The Finnish Retail Alcohol Market is Being Liberalised

Revising Finnish alcohol policies: amending the Finnish Alcohol Act

The principal legislative act applying to the retail of alcohol in Finland is currently under revision. The objective of the Finnish Alcohol Act (1102/2017, as amended) is to reduce the consumption of alcoholic substances by restricting and supervising the trade and commerce related to alcohol, in order to prevent harm caused to alcohol users, other people, and society as a whole. Finland operates a state-run alcohol monopoly system. On a European level, Finland's alcohol policies are considered relatively stringent compared to those of other European countries. The government is aiming to reform Finland’s alcohol policy in a responsible manner to bring its policies more in line with the alcohol policy in other European countries. The latest amendments allow licensed retailers to sell fermented alcoholic beverages with an alcohol content of up to 8,0% alcohol by volume (ABV). Moreover, a new government proposal proposes allowing the home delivery of alcoholic beverages from domestic retailers.

Background of the Finnish alcohol monopoly system

Like other Nordic countries, Finland operates a state-run alcohol monopoly system. The state-owned company Alko ("Alko") holds the exclusive right to retail alcoholic beverages exceeding a specified alcohol volume percentage.

While the principle of free movement of goods is fundamental to the European Union, member states are allowed to impose restrictions on alcohol markets under specific conditions. Generally, quantitative restrictions on imports and exports, along with measures having equivalent effects, are prohibited among EU member states. However, monopolies—despite being seen as restrictions on free trade—can be justified under EU law if they serve public order, security, or public health objectives.

Alcohol market restrictions, although barriers to trade, can be legally defended if proven to mitigate the negative effects of alcohol consumption. When Finland joined the EU, its alcohol monopoly was scrutinised by the European Commission and the European Court of Justice. It was deemed compatible with EU law, as Finland demonstrated that the monopoly was an effective means of addressing alcohol-related harm.

Raising the accepted ABV for fermented beverages

The Finnish Alcohol Act currently stipulates that Alko holds the exclusive right to retail alcoholic beverages exceeding a specific alcohol volume percentage. However, as an exception, retailers with an appropriate alcohol retail trade licence are permitted to sell lower-strength alcoholic beverages to consumers. 

On 5 June 2024, the Finnish Parliament approved amendments to the Alcohol Act which raise the alcohol by volume limit for licensed retail sales of fermented alcoholic beverages. The amendment allows as of 10 June 2024, licensed retail sales of higher-alcohol-content beverages produced only through fermentation, while distilled products remain restricted to lower alcohol levels. The amendment allows grocery stores and restaurants to sell fermented alcoholic beverages with an alcohol content of up to 8,0% ABV, while the previous limit of 5,5% ABV applies to beverages produced by methods other than fermentation. 

Debate surrounding the amendment to Finland's Alcohol Act 

The amendment to the Alcohol Act has raised concerns both domestically and within the European Commission. The Commission reminded Finland to ensure that the restriction does not result in indirect discrimination, while the Finnish Competition and Consumer Authority emphasised that the regulation of beverages with similar health effects should, in principle, be neutral.

Although the government cited studies on alcohol production methods and youth drinking behaviour to support the amendment, critics argue that there is insufficient evidence linking production methods to health outcomes. Of the 85 statements submitted during the consultation, the majority opposed the changes, with only 15 in favour. Supporters primarily advocated for removing the restriction on production methods, viewing it as potentially discriminatory. Opponents raised concerns about the amendment's health implications, particularly its potential impact on youth and work productivity, and argued that it conflicts with the objectives of the Alcohol Act.

In response, the government reiterated that the restriction on production methods is intended to protect young people from alcohol-related harm.

Competition concerns and market access implications of the Alcohol Act amendment

The amendment has also raised competition law concerns within the alcohol industry, with organisations claiming that it unfairly favours fermented products, limiting market access for distilled beverages. Both organisations have filed complaints with the European Commission, arguing that retail regulations should not be based on production methods.

In response to these competition law concerns, the government provided a detailed analysis in its proposal, following feedback from the Commission. The analysis indicated that the amendment does not favour local producers and would actually improve market access for producers from other EU member states. For instance, over half of the beer sold through Alko is imported, while 92% of mixed drinks with an ABV of 5.5-8.0% are domestically produced. Therefore, the amendment would open the Finnish market to more EU-produced fermented beverages with a 5.5-8.0% ABV, while domestic non-fermented mixed drinks would still face stricter limitations.

New government proposal on possibly allowing the home deliveries and online sales of alcoholic beverages 

The government has recently proposed new amendments to the Alcohol Act to permit the home delivery of alcoholic beverages from domestic retailers, with strict age verification procedures (government proposal 173/2024). At the moment, alcohol may only be sold through physical licensed retail stores and any online orders are allowed only if the alcohol is then collected from the licensed alcohol retailer. This new proposal was submitted to the Finnish Parliament on 10 October 2024 and the amendments are already scheduled to come into force on 1 January 2025. 

The government proposal emphasises the importance of protecting young people via age-verification. The sale of mild (maximum of 22% ABV) alcohol beverages is limited for persons who are eighteen years or older. The proposed home delivery of alcoholic beverages would require a specific delivery license, and the delivery personnel would need to confirm the recipient’s age upon each delivery. This means in practice that the delivery of alcohol could not be left unattended to the recipient’s door but requires a physical contact upon delivery. Any delivery of alcohol would not be allowed to sensitive locations such as healthcare facilities or schools. Deliveries from retail outlets would only be allowed between 9 a.m. and 9 p.m.. Further, Alko alcohol deliveries would only be available during Alko’s operating hours. 

According to the government proposal, the reform is expected to increase competition and reduce demand for cross-border alcohol purchases that could also slightly increase the revenue from alcohol tax if domestic alcohol consumption increases and purchases from abroad decrease. The feedback provided during the consultation stage has highlighted that there still remain unresolved issues around the legal status of distance selling and purchasing alcohol from abroad, which these proposals do nothing to solve. The government plans to address this in future proposals.

The government proposal is now under detailed review by the Social Affairs and Health Committee and will be receiving statements from the Constitutional Law Committee and the Commerce Committee. After receiving the report from the Committee, the Parliament will decide on the possible approval of the amendments.

The core question: Is the Finnish alcohol monopoly still justified under EU Law?

In practice, the recent and possible future changes mean that Alko's exclusive rights will be reduced and that the retail alcohol market will eventually be liberalised. The reforms are likely to raise questions about whether the monopoly system effectively prevents alcohol-related harm and whether it is still justified. The Finnish Institute for Health and Welfare has noted that significant changes to the sales system could impact the validity of the monopoly justification under EU law. Both EU law and the Finnish constitution require that restrictions on consumer goods sales be justified and consistent. This could make it more challenging to defend a system where the majority of alcohol sales are liberalised, while a small portion remains restricted for public health reasons.