News: October 2009

The Office of Fair Trading (OFT) has published its response to the Campaign for Real Ale’s super-complaint concerning the supply of beer in pubs.

The complaint followed recommendations from the Commons Business and Enterprise Select Committee (BEC) that called for a fairer tie system in pubs.

In its submission to the OFT, CAMRA expressed concerns over exclusive purchasing obligations, which require pub lessees to buy beer solely through their pub company landlord. Such supply ties, said CAMRA, protect pub companies from competition, and result in higher prices and less choice for customers. Other issues outlined by CAMRA included the methods used by pub companies to calculate rents.

In a statement, the OFT declared: ‘Having examined the issues raised in the super-complaint, the OFT has not found evidence that supply ties are resulting in competition problems that are having an adverse impact on consumers.

‘The OFT has found that there is generally effective competition between pubs and does not consider that supply ties contribute to higher prices or prevent pubs offering a wide choice to consumers.’

In considering the complaint, the OFT also took submissions from pub lessees, outlining concerns about the rent assessment process and their negotiations with pub landlords.

The OFT statement continued: ‘Although the OFT acknowledges the concerns of these lessees, the objective of the OFT’s work is to ensure that effective competition delivers value and choice to consumers. The OFT considers that the issues raised in the super-complaint do not warrant further assessment by the OFT, and will be taking no further action.’

CAMRA is one of a select number of bodies that is allowed to raise a ‘super complaint’ with the OFT to fast-track important issues. Such complaints have to be responded to within 90 days. The consumer group has rejected the OFT’s response and has called for the Government to refer unfair tie arrangements in the pub sector to the Competitions Commission.

‘We do not accept that there is sufficient competition between pubs or adequate consumer benefit from competition and choice within this sector,’ said CAMRA Chief Executive Mike Benner. ‘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.

‘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.

‘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.’