You might have thought that banning retailers selling alcoholic drinks below cost price was something quite easy to achieve. But in practice it’s proving far less straightforward than many imagined. The government have put forward four different options for consultation. One, just defining cost as duty plus VAT, is seen by many as too low as it excludes any production or distribution costs. Another, defining it as the invoice price paid, would mean opening up retailers’ accounts to expensive and time-consuming audits. And the remaining two simply seem to give manufacturers carte blanche to create a cosy price-fixing cartel that would effectively end price competition at the lower end of the market.
It also isn’t stated whether any option will deny retailers (and indeed pub operators) the ability to sell off surplus or short-dated stock below cost rather than be forced to pour it down the drain.
Yet another example of how, when governments try to interfere with the workings of markets in the pursuit of “higher purposes”, they so often end up with a can of worms floating on a raft of unintended consequences.