CAMRA demands action against pubcos
British pubs face extinction
In an outspoken attack on the activities of giant "pubcos" -- pub companies -- the Campaign for Real Ale (CAMRA) has today called on the Office of Fair Trading to tackle anti-competitive practices in the pub market that are forcing landlords out of business and closing pubs.
CAMRA enjoys "super-complainant" status and has used its position to call on the OFT to look at high prices, restricted choice and closures in the pub trade.
The campaign's report, A Fair Share for Consumers, says that high rents and "tied" beer prices are driving many pub landlords to quit the business. More than seven pubs are closing every day and CAMRA says this situation is driven by punitive rents and chronic under-investment.
The campaign's chief executive Mike Benner says: "Exploitation of 'beer tied' areements 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 the OFT will act to deliver a fair share for Brtitain's 14 million regular pubgoers. Reform of the beer tie along with a framework of support from the government is urgently required to save the pub from extinction."
More than half the pubs in Britain are run under "tie" arrangements that prevent pub landlords buying beer and other products on the open market. It means that many pub landlords are forced to pay over the odds by around 50 pence a pint, CAMRA says.
Mike Benner added: "The tied model works best when its a true partnership, where the risks and benefits are shared equally between pub-owning company and the pub landlord.
"But 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 on to 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."
CAMRA is calling for the OFT to review the way in which excessive pub rents translate into higher prices for pubgoers. The current system, the campaign says, is open to abuse as it is based on a range of hypothetical assumptions and ignores the fact that tied pub landlords have to pay above market prices for beer and other products.
Mike Benner goes on: "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."
The report says there is enormous consumer interest in local produce and it is "crazy" that local brewers are prevented from selling their beers to local pubs. Mike Benner says: "We believe a 'guest beer' regulation that would allow tied pub landords to buy a guest real ale from a brewer of their choice should be introduced. This alone would boost choice and have the impact of driving down pub beer prices through competition."
The CAMRA report makes it clear it's not calling for the total abolition of the tied pub system. "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," the campaign says. "It would lead to increased domination of the beer market by global brewers. Abolishing the tie would be a classic example of chucking the baby out with the bath water.
"But the tie must be reformed if these valuable small businesses are to survive and thrive. 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. With increasing pub prices, failing pub businesses and unprecedented pub closures, the model is faltering and must be reformed as a matter of urgency."
*A super complainant process is intended to be a fast-track system for designated consumer bodies. The OFT has 90 days to respond to the CAMRA complaint. If the complaint is upheld the OFT has the option of carrying out a market study, agreeing legally-binding undertakings or a direct referral to the Competition Commission.
A Fair Share for the Consumer is available at www.camra.org/supercomplaint.
SIBA backs call
Keith Bott, president of SIBA, the Society of Independent Brewers, has backed CAMRA's complaint to the OFT. He says: "We welcome referral to the OFT and hope this will be the start of a resolution to the issue.
"This long-running debate and uncertainty around the tie is not helpful to our members as they make long-term plans for their business.
"SIBA would like to see greater access for its memebrs' beer into pubs, especially as consumer demand for local quality beers is growing and presenting exciting sales opportunities for brewers and retailers. There are, however, some benefits to the tied model, which is why we don't support calls for it to be removed completely."
*SIBA represents most of Britain's independent and craft brewers, including family-owned companies as well as newer micros.