(CN) – Legislation in France, Austria and Ireland fixing minimum prices for cigarettes violates European Union law, the Court of Justice ruled. Europe’s top court said price-fixing undermines competition and violates EU regulations on tobacco products.
The European Commission sued the three EU member states, claiming their price-fixing legislation violated a European directive regulating excise duties on tobacco products.
The directive requires member states to tax tobacco products, but allows tobacco manufacturers and importers to set the maximum retail prices for their products.
Price floors in France, Austria and Ireland “undermine the freedom of manufacturers and importers to determine the maximum retail selling prices of their products and, correspondingly, free competition,” according to an EU press release.
Minimum pricing is anticompetitive, the court ruled, because it could prevent tobacco companies from taking advantage of lower manufacturing costs by offering more attractive retail prices.
The EU high court emphasized that the directive does not prevent the member states from combating smoking.
“[T]he directive does not preclude a pricing policy provided that it does not run counter to the directive’s objectives,” the press release states.
The member states can still hike up the taxes on the tobacco products to discourage its citizens from smoking “without undermining the freedom to determine prices,” the court ruled.