Court Rules Price Fixing Violates EU Regulations

Three EU countries have a minimum price for cigarettes, which the court found undermines competition.

March 05, 2010

BRUSSELS - The Court of Justice has ruled that establishing minimum prices for cigarettes is in violation of European Union law, Courthouse News reports. Currently, Austria, France and Ireland have legislation that fixes a minimum cost for cigarettes.

The highest European court decided that such price fixing weakens competition and goes against EU tobacco product regulations. The European Commission filed the suit against the three EU countries, contending that their price-fixing laws countered an European directive that controlled tobacco excise duties. That regulation makes EU nations tax tobacco products, but does not provide a maximum retail price ceiling for those products.

Ireland, France and Austria??s price floors "undermine the freedom of manufacturers and importers to determine the maximum retail selling prices of their products and, correspondingly, free competition," said an EU press release.

The court found that minimum pricing hampers competitiveness because tobacco companies cannot pass along reduced manufacturing costs to the consumer in the form of better retail prices. The Court of Justice stressed that under the directive, EU nations could still run anti-smoking campaigns.

"The directive does not preclude a pricing policy provided that it does not run counter to the directive??s objectives," said the press release. Therefore, the court said that EU member countries could increase tobacco taxes in an effort to curtail smoking "without undermining the freedom to determine prices."

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