Friday, 24 July 2009

CAMRA launches 'super-complaint' on Beer Tie

From a CAMRA Press Release:

CAMRA, the Campaign for Real Ale, has today exercised its ‘super-complaint’ power to require the Office of Fair Trading (OFT) to fast-track consideration of anti-competitive practices in the UK pub market which are resulting in high prices in pubs, lower amenity, restricted choice and pub closures.

CAMRA’s ‘super-complaint’, ‘A Fair Share for the Consumer’, highlights that high rents and ‘tied’ beer prices are driving many good pub landlords out of business and contributing to the destruction of Britain’s pubs through pub closures and chronic under investment in pub facilities. Currently more than seven pubs close every day.

Mike Benner, Chief Executive, said, “Exploitation of ‘beer tie’ agreements and the unfair method of setting pub rents are harming consumers and society as a whole. It is enshrined in EU law that consumers must get a fair share of the benefits arising from exclusive purchasing deals such as the ‘beer tie’, but this is often not the case. We hope that the OFT will act to deliver a fair share for Britain’s 14 million regular pub goers. Reform of the ‘beer tie’ along with a framework of support from Government is urgently required to save the pub from extinction.”

‘Tied’ Beer Prices

More than half of the pubs in the UK are run under ‘tie’ arrangements which prevent pub landlords buying beer and other products on the open market meaning many pub landlords are forced to pay over the odds by around 50 pence a pint.

Mr Benner said, “The ‘tied’ model works best when it is a true partnership, where the risks and benefits are shared equally between pub owning company and the pub landlord. Unfortunately, this is not the current reality. Pub-owning companies are able to earn excessive profits by increasing the cost of beer to their ‘tied’ pub landlords who have no choice but to accept high prices and pass them onto the consumer. This practice has led to higher prices in pubs and has widened the gap between pub and supermarket prices encouraging people to shun the pub for their armchair.”

Pub rents; a flawed system

CAMRA is calling for the OFT to review the way in which pub rents are set as excessive rents translate into higher prices for pub-goers. The current system is open to abuse as it is based on a whole range of entirely hypothetical assumptions and specifically ignores the fact that ‘tied’ pub landlords have to pay above market prices for beer and other products.

Mike Benner said, “Pub landlords should not be denied access to the information and assumptions used to calculate a rent figure. An independent and affordable rent dispute system is urgently needed to avoid pub landlords being forced into agreeing excessive rents because they cannot afford to contest it. The rent charged to ‘tied’ pub landlords must fully take into account the financial penalty they face as a result of being unable to purchase beer and other products on the open market. The current system is seriously flawed and is leading to higher prices in pubs and contributing to the high rate of pub closures.”

Beer Choice; securing access to market for small brewers

Mike Benner said, “There is enormous consumer interest in local produce and it is crazy that local brewers are prevented from selling their beers to local pubs. We believe a ‘guest beer’ regulation, so that ‘tied’ pub landlords can buy a guest real ale from a brewer of their choice, should be introduced to overcome this. This alone would boost consumer choice and have the impact of driving down pub beer prices through competition.”

Pub Closures; stamp out restrictive covenants

CAMRA is calling for regulation to prevent pubs being sold with ‘restrictive covenants’ preventing them from being used as licensed premises in the future.

Mr Benner said, “At a time of accelerating pub closures it is disgraceful that companies are allowed to sell pubs and deliberately prevent them ever being reopened. Pubs are at the heart of so many of our communities and it is for the market and the community to decide if a pub is a viable and sustainable business.”

The Way Forward

Mr Benner added, “In parallel to its ‘super-complaint’ CAMRA, along with the Fair Pint Campaign and the Federation of Small Businesses, are participating in efforts to achieve an industry-wide mediated settlement to overcome the current unfairness of the ‘beer tie’ and pub rents. If mediation is successful then it is possible the OFT would decide to use its powers to make the outcome of the mediation legally binding as an alternative to further action including reference to the Competition Commission for a lengthy market investigation.”

“Total abolition of the ‘beer tie’ would be a grave error and would be likely to turn the current storm of pub closures into a hurricane and lead to increased domination of the beer market by global brewers. Abolishing the ‘tie’ would be the classic example of ‘chucking the baby out with the bath water.”

“Our ‘super-complaint’ will give the OFT the opportunity to take swift action to ensure the ‘beer tie’ works fairly in future. Clearly there are a number of reasons why Britain’s pubs are under pressure, not least the recession and our punitive beer tax regime, but the evidence is clear that the ‘tie’ must be reformed if these valuable small businesses are to survive and thrive. In response to the BEC report, some companies have taken some positive steps to improve matters and we welcome that progress, but legally-binding reform is still required to ensure a fair deal for consumers.”

“EU competition rules demand that exclusive supply agreements between pub owning companies and pub landlords must result in a fair share of the benefit for consumers. The ‘tie’ is a restrictive agreement, but it should work through countervailing benefits for pub landlords to enable them to run a viable and sustainable pub providing good value and quality to their customers. With increasing pub prices, failing pub businesses and unprecedented pub closures, the model is faltering and must be reformed as a matter of urgency.”

- CAMRA is a designated consumer body within the Enterprise Act 2002. A ‘super-complaint’ may submit views on ‘any feature, or combination of features, of a market in the UK for goods or services is or appears to be significantly harming the interests of consumers’.

- The ‘super-complaint’ process is intended to be a fast-track system for designated consumer bodies. The OFT has 90 days to respond to the ‘super-complaint’ and, if upheld, has the option of carrying out a market study, agreeing legally binding undertakings or a direct referral to the Competition Commission.

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