Biochemical markers

Rationale

There is evidence that the heaviest drinkers and young people, in particular, seek out lower priced alcohol. The affordability of alcohol can be affected by alcohol marketing strategies based on price discounting and also by situations and policy changes that result in lower prices. There is evidence that raising the minimum price of the cheapest beverages can be an effective way of reducing alcohol-related harm and that it will be especially effective in influencing heavy drinkers (Babor et al. 2010).

Large retailers, such as supermarket chains, have the ability to purchase in bulk and then sell alcohol very cheaply to draw people into the store. These are known as ‘loss leaders’ (i.e.

below cost). In New Zealand, for example, the bulk buying power of the two big supermarket chains means ‘specials’ can cost less than the wholesale price to other alcohol retailers (New Zealand Herald 2010). This kind of discounting has led some high-income countries, such as Scotland, to consider a minimum price approach.

A minimum price policy sets a floor under price competition. It does not dictate all pricing, and may not affect the pricing of many products. It does not intervene in other aspects of fair competition, such as quality, service or profitability.

Minimum pricing policies

A number of governments have set minimum sales prices to reduce rates of alcohol problems, although currently the practice is not common. It is most easily done in jurisdictions where government monopoly alcohol outlets can alter retail prices to meet certain objectives.

Minimum prices have also been set by regulating privately owned retail outlets and at the wholesale level by licensing or other regulation of producers or importers (Babor et al. 2010).

There is little research that directly measures the impact of minimum pricing. However, the effectiveness of minimum pricing as an intervention can be inferred from the alcohol tax

research literature which shows that increasing price does have an impact on consumption.

The effects of minimum alcohol pricing and banning discounting by off-licensed outlets have been modelled for England and Scotland. For Scotland, the model showed a steep increase in effectiveness as the minimum price rose. A price of 35 pence (U.S. 55c) per standard unit of alcohol would decrease consumption by just over 1%, with the least effect on wine and little reduction in harmful behavior. By contrast, a price of 70 pence (U.S. $1.10) decreased consumption by nearly 19%, with sharp reductions in alcohol-related hospital admissions and deaths criminal offending, work absenteeism and unemployment.

A ban on all forms of price promotion and discounts would reduce consumption by 3%, similar to a minimum price of 40 pence to 45 pence (U.S. 63c-71c) per unit. Implementing both policies together – that is minimum price and ban on price promotion discounts - doubled the impact only at low minimum prices; banning discounting added little to the effectiveness of a 70 pence (U.S. $1.10) minimum price. When prices increase by, say, 10%, drinkers tend to reduce the amount they drink by less than 10%. Therefore, although these policies will reduce consumption, particularly hazardous and harmful drinking, retailer revenue is expected to increase (Purshouse et al. 2009).

In Canada, most provinces set floor prices for alcohol sold in state monopoly stores and in licensed outlets (Giesbrecht 2000). Minimum prices for beer have been justified in Quebec and Ontario as contributing to public health and order (Giesbrecht et al. 2006). In British Columbia, Canada, the Liquor Control & Licensing Act (1996) allows alcohol pricing in licensed establishments to be set by regulations under the Liquor Control and Licensing Act, whereas in Manitoba the legislation empowers the licensing commission to set prices without requiring a formal regulation approval by government. Producers are licensed, allowing investigation and regulation of prices and, in Manitoba, profits at the wholesale level.

Minimum pricing is currently being debated in the United Kingdom. In Scotland, the birthplace of whisky, alcohol is now 62% more affordable than it was in 1980 and there are concerns about cut-price and loss-leader promotions by off-licensed outlets (Scottish Government 2008). In late 2009, the Scottish government introduced a licensing amendment bill that will make minimum pricing a mandatory condition of an off-licence. A minimum price per unit of alcohol will be set by Scottish Ministers through regulations and applied by licensees to products of varying strength and volume using a formula in the bill. Packages of two or more products may not be sold for less than the products individually. The current prohibition of on-premises promotions involving free or discounted drinks will be extended to off-licensed premises.

This approach is already being tried by some towns. The local licensing board for Perth, Scotland, has set minimum prices since 2002 as a standard condition of its off-licences (Scottish Government 2008). In Oldham, Yorkshire, to reduce recent increases in alcohol-related violence, the city council is reviewing the on-licences of 22 bars and nightclubs selling cut-price drinks and threatening to exercise its legal power to restrict other aspects of operation unless the bars voluntarily adopt a minimum price of 75 pence (U.S. $1.18) a unit (Bilton 2009).

Issues to consider

Competition policy and trade

Regulating a minimum price of alcohol in the interests of public health may appear to run counter to other policies, such as market competition or reducing barriers to trade. However, the policy treats all products equally, dictates the bottom of price scale only and does not affect other aspects of fair competition.

Pricing policies may be opposed by some sectors of the alcohol industry as interfering in local and global markets. For example, a producer group, the Scottish Whisky Association, suggests Scotland’s proposed policy would contravene European Union trade rules. In the 1970s, the European Court of Justice considered minimum pricing would prevent imported products with lower cost structures from exercising a legitimate price advantage (Northern Ireland Assembly 2009). However, recent European Union rulings have upheld other restrictive alcohol policies, provided they treat all imported and domestic products equally. In principle, restrictive measures to protect public health can be defended under international law if the government goals are clear, a range of options has been explored, there are good reasons to prefer the option proposed and there is evidence that it will achieve the goals.

Specialist alcohol retailers and the hospitality sector may see minimum pricing policy as putting a level playing field under unfair competition and also increasing their profit margin on lower-priced drinks if the margin is retained by them. For example, Scotland’s Bar Restaurant and Dance Association does not oppose a minimum price policy if it is consistent across all licensing districts in the country. In public submissions, minimum pricing was supported by nearly 40% of trade and business submitters, as well as 89% of local governments and 90% of health organizations (Scottish Government 2008). Concern has been expressed that increasing profit margin for the industry might result in increased expenditure on marketing.

Monitoring and enforcement

Ensuring compliance with minimum price regulations will require some additional resources but, in an effective licensing system, would be just part of routine monitoring and enforcement of all sale of liquor laws (see section on Monitoring and Enforcement). Legislation would address how the minimum price is set price (most flexibly by regulations under the Act) and any specific sanctions.

In jurisdictions without a licensing system, checking retail alcohol prices may receive low priority from police. Setting a minimum price at the wholesale level could be considered as an alternative, and monitored when producers and importers report quantities for alcohol taxes purposes. The wholesale level has the advantage of fewer parties to monitor, but does not fully address retail loss leaders sold deliberately below the wholesale cost.

One option is to require wholesalers to submit pricing schedules regularly to relevant government agencies and “hold” those prices for a set period of time. These prices can be then be posted. Monitoring is promoted because government agencies can spot check compliance relatively easily.