MPs call for inquiry into 'beer tie' activity

13th May 2009, 10:09am

The Business and Enterprise Select Committee has said that an inquiry into beer ties between pub companies and their licensees is needed, after it raised concerns about prices and competition within the pub industry.

The Committee raised issues with the way some pub firms require licensees to buy their stock through them rather than sourcing 'better deals' from suppliers elsewhere.

"We have no confidence that the advantages of the tie outweigh its drawbacks. There are strong indications that the existence of the tie pushes up prices not just to lessees but to consumers," said the report.

Tenant satisfaction was also questioned by the Committee: "Our investigation showed that the majority of lessees of tied pubcos did not consider their pubco added value to them and were dissatisfied with their pubco; 78% of lessees were dissatisfied with the tie. 67% of lessees who responded to the survey said that they earned less than £15,000 per annum. Even where pubs had a turnover of more than £500,000 a year, over 50% of lessees earned less than £15,000."

The Committee also said that many pubcos are aware of the power they hold and use it for financial gain: "While we are sure that in some cases pubcos have acted fairly and even generously towards their lessees, in many cases they take full advantage of their economic strength. There is a worrying pattern in the evidence presented to us of lack of support for lessees, of verbal agreements not honoured, and, on occasion, of downright bullying."

Calling for a further inquiry the report concluded: "We are wary of simply recommending that it (beer tie) should be abolished; such a move might simply increase the power of brewers or distributors. The OFT has declined to act in the past; we recommend that the Secretary of State refer the matter to the Competition Commission for urgent investigation by a body which has no vested interest in defending its earlier position.

"However, our provisional view is that the tie should be severely limited to ensure there is proper competition in the market. Displacing pubcos without considering the market  as a whole may put too much power into the hands of brewers and wholesalers. The position of local brewers operating a small tied estate also needs to be considered; we would not wish to damage regional brewers. For these reasons we recommend an urgent investigation, rather than simply making a policy recommendation."

CAMRA responded by saying the investigation would disrupt the industry. Mike Benner, CAMRA Chief Executive, said: "While the issue of the 'beer tie' needs to be assessed to ensure fairness to all parties we are not yet convinced of the need for a lengthy Competition Commission Investigation. A two to three year investigation would create huge disruption and uncertainty for the UK's pub owners, licensees and consumers. A lengthy investigation may also serve to delay urgent action to deliver fairness to struggling pub licensees and their customers."

"CAMRA supports the principle of the "beer tie" provided that the higher prices licensees are required to pay for their beer supplies are balanced by a lower rent, credible business support and the option of stocking a guest beer."

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• 04 Jan 2010 - Pubco tied tenants will ballot for strike action in 2010
• 22 Oct 2009 - Office of Fair Trading gives beer ties the all-clear
• 05 Aug 2009 - 55% of all drinkers support lower strength beer option in pubs
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• 24 Jul 2009 - 'Super-Complaint' prompts OFT probe into pub market
• 23 Jul 2009 - CAMRA declares National Pub Design Awards open
• 28 May 2009 - 'Pubcos profit margin nine times more than Tesco'
• 14 May 2009 - Unite supports pub beer supply investigation
• 29 Apr 2009 - Punch Taverns offloads pubs worth £91m
• 28 Apr 2009 - Beer sales continue to slide
• 22 Apr 2009 - Industry react angrily to the Budget
• 21 Apr 2009 - 'We have 48 hours to save the pub industry'
• 20 Apr 2009 - 90% of public want taxes reduced or frozen in Budget
• 18 Apr 2009 - Chancellor counts cost of £242 million tax loss from pub closures
• 15 Apr 2009 - MPS oppose beer tax rise
• 08 Apr 2009 - Tax rises will result in pub job losses
• 31 Mar 2009 - Sun advert launches 'Text the Chancellor' campaign
• 13 Mar 2009 - Taxation on pubs has gone too far, says Wetherspoon
• 12 Mar 2009 - 30,000 people support local pubs
• 26 Sep 2008 - FSB calls for beer ties to be scrapped

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