Benner: status quo on tie is not an option

The Campaign for Real Ale's chief executive Mike Benner looks forward to the organisation's super-complaint achieving legally-binding reforms on the beer tie

Temperatures are running high on the issue of the beer tie. I can't be the only one who has noticed that just about every pubs related story that appears on the Morning Advertiser website at the moment is followed by a flurry of forum comments, which almost always bring the discussion back to the operation of the tie.

In recent months it's been unusual for me to have a conversation with a parliamentarian without it turning towards the plight of tied tenants, within seconds of exchanging pleasantries.

While the issue has been a hot potato since long before the hard-hitting Business and Enterprise Select Committee report hit our desks in May, there's no doubt that this has served to focus minds on the urgent need to reform the operation of the beer tie to deliver fairness to all parties.

It is fast becoming a widely accepted view that the current operation of the tie needs to be urgently and radically reformed, if we are all to enjoy the benefits of a vibrant and sustainable pub sector in the future. The way in which pub rents are calculated needs to be improved; tied beer prices must fall to reflect the freetrade discounts now available and there should be a real-ale guest beer right to enable small brewers to get their beers into those local pubs that want to stock them.

CAMRA's super-complaint to the Office of Fair Trading (OFT) is an attempt to get to the heart of the issues relevant to consumers and move towards a swift and legally-binding set of reforms. Only by achieving this will the industry and other stakeholders be able to move forwards in securing a Government policy framework to support community pubs.

Community​

The joint CAMRA/Institute for Public Policy Research project (Pubs and Places) on the social value of community pubs is hugely significant in this process. While it provides much-needed evidence of the importance of pubs in our society, its real triumph is the call for a Government policy framework to support well-run community pubs that can demonstrate they are true "centres of the community" and a key part of the solution to alcohol-related problems.

Once Government accepts that pubs are not just businesses, but are genuine community amenities that offer so much more than other on-licensed premises and the dreaded supermarkets, we will be close to a package of support. There are, after all, votes in pubs.

But, let's be honest with ourselves, no Government will take this giant step until the industry resolves to eliminate anti-competitive practices in the UK pub market. The fact that tied pub businesses are generally worse off than free-of-tie pub businesses distorts, prevents and restricts competition and means that consumers suffer from inflated prices, unnecessary loss of pubs and a lack of investment in pubs. A lack of price competition has inflated prices across the sector.

The tie must be a true and equal partnership in all its guises, where the risks and benefits of running a pub business are equitably shared between pub-owning company and the pub licensee.

The OFT has 90 days to respond to CAMRA's complaint. It looks increasingly unlikely that a "clean bill of health" will be the outcome. Last week's announcement that the Government has brought forward its consultation on the revocation of the Land Agreements Exclusion Order 2004 is a key development. The fact that the Government has made clear that its preferred option is to repeal the Order as "an anomaly in the modern competition regime" is a dramatic wake-up call to anyone who thinks the Office of Fair Trading's consideration of CAMRA's super-complaint leaves the large pub-owning companies with little to worry about. It is no longer business as usual for those who consider maximising short-term returns as more important than the long-term success of Britain's pub and brewing industry.

Family brewers​

However, the small and family brewers need not be too concerned about the Government's proposal to repeal the Order. Their small market shares mean they would not be regarded as having a significant anti-competitive effect and they can demonstrate a positive impact on competition, because the beer tie enables them to bring their beers to the bar in a market dominated by global brewers.

Basically, repealing the Order would require any pub owning company with a significant market share to ensure that their beer-tie agreements do not prevent, restrict or distort competition.

The industry-wide mediation process, considering reform of the beer tie, is now underway. It is a positive step forward. CAMRA's super-complaint works in parallel with this and will help keep it on track. I hope that the outcome of the OFT's inquiry will be to agree undertakings directly related to the outcomes of mediation. The OFT has the ability to make the outcome of mediation legally-binding as an alternative to referring the UK pub market to the Competition Commission for a full market investigation.

The opportunity is now on the table to resolve this issue once and for all in a matter of months without getting bogged down in a lengthy Competition Commission investigation with all the uncertainty and unintended consequences that may bring.

However, should the mediation process fail, and should the OFT be unable to agree legally-binding undertakings then a full market investigation surely becomes a certainty, and rightly so. The status quo is no longer an option.