M-003 - Alcohol Pricing and Promotions Market Study

Timeline

On 28 September 2021 we launched our market study into alcohol pricing and promotions. The study was focused on a specific feature of the Jersey alcohol market, which is the Attorney General's Guidance (Licensing (Jersey) Law 1974) on Drinks pricing and promotions. We released our final report on 10 March 2022.

Findings

The findings arising out of the study with respect to the on-licence trade restrictions included in the Attorney General’s Guidance (Licensing (Jersey) Law 1974) are as follows:

• Jersey’s on-licence pricing restrictions are unique. Stakeholder feedback, economic theory and market outcomes all suggest they restrict competition.
• High prices in the on-licence sector are likely to lead to a shift away from on-licence to off licence consumption. This is a trend identified by stakeholders and is consistent with economic theory, and the weight of econometric evidence from other countries.
• There are relatively higher on-licence prices on Jersey. This suggests the removal of pricing restrictions and responsible use of promotions could encourage competition and benefit consumers.
• There are other features of the on-licence trade that might also have an impact on competition. This includes tied relationships and exclusive wholesale supply deals.

Inconsistencies in the way the Guidance is applied could impact the level playing field in the on-licence market.

The findings of the market study with respect to the off-licence trade restrictions included in the Attorney General's Guidance (Licensing (Jersey) Law 1974) are set out below:

• It appears few products were affected by the introduction of minimum unit pricing. However, it is too soon to reach definitive conclusions on its impact as its introduction coincided with COVID restrictions and the shift of demand to off-licences.

Based on the findings, we made the following recommendations:

Recommendation 1

From an economic perspective, the pricing restriction on the on-licence trade should be removed i.e to allow on-licences to price freely.

This would ensure that benefits of competition and innovation are passed on to the consumers in the form of lower prices.

Recommendation 2

For the on-licence trade, to consider using alternative measures that distort competition less but ensure that promotions do not lead to excessive drinking.

Recommendation 3

For the off-licence sector, to review the impact of minimum unit pricing after a sufficient length of time post-COVID has passed. This review should be holistic and cover the economic, health and social impacts of the policy.

Recommendation 4

The restrictions on promotion for the on-licence trade, when considered from an economic perspective, should be removed or eased. The restrictions limit on-licences' ability to compete and to attract price sensitive customers. They may also affect the level playing field in the market.

Recommendation 5

For the Authority to monitor the impact of tied house relationships and exclusive wholesale supply deals after restrictions imposed by the Guidance are relaxed. If competition issues persist, to take appropriate action to address this.