The Court of Justice of the European Union (ECJ) has ruled that Irish legislation setting minimum retail prices for cigarettes is contrary to EU law.
The European Commission took proceedings against Ireland for fixing minimum retail prices for cigarettes. The Commission considered that the Irish regulations concerning tobacco products were incompatible with the EU Manufactured Tobacco Tax Directive, which obliges Member States to impose a proportional excise duty on cigarettes calculated on the maximum retail price and also a specific excise duty calculated per unit of the product.
Irish legislation requires the retail price of cigarettes to be at least 97% of a weighted average, calculated by reference to sales volume for each brand for the previous year and the recommended retail price. The ECJ found that the imposition of a minimum retail price by Ireland meant that the maximum retail price determined by manufacturers and importers (used as the basis for excise duty) could not be lower than the obligatory minimum price. This undermined competition by preventing manufacturers and importers from offering more attractive retail prices.
Ireland’s argument that the minimum pricing was justified by the objective of protecting people’s health and life was rejected. The ECJ found that the directive does not prevent Ireland from taking measures to combat smoking as part of the objective of promoting public health. It also decided that Ireland had breached EU law by not providing information requested by the Commission to enable it to monitor compliance with the directive. In separate cases, the ECJ has declared similar minimum retail price restrictions on tobacco products in France and Austria to be contrary to EU law.
The Government has not yet indicated how it intends to rectify the position, and until it does it will have difficulty enforcing the existing legislation. It may consider a number of alternative approaches suggested by the ECJ, which are likely to lead to increases in excise duty on tobacco products.
