During the summer, mandarins in
On the face of it, the European Commission move seems positive for cigarette manufacturers' stocks, if not for general health. Or so you might think.
The Commission gave the three countries until mid-September to eliminate mandatory minimum cigarette prices, or face its wrath – albeit very long, drawn out wrath. In
The Comission has threatened to harry the three respective governments through the European Court of Justice if they fail to dispose of the miniumum price regulation.
And there’s a precedent.
Back in 2000, the Commission found that the Greek government was in breach of EU rules by also determining the minimum price of a packet of cigarettes. In its ruling, the Commission said that manufacturers, their representatives or authorised agents of cigarettes and importers from non-member countries “shall be free to determine the maximum selling price for each of their products for each
Legal wrangling in the case began in 1994, when the Commission fired off a missive to the Greek government, alleging it was in breach of the law by interfering with cigarette pricing. The Greek government, unsurprisingly, took a different view.
It argued that by maintaining a minimum selling price that it was protecting public health. The EU acknowledged that, but said that objective could be “adequately attained by increased taxation [of tobacco products] which would safeguard the principle of free formation of prices”.
The upshot was that the Greek argument was shot down.
Last March, the EC initiated a similar case against
For the big tobacco firms this is good news, right?
Wrong. It’s instilling fear.
They know that if the Commission is successful in forcing the Irish, Austrian and Italian governments to abandon minimum pricing policies, then the result could be a surge in taxes levied on their products. And that’s bad for business, if not for people’s health.
Yesterday in Ireland, the anti-tobacco lobby ASH called on finance minister Brian Cowen to introduce a whopping €2 per pack rise on cigarettes in his budget next month, which would bring the average price close to €10 (US$14.55) per pack of 20 (packs of 10 were outlawed earlier this year to deter young people in particular from smoking).
While the government is feeling a marginal fiscal tightening and additional sources of tax revenue would be welcome to help balance the books, slapping such a price rise on cigarettes is highly unlikely as it would fuel inflation, which has been just about kept under control. As an ‘old reliable’, it’s more than possible that some tax hike on tobacco will be implemented, but no where near as much as €2 per pack.
Altria, which owns
It’s not alone in fearing the worst. Gallaher, acquired earlier this year by Japanese Tobacco in a $15bn deal, said that the imposition of a minimum selling price in
A smoking ban in
An EU ruling scrapping minimum selling prices could make things an awful lot tougher for the big tobacco firms, forcing them to continue looking further afield to regions such as
The European Commission could be killing them with kindness.