Prohibiting the sale of alcohol at a price below the total of duty paid plus VAT - Live from 28 May 2014

As you will probably be now aware, this new Mandatory Condition goes live on 28 May and already we are seeing councils writing to individual premises alerting them to the changes.

We have previously updated on the detail for which see here - LINK  and the Guidance which can be found here - LINK

The headline is much clearer than the detail of the condition but for many operators the floor level of a 'price below the total of duty paid plus VAT' should not be a material concern.

However you should be alert to some possible unanticipated consequences, highlighted in the Guidance.  We will not list them all here but by way of example (as set out in the Guidance):

• Multi-buy promotions - Businesses can continue to sell alcohol as part of buy one get one free promotions. However, businesses will need to ensure that the total purchase price for the package of products is not below the aggregate of the duty plus VAT permitted price for each product comprised in the package. To achieve this, businesses will need to calculate the total of the combined permitted price of each alcoholic product in the promotion.
• Multi-buy promotions on non-alcoholic products - In instances where businesses run a promotion for the sale of an alcoholic product and a free non-alcoholic product (such as chocolates, flowers etc.) and vice-versa, businesses will need to ensure that the total purchase price of the promotion is not below the permitted price of the alcohol product comprised in it (or aggregate of the permitted prices if there is more than one alcohol product). The Guidance gives the example of if a retailer runs a promotion for a meal deal that includes a free bottle of wine then the retailer will need to ensure that the selling price of the meal deal is not below the permitted price of the wine - we do not foresee this as a likely problem - but be aware.
• Inclusive drinks - Many businesses run promotions in hotels and restaurants, for example, a free bottle of champagne with a hotel room or a drink included in the price of a table meal. Businesses can continue to run these types of special promotions but will need to ensure that the permitted price of the alcoholic product in question is included in the overall price of the promotion. The Guidance gives the example of where a pub offers a table meal with a pint of 4% beer included in the price, the total cost of the table meal must be at or above the permitted price of the beer (i.e. 52p!) Again we do not foresee this as a likely problem - but be aware.
• Complimentary drinks - The Guidance states that free drinks provided an ad hoc basis, for instance those offered as compensation for late food service, do not count as sales because the customer has not paid anything for the drink.
• Discount coupons - Businesses may continue to offer discount coupons for alcoholic drinks, but must ensure that the price of the product after all applicable discounts are applied is above the permitted price of the product.
• Reward cards - Reward points and vouchers can continue to be used to buy alcohol, either in the store where they were earned, or at partner retailers, on the condition that the points redeemed (and additional money paid, where applicable) have an equivalent cash value that is not below the permitted price of the product. Where retailers offer a promotion on reward points or vouchers, the original value of the voucher shall be taken into account. The Guidance gives the example of where a retailer sells a bottle of wine for £3.99, it is permitted for a customer to pay for that wine either using points with a value of £3.99, or points with a value of up to £3.99 with the balance paid in cash. The price of an alcoholic product is considered to be the amount of money paid by the purchaser at the time of sale. Proxy benefits to the customer from the sale, for instance in the form of reward points, should not be considered as a part of the purchase price, as they have a cash value only in respect of subsequent sales, and not the present one.
• Staff discounts - Companies can offer staff discount, as long as the price after all discounts are applied is above the permitted price.
•  Online internet sales - The ban will apply to all sales of alcohol that take place (i.e. the alcohol is despatched) within England and Wales. Businesses will need to ensure that the online price of all alcohol products are sold above the duty plus VAT permitted prices.

Breach of the ban on the sale of alcohol at a price below the total of duty paid plus VAT - Failure to comply with the permitted price condition may be an offence under section 136 of the Licensing Act 2003 and this may also trigger a review of the licence, or the service on the premises of a closure notice under section 19 of the Criminal Justice and Police Act 2001.