The Office of Fair Trading has opposed the Scottish government's plans to impose a minimum price for alcohol on the basis that it would damage competition.
The Scottish government intends to introduce a minimum price of 40p per unit of alcohol this Autumn but OFT's chief executive John Fingleton said it would reduce incentives for the industry to innovate and cut costs.
"There is a political risk that in the interest of achieving a specific policy objective, weakening competition can be seen as an attractive short-term option where the alternatives might be to introduce a tax or implement more targeted regulation," Fingleton said in a speech to the Oxford-based Regulatory Policy Institute.
Fingleton argued that higher levels of duty are the right way to reduce alcohol consumption and the OFT has expressed its concerns about minimum pricing to the Scottish government.
An OFT spokeswoman said: "Setting minimum prices for anything leads to additional profits for businesses alongside a reduction in efficiency and competition. If you want to raise prices to achieve a social good, this should be done by taxation rather than removing suppliers' ability to set prices independently."
Janet Hood, head of BII Scotland, commented: "The OFT has said what we would expect. It is illegal for business to sign up to a voluntary price agreement. However if a government can meet the test of "exceptional and compelling reasons of public policy" they might be able to bring in minimum pricing.
"Our members are concerned about the legality of any measure relating to minimum pricing proposed by the Scottish Government and would not be likely to enter a voluntary regime. They believe that if minimum pricing came in it might prevent some bottom end alcohol harm but have doubts as to any real effect on that market."
By Emma White
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