View from City Road: Beer Orders prove a weak brew

THE BEER ORDERS are not working out the way they were intended. Designed to boost competition, increase consumer choice and reduce the price of a pint, they have failed in several respects.

The Monopolies and Mergers Commission report on the joint venture between Allied-Lyons and Carlsberg admits as much. While the Orders have forced large brewers to sell or free from tie 12,000 pubs and thereby contribute to increased competition in retailing, the same cannot be said of manufacturing.

In 1989 the top three brewers accounted for 46 per cent of the market. Now they account for 59 per cent. Far from helping consumers, this if anything damages them. Beer prices have risen sharply.

The MMC is so concerned by the dominance of Bass and Courage that it appears determined to allow a third force in manufacturing, the joint venture Carlsberg- Tetley. The MMC has belatedly recognised that the best way of fighting market dominance is with more market dominance.

To reach its conclusions the MMC had to adopt a tortuous argument. First, it said the joint venture would be against the public interest. But then it argued that the disadvantages would be outweighed if Allied-Lyons and Carlsberg made just three adjustments to the planned deal.

This turnabout would be more satisfactory if the adjustments or remedies were more substantial. Carlsberg-Tetley must reduce its supply agreement from seven to five years, it must maintain Carlsberg's business with existing customers for three years and allow guest lagers into pubs. None of these substantially reduces the attractions of the deal - as evidenced by the share price, which ended only 3p lower at 602p - yet they were enough to convince the MMC and the Government to give the go-ahead.

What next? Having allowed the Grand Metropolitan-Courage deal and now the Allied-Carlsberg joint venture, will the authorities also allow Allied, under Tony Hales, its chief executive, to supply beer to pubs leased by Brent Walker? Sir Gordon Borrie spoke out against this deal in one of his last speeches as Director-General of Fair Trading. Will Sir Bryan Carsberg, his populist successor, approve it? It would make a mockery of the Beer Orders if he does.

Only bright spot is that the principle of subsidiarity was seen at work. The EC adopted the same conclusions as the MMC. It is, however, scant compensation for the confusion in the wake of the Beer Orders.

(Photograph omitted)