Asia: Clear standards needed for violations of rules on cheap alcohol products

The Japan News

The Yomiuri Shimbun

June 15, 2017

The regulatory authorities must operate a system that does not harm the interests of consumers.

Relevant legislation, including the revised Liquor Tax Law, which came into force on June 1, prohibits selling alcoholic beverages at excessively cheap prices.

The legislation also bans the practice by stores of continually selling alcohol cheaply and below cost, a practice which can have a major impact on other stores. If tax authorities determine a store has violated the legislation, they can impose stiff penalties such as fines and revoking the store’s license to sell alcohol.

After the revised legislation came into effect, many supermarkets and large-scale retail stores increased beer prices by about 10 percent. Because standards for deciding what constitutes a violation of the legislation are vague, there have been reports that stores set the margin of increase considerably high to prevent even the slightest chance they would be seen as infringing on the legislation.

The new regulations must not drive consumers to spend more than they have to. It is vital that the National Tax Agency give the retail industry simple, clear explanations about matters including the cost calculation system that would be the basis for determining if liquor was sold at an illegally cheap price.

For example, costs include personnel and advertising expenses incurred by the company’s headquarters. Voices of the retail industry have pointed out that it will be arduous to precisely calculate the cost for each store or liquor brand.

Supermarkets and other stores have positioned beer as the centerpiece of efforts to attract customers, and engaged in fierce discount wars.

Chance for new products

The new regulations were strongly called for by small and midsize liquor stores, which have been squeezed by the price-cutting offensive. The revised laws were passed as lawmaker-initiated legislation before last summer’s House of Councillors election. This likely was a result of consideration for the powerful political influence wielded by liquor shop organizations.

Many neighborhood liquor shops continue to do solid business by stocking an extensive range of products. With the increase in elderly households, there is a deep-rooted need for “making the rounds of customers” and delivering products ordered over the phone. It is hoped that stores will find new business opportunities by offering flexible services that hold their own against cheaper prices.

The Fair Trade Commission has already cracked down on excessive discounts that heaped pressure on rival stores, a practice considered “dumping” under the Antimonopoly Law.

The revised legislation can be described as putting a fifth wheel on a carriage. The commission and tax authorities must closely work together to ensure the retail industry does not descend into confusion.

The revised legislation also called for stricter standards on the money breweries pay to retail outlets and other stores to promote sales of their products. In effect, outlets have become unable to use this money as funds to offset discount prices, which was a factor in the recent price hike.

It also will be important to make liquor products more appealing to gain consumer understanding for higher prices.

In April 2018, the legal definition of beer will be changed, allowing manufacturers to use fruit and seasonings as supplemental raw ingredients in addition to malt.

Breweries are expected to harness these relaxed regulations to create new products that will boost demand. The efforts and ingenuity behind such technical innovation also will be an important driving force that raises economic growth and leads the nation toward breaking free from deflation.

(From The Yomiuri Shimbun, June 15, 2017) Speech