A minimum price on alcohol could damage competition and reduce innovation in the retail sector, the boss of the Office of Fair Trading (OFT) has warned.
The news is a serious blow to the Scottish National Party (SNP), which is hoping to pass legislation on a minimum price as part of its Alcohol Bill.
OFT chief executive John Fingleton told the Oxford-based Regulatory Policy Institute a minimum price would "reduce the incentives of firms to compete, innovate and cut costs".
He said: "The dynamic benefits of competition are lost. In some sense these costs are irreversible. Even though a minimum price or some other form of competition restriction might be removed in the future, this wouldn't immediately allow the market to discover the missed efficiency gains."
He added: "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."
And in a veiled warning to pubs who rail against the effects of cheap supermarket alcohol, Fingleton said: "Our clear remit is to protect the process of competition, not to protect competitors from the effects of competition. One of the main ways we achieve this is by focusing on the interests of consumers, who are the ultimate beneficiaries of competition."
An OFT spokesman said that it had been in touch with the SNP to voice its concerns over the introduction of a minimum price.
Last week, the European Commission suggested minimum pricing could be legal in response to a question from a Labour MEP (EC: minimum pricing can be legal).