2024-09-09 19:03:25
Court evaluates autonomy in liquor tax revenues. In a public hearing, the Constitutional Court will hear the parties in the framework of a discussion on the claim of Article 28 of Law 1816 of 2016, which regulates the monopoly on distilled spirits rentals in Colombia.
HUILA DAILY, FRONT PAGE
By: Gustavo Patiño
On October 7, 2024, the Constitutional Court of Colombia will hold a public hearing that could have far-reaching implications for the aguardiente market and the liquor monopoly in the country. The discussion will focus on the lawsuit against an article of Law 1816 of 2016, which regulates the rent-based monopoly of distilled liquors in Colombia, and its potential impact on free competition and the economic autonomy of the departments.
The controversy
The distilled spirits monopoly, established by Law 1816 of 2016, grants departments the exclusive power to produce, market and supervise these products. This regulation seeks to ensure that the income generated by the consumption of spirits is allocated primarily to sectors such as health and education. However, a group of plaintiffs has questioned the constitutionality of some of its provisions, arguing that they restrict free competition and the circulation of products between departments.
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The lawsuit, which is being analyzed by the Constitutional Court, aims to eliminate Article 28 of the law, which allows departments to suspend import permits for liquor produced in other regions of the country or abroad. According to the plaintiffs, this provision creates a market monopoly that favors the producing departments and negatively affects competition, in addition to violating constitutional principles such as economic freedom.
The conflict
The debate has created a deep divide between some of the country’s main liquor industries. The Cauca Liquor Industry and the Antioquia Liquor Factory are in favor of maintaining the existing monopoly, arguing that it protects local production and ensures that the revenues are used to fund health and education programs in their respective regions. On the other hand, the Caldas Liquor Industry, known for its Aguardiente Amarillo, advocates repealing the provision that restricts the entry of liquor from other departments, since they consider that it fosters a less competitive market.
The purpose of Law 1816
Alejandro García, partner in the Competition and Integrations team at Brigard Urrutia, explained that “Law 1816 of 2016 unified the regulation of the distilled spirits monopoly and granted the departments the power to exercise it directly or receive the resources from the consumption tax derived from the sale of these products.” The law was designed not only to ensure that the departments obtained a stable source of income, but also to combat problems such as liquor smuggling and the sale of adulterated products.
García pointed out that “the preferential allocation of resources obtained from the rent-based monopoly is clearly established in the Constitution, which provides that these revenues must be directed primarily to health and education. In this way, the aim was to create a system that would benefit society and, at the same time, regulate a sensitive market.”
However, the expert warned that the same law can be seen as a barrier to free trade within the country, as it allows departments to restrict the entry of products from other regions. “This situation limits competition, preventing similar products from other areas of the country from competing on equal terms,” added García.
Arguments for and against
Nicolás Rico, a partner at Scola Abogados, explained that the rent monopoly, as defined in Law 1816, grants the departments “exclusivity in the production and marketing of distilled spirits.” However, he stressed that this law also allows the free production and importation of products such as wines and aperitifs, which are only subject to the payment of the consumption tax.
Rico added that “if the Constitutional Court decides to strike down Article 28, it would allow the entry of liquor produced in other departments, which would encourage greater competition and could translate into benefits for consumers. Access to a greater variety of products on the market could improve both the quality of the liquors and the purchasing experience.”
Proponents of the current law argue that the monopoly is necessary to protect local production and ensure that the revenue generated is allocated to key areas of social welfare. The Cauca Liquor Industry and the Antioquia Liquor Factory have insisted that any change to the law could destabilize the current system, putting at risk the health and education programs that depend on this revenue.
Opponents, such as the Caldas Liquor Industry, argue that the current system creates unjustified barriers to trade and limits consumers’ ability to access products from different regions. The lawsuit being considered by the Court seeks to allow the sale of liquor from other departments, which, according to the plaintiffs, would foster a more open and competitive market.
The public hearing
The hearing scheduled for October 7 will be crucial in determining the future of the liquor monopoly in Colombia. The Constitutional Court has indicated that two fundamental issues will be discussed during this session: first, the operation of the rent-based monopoly by the departments, and second, the effectiveness of this measure and its effects on the collection of revenues and the plurality in the market.
The judge in charge of the case, Jorge Enrique Ibáñez Najar, will be in charge of coordinating the discussions during the hearing, where the parties involved are expected to present their arguments. The Court has indicated that this hearing is necessary due to the “significant controversies” that have been identified in relation to the operation of the monopoly and its impact on the liquor market.
The effects
If the Constitutional Court decides to repeal Article 28 of Law 1816 of 2016, it would open the door for spirits produced in other regions of the country to compete on equal terms in all departments. This measure could generate greater diversity in the market, with more options for consumers and a possible improvement in the quality of the available products.
On the other hand, departments that rely on monopoly revenues could face a reduction in their resources, which could affect health and education programs that are currently funded by these revenues. Liquor industries that have prospered under the current system could be forced to adapt to a more competitive market, where they would have to face a greater variety of brands and products.
A fundamental debate
This case involves not only economic and commercial aspects, but also touches on fundamental issues related to the autonomy of the departments and the principle of free competition. The Colombian Constitution allows the creation of monopolies for profit-making purposes, but also guarantees economic freedom and the circulation of goods within the national territory.
In this sense, the decision taken by the Constitutional Court in the coming months could have repercussions not only on the liquor market, but also on the way public resources are managed and markets are regulated in Colombia. Meanwhile, all eyes are on the hearing on October 7, where the future of the liquor monopoly and its impact on the national economy will be discussed.