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OFT has reservations over minimum pricing

Published:  15 August, 2012

The Office of Fair Trading has expressed "reservations" about the "unintended consequences" of a minimum price for alcohol.

The watchdog states concerns that introducing a minimum price for alcohl would "generate windfall gains for retailers", with increased spending on alcohol going directly to private firms rather than the government.

The OFT belives that such gains could incentivise retailers to "sell more, rather than less, low cost alcohol", which would limit the effectiveness of the policy.

Instead, the OFT recommends that a change in tax would be more effective.

It also expressed reservations about the long-term impact of minimum pricing restrictions on consumers and productivity in the retail sector.

"The OFT is concerned that, by legitimising intervention to control prices in a competitive market, it will be harder for the government to resist calls for similar measures in other parts of the retail sector in future. This could have significant long-term costs.

"For these reasons, the OFT considers that a change in taxation would be preferable to imposing a minimum price, with less risk of creating unintended consequences."

When it comes to the legality of imposing a minimum price, the OFT said a unilateral government-imposed minium price would not be illegal, but if retailers were able to set a voluntary agreement, this would definitely infringe competition law. What's more, it said there "may be constraints on minimum pricing legislation arising from wider European law", which are currently being looked at in relation to Scotland. It also urged caution over multi-lateral voluntary agreements between retailers and government, which could infringe competition rules.