EU ruling on Irish tobacco prices

Thursday, 22 October 2009 12:44

The European Court of Justice has declared that Ireland can not set minimum prices for tobacco products since it distorts competition and benefits manufacturers.

The declaration came in the form of an opinion by the court's Advocate General. In 80% of cases the opinion is in line with the final judgement.

In December 2006 the European Commission wrote to the Irish Government saying that the policy of setting minimum retail prices for cigarettes was contrary to EU law since it limited the freedom of producers and manufacturers to determine their selling prices.

When Ireland failed to legislate for the relevant EU directive the Commission took Ireland to the European Court of Justice in May 2008.

At the time, the Commission said the best way to deal with the public health concerns over tobacco was to use tax and excise duties, not set minimum prices, since such prices were of 'sole benefit to manufacturers by protecting their profit margins.'

In this morning's opinion the Court held that setting minimum prices for public health reasons was legitimate but that using taxation and excise duties were the best ways of meeting public health objectives, since they did not interfere with the principle of the free formation of prices.

The Advocate General acknowledged that smoking is the biggest cause of preventable death in the European Union.

During hearings, Ireland argued that manufacturers could counteract taxes on cigarettes by reducing their profit margin. But the Advocate General held that this in turn could be countered by steeper tax increases so that manufacturers would not be able to avoid increasing the price of a packet of cigarettes.