on volume sales supplied by the tobacco companies for filtered and unfiltered cigarettes.

The Government said at the time that the agreement was made for the primary purpose of preventing low-cost selling of tobacco products in Ireland.

Setting a minimum retail price for cigarettes undermines the ability of retailers to provide cut-price offers on certain brands.

Price control is also seen as a way to protect children from becoming addicted to cigarettes and to encourage smokers to quit, the department said. However, in her decision, Ms Kokott says minimum prices are not necessary because protecting public health can be equally and less intrusively attained by raising taxes.

A spokesman for cigarette firm John Player Sons said the main issue for the industry was illegal cigarette selling.

“While we don’t oppose the commission’s view that tobacco manufacturers should have the freedom to determine retail prices for their products, the fact remains that the real minimum price for 20 cigarettes in Ireland is the street price of €4-€5, due to widespread illegal cigarette selling.

“This greatly incentivises criminals by giving them huge margins while denying Government badly needed revenues. One in four cigarettes smoked in Ireland today is not even bought in an Irish shop.”