OFT clears pub industry over 'beer ties'

The UK pub industry was again cleared by competition watchdogs today after a reopened investigation into controversial "beer ties".

The Office of Fair Trading (OFT) stuck by its initial findings last October that there was no evidence that so-called tied prices - where pub companies compel tenants to buy drinks from them - damage competition.

It revisited the inquiry after an appeal from the Campaign for Real Ale (Camra), which lodged the original super-complaint in July 2009 over fears that high rents and beer ties were forcing good landlords out of business and leading to higher prices for consumers.

But the OFT said today the UK pub sector is "competitive overall" and that there were "insufficient grounds to justify further OFT action".

The regulator said it recognised pub lessee concerns over contractual issues with their pub companies.

"Our focus, however, has been to assess whether the market is working well for consumers," it added.

Camra branded the OFT decision as "blinkered" and vowed to keep up the pressure to see the beer tie reformed.

The British Beer & Pub Association (BBPA), which has been working on the new code of practice, welcomed today's findings.

Brigid Simmonds, chief executive of the BBPA, said: "We would hope this would help draw a line under many issues and enable the industry to move forward."

But she said there was "much work to be done" in implementing the code and ensuring tie reform remained on track.

The OFT, which received submissions from more than 40 parties in the latest leg of the inquiry, dismissed concerns that beer tie arrangements lead to inflated prices and rents for lessees, which are passed on to the consumer.

It also said tied pubs are not prevented from offering a wide choice of beers, finding that pub-owning companies source beer from a wide range of suppliers, including small brewers.

Ann Pope, OFT senior director of goods, said: "Camra's super-complaint has provided a timely opportunity to examine the pub sector, as the beer tie model has attracted considerable attention recently.

"After carrying out detailed analysis, we have found that the sector is competitive overall and that there is no need for the OFT to take further action at the moment."

However, Camra reiterated claims of anti-competitive behaviour among big pub companies and said it is considering a new appeal.

Mike Benner, Camra chief executive, said the OFT's decision was "based on a blinkered and selective consideration of the evidence".

"It is extraordinary that the OFT appears to have dismissed as irrelevant the treatment of tied pub landlords by the large pub companies.

"A balanced and fair relationship between tied pub landlords and the large pub companies is crucial to ensuring the pub market works well for consumers."

It estimates tied pub landlords pay around £20,000 more for their beer a year as they cannot buy on the open market, which Camra said "inevitably" means higher prices for consumers.

Britain's large pub companies have always denied any wrongdoing, but Business Secretary Vince Cable told MPs recently that pubcos were "on probation" and promised legislative action if they fail to bring in changes by June 2011.

The industry is in the process of bringing in a new voluntary code of practice, with new lease options for tied landlords.