The European Commission yesterday said it would give the Government 40 days to scrap what it claims is a discriminatory ban on the sale of draught beers which have not been brewed according to traditional British methods.
Under fire is the legislation of 1989 which allowed pub tenants to sell "guest" beers rivalling those produced by the brewery to which they are tied, but only as long as they had been fermented according to the traditional cask-conditioning method.
But because this method of secondary fermentation in the cask is almost unique to the UK, the Commission argues the limit is de facto protectionism and breaches the free-trading rules of the single European market.
The crackdown was prompted by complaints of importers of German and other continental draught lagers which do not qualify as cask-conditioned.
It comes as the Commission prepares to review the future of the tie between breweries and pubs under EU competition law. The British tie system has been given a temporary exemption from the normal competition rules. But yesterday's warning will fuel speculation that the Commission will not renew the exemption after it expires in December next year.
The Commission has been taking soundings from the industry and is expected to recommend at least some changes to the present exemption.
The most extreme scenario would be an end to the property tie, which would be strenuously opposed by brewers.
A spokesman for the Brewers and License Retailers Association, which represents the brewing industry, said: "We believe we have the most open system in Europe, and what is being proposed could in fact lessen consumer choice".
He added: "The evidence is clear if you go into any British pub and see how many beers are sold, sometimes 15 or 16, a lot more than in a German or Italian bar."