Beer Orders - 20th Anniversary: Following orders...

Competition: "the rivalry between two or more businesses striving for the same customer or market"

Monopoly: "exclusive control of a particular market that is marked by the power to control prices and exclude competition"​

The Office of Fair Trading's (OFT) latest look at the pub sector, following CAMRA's 'super complaint', led to it concluding there was "no evidence of competition problems having a significant impact on consumers".

It's fair to say the OFT's findings were greeted with undisguised exasperation from those hoping the industry would be referred to the Competition Commission. The relief in other quarters, however, was palpable. A Commission inquiry, pubco and brewing types argued, would have had a devastating effect on the trade, with investment plans shelved and valuable resources channelled into defending company positions.

Some City analysts also took the view that if the OFT opted for a referral, some of the more indebted pub operators would see any chance of banks refinancing them fly out the window with potentially devastating consequences.

The OFT's recent probe was the latest in a series of investigations into the sector and not the first in recent years to find little or no case to answer.

It was not always thus. It is not an act of hyperbole to argue that the Monopolies and Mergers Commission (MMC) 1989 report into the UK beer market led to the most radical re-jig the sector had ever - and to this day has ever - undergone.

Some take the view that the Beer Orders paved the way for better-run pubs offering more choice, while others argue the MMC report created a new era of monopoly. Prompted by opponents of the UK's large brewing concerns, including CAMRA, the MMC undertook to look into claims that a monopoly existed over the supply and subsequent retail of beer across the country in 1986.

On March 21, 1989, after a three-year investigation, the MMC published its much-anticipated report in which it "unanimously concluded" that "a complex monopoly situation exists in favour of the brewers with tied estates and tied loans… which restricts competition at all levels".

Examining the monopoly claims

In a report which stunned many in the sector, the MMC recommended individual brewers be permitted to own no more than 2,000 pubs through which to sell their products, a move which would require the big companies to offload around 22,000 properties.

The MMC also said when such pubs were sold they should not have any terms attached that would require a new owner to continue buying beer from the brewery, and recommended a revised Code of Practice to be included in tied tenancy agreements. And crucially, for the likes of CAMRA, the MMC said these newly independent pubs should be able to sell at least one guest ale and that the tie be removed for other products, namely soft drinks, wines and spirits.

Where the MMC had seen a monopoly the brewers obviously saw things differently. The Brewers Society, a forerunner to today's British Beer & Pub Association (BBPA), argued that the UK beer market was highly competitive and that any conclusions that the existing set up was detrimental to the public interest were unfounded.

It told the MMC it saw "no widespread or focused evidence of consumer complaint". In its view the industry had "adapted readily and well to changing consumer tastes and social trends".

However, the MMC was not swayed by what it described 20 years ago as the "vigour and thoroughness" of the society's responses to its questions. It believed that a monopoly did indeed exist, at all levels, and that a large brewer's pubs were protected from supply competition by virtue of the fact that other brewers did not have access to them.

And in terms of predicting a row that would be uppermost in the sector's mind two decades later, the MMC stated that the beer tie, whether through direct supply or in the freetrade through beer loans, meant prices were higher than they would otherwise have been.

The Conservative government of the day agreed, and the Beer Orders - or to give them their more prosaic official title, The Supply of Beer (Tied Estate) Order 1989 - were put onto the statute book. A great sell-off began. Established names such as Bass and Courage gradually exited the pub game, and new operators such as Enterprise Inns and later Punch Taverns came into the market, bolstered by property-minded investors and management with an eye to unlocking what they saw as the underlying value of the bricks and mortar of the key asset, the freehold pub itself.

Watching for a return to old ways

In the years following the Beer Orders a number of inquiries were undertaken to ensure the new-look industry was not reverting to its old ways through the back door.

In 1995 the Office of Fair Trading (OFT) looked at price variations between tied and free-of-tie pubs and concluded that lower fixed rents and support packages meant the higher price for beer charged to the tied sector did not place it at a disadvantage.

In 2000 the OFT looked at the sector again, this time concluding that the beer supply market was "very different" at all levels from that seen in 1989. It recommended that many provisions of the original legislation be rescinded.

Then five years ago, with large numbers of pubs once again being owned and operated by a relatively small number of companies, the Trade and Industry Select Committee investigated the sector.

Among its conclusions were that rent negotiations be more transparent, that upward only rent reviews be abolished and that rents be "reasonable and sustainable". Again the industry breathed a sigh of relief, believing its practices had been exonerated, though many licensees begged to differ.

Earlier this year came a report from the Business & Enterprise Select Committee (BEC), one which proved highly critical of several industry practices and effectively paved the way for CAMRA's 'super complaint' to the OFT. That the OFT found no case to answer is unlikely to be the end of the wrangling between those who oppose the current system of tied leases and those who profit from them.

What is clear is that without the legislation that followed the MMC's 1989 report the shake-up that saw the then-Big Six brewers sell off thousands of their pubs and, in some cases, exit brewing altogether, might never have happened.

The MMC's report led to the industry we have today. Some like it, others do not. Observers suggest the industry might well have evolved into that which we see today, and that prompted by a more affluent and demanding consumer pubs would have smartened up their acts, that retail standards would be focused upon as never before and that a new breed of operator - one without necessarily any substantial background in the industry - would come into the sector.

We are unlikely to have seen the last of the call for a fairer system. Who owns the nation's pub stock when that comes to pass is anyone's guess.

So what do people who were working in or around the industry make of the impact of the Beer Orders on the sector? And where do such people think the pub and brewing sectors are likely to go from here? We asked a few individuals for their thoughts…

Iain Loe
Then​: research officer, CAMRA
Now​: research and information manager, CAMRA

"We should have predicted the rise of the pubcos following the Beer Orders. The legislation changed one complex system for another, one that it could be argued is perhaps less benign than the six large brewers which the Beer Orders affected.

"The Orders gave rise to the growth of new brewers and triggered interest in real ale, but these things may have happened anyway. If there had been no Beer Orders we would still have had consolidation among the bigger brewers, while those regional brewers we did lose were simply not competitive enough.

"Parts of the