News and Press
OFT investigation of beer tie

On 22 October 2009, the Office of Fair Trading (OFT) published its response to the super-complaint relating to the operation of the 'beer tie' by the Campaign for Real Ale (CAMRA).

CAMRA's super-complaint

CAMRA asked the OFT to examine the impact of the operation of beer supply ties within the pub industry in the United Kingdom. It alleged that it prevents suppliers from being able to access tied pubs directly; results in higher wholesale prices paid by tied pubs for beer and other tied drinks than would be the case in its absence; and that combined with the level of rent paid by tied lessees this harms consumers by leading to higher prices for, and a reduced choice of, beer served in tied pubs. Moreover, that this leads to the closure of valuable community pubs.

CAMRA further alleged that customer service was damaged and that existing pubs reduced expenditure on refurbishment and renovations leading to lower quality of amenities pub premises. CAMRA also asked the OFT to look at the basis upon which rents for pub lessees are calculated, the use of restrictive covenants on the sale of premises by pub companies, as well as the paucity of free-of-tie premises for prospective pub lessees.

The OFT's response

The OFT states that it has found no evidence that beer ties are causing adverse effects on competition. In short, the OFT concluded that competition between pubs is generally effective and that the beer tie does not lead to a reduction of choice for consumers or higher prices. Accordingly, it will not launch an initial market study or refer the pub sector for detailed investigation by the Competition Commission ("CC"). CAMRA, in response, has called on the Secretary of State, Lord Mandelson, to use his powers to refer the market direct to the CC.

Nicola Kingaby, Associate in TLT's Competition team explains: "Lord Mandelson, as Secretary of State, is entitled, under the Enterprise Act 2002 to ask the CC to investigate a market where he is not satisfied by an OFT decision not to make a reference. However, any reference to the CC by Lord Mandelson must be based on competition issues, (that is, that one or more features of the market restricts competition). In circumstances where the OFT has investigated elements of the beer market on several separate occasions - including following the CAMRA super-complaint - over the last decade and in each case has concluded, having taken evidence from across the industry, that competition is not restricted, it is hard to see how Lord Mandelson could reasonably make a reference. In view of the impending general election and the current public concerns around binge drinking and anti-social behaviour, it may be that instead of referring the pub market to the CC, Lord Mandelson will recommend a root and branch investigation of the alcoholic drinks industry as a whole."