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Cheaper Cigarettes?

12 March 2010

The European Court of Justice has just handed down three rulings holding that Irish, French and Austrian laws that fixed minimum retail prices for cigarettes infringed EU law

Arguments by all three countries that the laws were necessary to protect public health were unsuccessful. 

The cases concerned the interpretation of a specific European Directive that harmonises national excise duties on tobacco products rather than the application of EU competition rules.  However, the Court considered that a minimum retail price for cigarettes could undermine competition between manufacturers and importers of cigarettes. 

The cases serve as a useful reminder that the EU legal system will strive to protect price competition and that other legitimate public policy concerns are unlikely to succeed in overriding this principle.  No doubt followers of the debate on minimum alcohol prices will be taking note. 

Of course the question that all smokers in Ireland, France and Austria will want to know is whether this means that their cigarettes will be cheaper.  We’ll have to wait and see but the Court made it clear that the Directive in question does not prevent the countries from protecting public health by increasing taxation on cigarettes.   It simply prevents the imposition of a minimum retail price. 

I suspect that this means that the tax man rather than the smoker will be the winner!

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