Retailers face practical challenges in meeting new alcohol pricing guidelines, says expert

Earlier this week the Home Office published new guidelines on banning the sale of below-cost alcohol (21-page / 327KB PDF) in England and Wales. The guidelines are intended to be read in conjunction with draft legislation that is expected to come into force in April.

The Licensing Act 2003 (Mandatory Licensing Conditions) Order 2014, which is still subject to Parliamentary approval, is set to come into force on the 6 April and will require those licensed to sell alcohol to "ensure that no alcohol is sold or supplied for consumption on or off the premises for a price which is less than the permitted price". It applies to businesses such as pubs and clubs as well as supermarkets and other retailers. The legislation defines the lowest 'permitted price' that alcohol can be sold at as the cost of the alcohol duty that applies to a particular drink added to the VAT that is payable on that duty.

The guidelines set out examples of what the lowest permitted price is for individual drinks, such as beer, cider, wine and vodka. It also explains that crates of lager and other multipacks of alcohol can continue to be sold so long as the price set for those goods is "above the aggregate of the permitted price of each product in it".

In addition, the guidelines allow licensed businesses to allow their customers to use discount vouchers when buying alcohol provided that the price that applies to those products after the discount has been applied is above the permitted price for that product.

However, the guidelines permit the sale of alcohol below the permitted price for that product where a discount is applied to the sale of that product alongside others in a basket of shopping where the "aggregate price paid is not less than the permitted price of the alcohol comprised in the sale".

"In relation to a sale of two or more alcoholic products, this is the aggregate of the permitted price for each alcoholic product comprised in the sale," the guidelines state.

The guidelines also explain similar rules for staff discounting, so-called 'meal deals' and other discount and reward schemes.

For online sales the new rules will be applied from a point of consumption perspective and therefore only apply to customers based in England and Wales.

Licensing expert Audrey Ferrie of Pinsent Masons, the law firm behind Out-Law.com, said that the guidelines are unlikely to impact much on businesses that do not heavily discount alcohol. However, she warned there are implications for supermarkets and other licensed businesses around multi-buy offers and the operation of discount voucher schemes in particular.

Ferrie said that the new regime would create a new "regulatory burden" for retailers. Failure to comply could mean prosecution or a review of the premises licence.

"No one would disagree that there is a problem with the over-consumption of alcohol in Britain, but these guidelines appear to be a cumbersome way of dealing with the issue," Ferrie said. "Those calling for a minimum price for alcohol, like the Scottish Government has outlined, claim that the new rules and guidelines will apply to a very small percentage of sales, but regardless of whether they are right there are a number of practical challenges to the compliance of supermarkets and other licensed businesses under the regime."

"The guidelines explain the steps that businesses need to follow to comply. This ranges from doing the calculations to ensure the products they are promoting are being sold above the lowest permitted price, to amending prices if necessary on electronic systems corresponding to the product's barcode, on individual tags, banners and other in-store promotional material, and those displayed on their websites," she said.

For alcohol units bought individually the calculation process should be relatively simple, Ferrie said. However, she said it would be harder for businesses to comply in other cases.

"For example, if a customer seeks to use a discount voucher and points on their reward card to pay for a basket of goods that contains a few grocery items, the items in a meal deal including the bottle of wine, as well as other alcoholic products, how can the business honour customers' discounts and still comply with the rules where the aggregate price paid is less than the permitted price for the alcohol?" Ferrie said.

The expert said that supermarkets may have to simplify their discount and reward schemes to account for the new guidelines to avoid sales staff having to do the "complicated calculations at the till".