Call for pub industry competition inquiry

MPs called today for an urgent competition investigation into the pub industry amid fears that ties between pub firms and licensees were forcing up prices for drinkers.

The Business and Enterprise Select Committee said the current practice in which pub companies compelled their tenants to buy drinks from them - known as the "beer tie" - should be "severely limited".

"There... are strong indications that the existence of the tie pushes up prices for consumers," the MPs said.

The committee was "surprised and disappointed" at the Office of Fair Trading's (OFT) reluctance to re-examine the beer tie's impact since a study in 2004 and called on the Government to order a Competition Commission probe.

'Pubcos' such as Enterprise Inns and Punch Taverns fall under the spotlight in the committee's report, after claims that firms use their strong position to impose heavy rental burdens - while failing to pass on the full benefit of discounts on beer to tenants.

The report said: "The failure of the pubcos to pass on the benefit of their discounts to the lessees prevents the lessees from passing on the benefit to the consumer in terms of reduced prices."

This has led to an "ever increasing disparity" between the price of beer in pubs and off-licences, it adds - undermining the viability of many pubs, as tenants are forced to increase prices and encouraging the trend towards drinking at home.

An independent survey commissioned by the MPs also found that almost two-thirds of lessees did not think pubcos added any value, while 67% of tenants earned less than £15,000 a year.

Although the report admitted other pressures on pubs, such as changing consumer preferences and recession, an average of 39 pubs closed every week in 2008, compared with eight in 2004.

"It is to the overall detriment of the consumer if pubs are forced to close due to uncompetitive practices in the market," the report added.

The practice of pubcos selling sites with restrictive clauses stating that they should no longer be used as pubs was also criticised as anti-competitive by MPs, who called for it to be banned.

"We believe it is for the market to decide whether a pub is unviable and not for a pubco to restrict a building's use," it said.

Committee chairman Peter Luff added: "Our inquiry found alarming evidence indicating there may be serious problems caused by the dominance of the large pub companies."

Alongside greater transparency over rent-setting and an independent dispute resolutions system, Mr Luff challenged pubcos to demonstrate the benefits of the tie by allowing tenants the opportunity to run their pubs on a free-of-tie basis.

Mr Luff said that doing away with the tie completely could put too much power into the hands of brewers and wholesalers, but called for severe restrictions on the practice.

In calling for a competition investigation, he added: "Some might argue that this can be left to the market. Pubcos which not only benefit themselves but support their lessees are likely to stay in business. If pubcos push too hard and are too greedy they will fail.

"But on the way, bad companies will inflict real damage on their direct customers, the lessees, and on their indirect customers, ordinary drinkers."

Punch Taverns said it was disappointed by the report's findings and said there were good grounds for the Government to reject the committee's recommendation for a market investigation by the Competition Commission.

It said competition authorities had looked at the market on several occasions and concluded it was not anti-competitive.

Punch added: "We strongly believe that the tied pub model provides a fair and equitable approach to sharing risk between ourselves and our licensees, represents a low cost opportunity for entrepreneurs, and has a rightful place in the market."

Start your day with The Independent, sign up for daily news emails
ebookA unique anthology of reporting and analysis of a crucial period of history
peopleMathematician John Nash inspired the film Beautiful Mind
Richard Blair is concerned the trenches are falling into disrepair
newsGeorge Orwell's son wants to save war site that inspired book
Life and Style
Audrey Hepburn with Hubert De Givenchy, whose well-cut black tuxedo is a 'timeless look'
fashionIt may be a paradox, but the industry loves it
Arts and Entertainment
The pair in their heyday in 1967
Life and Style
fashionFrom bathing dresses in the twenties to modern bikinis
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine