Pub company ties must be referred to the Competition Commission urgently
CAMRA, The Campaign for Real Ale, has criticised the Office of Fair Trading (OFT) for failing to protect consumers by taking no action following the consumer group's super-complaint submitted in July and has called on the Government to refer unfair tie arrangements in the pub sector to the Competition Commission.
In this morning's response to CAMRA's super-complaint, the OFT has said that consumers benefit from a good deal of competition and choice in the pubs sector, but CAMRA has challenged this at a time when prices are rising and seven pubs are closing every day.
CAMRA's super-complaint followed the hard-hitting report from the parliamentary Business and Enterprise Select Committee (BEC) which called for urgent action to re-balance the relationship between pub-owning companies and their lessees in the interest of consumers.
Mike Benner, CAMRA's Chief Executive said, "We do not accept that there is sufficient competition between pubs or adequate consumer benefit from competition and choice within this sector. The OFT decision fails to address the legitimate concerns raised both in our super-complaint and the BEC report and does nothing to address the imbalance in the landlord/ lessee partnership which is leading to higher prices, less choice and weak investment in pubs."
Mr Benner added, "It is difficult to see how the OFT can argue that competition is working well in the pubs sector when demand is falling, yet prices are rising. Urgent action is now required by Government to stem the flow of pub closures, build a sustainable future and ensure that consumers get a fair share of the benefit from tied agreements as demanded by competition law."
Mike Benner said, "There simply cannot be effective competition between all pubs when many pub landlords are placed at a huge disadvantage, by paying wholesale beer prices that can be around 50p a pint greater than their free of tie competitors."
The OFT has found that higher prices exist for some products in tied pubs, but claims that these are marginal, with a pint of lager costing drinkers 8p more in a tied pub compared to a free house. CAMRA, however, claims that this fails to fully consider that higher prices in tied pubs lead to artificially higher prices in other local pubs through lack of effective price competition and contends that today's cash-strapped drinkers would not regard an 8p premium as marginal.
CAMRA is urging Lord Mandelson to overrule the OFT by referring anti-competitive and unfair tie arrangements of the large pub operating companies to the Competition Commission for an urgent investigation. In taking this decision Lord Mandelson will help secure a sustainable future for Britain's pubs and a fair deal for Britain's 14 million pub-goers.
CAMRA is also calling on the Government to take immediate legislative steps to protect pub landlords and therefore consumers from unfair and anti-competitive contract terms.
CAMRA has called for a policy framework to support community pubs which benefit society following the publication of 'Pubs and Places' by the Institute for Public Policy Research (ippr) in March.
Dr. Rick Muir, author of 'Pubs and Places', said, "Pubs play a key role in community life by providing a friendly and safe environment for people to socialise with friends, family and their wider community. The positive social contribution of many pubs is under threat as a result of high rents and high tied beer prices imposed unfairly by large pub owning companies. Pub landlords are rightly very concerned that unfair tie arrangements are having a serious impact on their ability to compete by reducing prices and improving facilities. The relationship between large pub owning companies and pub landlords needs urgent rebalancing and both the Government and Competition Authorities have their roles to play. In addition a new Government policy framework is required to support, incentivise and reward well-run community pubs."
In calling for referral to the Competition Commission, The BEC report stated the disappointment of the Select Committee that the OFT has previously failed to act on this matter and had refused to acknowledge the current problems in the market. The report said, on the point that the market is working, that "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."
Mr. Benner added, "The Business and Enterprise Select Committee have been proven correct in the view they expressed early this year that an OFT investigation would not be satisfactory and that the Government should now assume responsibility."
