Last week, the Small Business, Enterprise and Employment Bill Committee voted in favour of an amendment to exempt pub companies with fewer than 500 tied pubs from the code.
It is the first fundamental change since the Government published its response to the consultation in June.
It means that, as the pub company estates currently stand, Enterprise Inns, Punch Taverns, Marston’s, Star Pubs & Bars, Greene King and Admiral Taverns are the only ones that will have to abide by the code.
Ministers had proposed a core code to protect all tied tenants and an enhanced code to protect those at pub companies with 500 or more tied pubs.
The Department for Business, Innovation & Skills refused to say whether it would seek to reinsert smaller pub companies in the code as the Bill makes its way through the legislative process.
However, it said: “Family brewers who are acting fairly have nothing to fear from our proposals.
“There was a robust discussion in the Committee and we will be looking at the issue carefully.”
The Independent Family Brewers of Britain said it would continue to remain fully compliant with the voluntary code and was pleased the amendment had been passed.
'No grounds for legal challenge'
The Government response comes as industry experts claim there are no grounds to launch a legal challenge following the family brewers’ exclusion.
Andy Tighe, policy director at the British Beer & Pub Association, said the amendment was “not an issue under competition law” but highlighted the need for the Government to address the problem of parallel rent assessments, which risk being unlawful if it means an adjudicator could use them as a basis to determine pubs’ rents.
“Now that [the code] only applies to one part of the pub market it just makes that issue even more stark,” he said. “It means the code is not just about behaviour but about the economies of the agreements between pub companies and their tenants.”
Association of Licensed Multiple Retailers chief executive Kate Nicholls said she did not think there would be reasonable grounds to challenge the amendment in the courts.
“There is a common de minimis applied to exempt smaller players and it is normally set at a percentage of the market. ‘Under 500 pubs’ has been used by the Office of Fair Trading and others in assessing the market in the UK so there would be grounds to sustain and support it,” she said.
Fair Pint campaigner Simon Clarke said the exclusion of family brewers left a “weak code” that would only apply to large pubcos.
However, he added, if family brewers “continue to misbehave”, there is a risk the adjudicator will alter the threshold so they
Toby Perkins MP tabled an amendment to regulate all pub-owning companies with 500 pubs of any type, but this was defeated.
The House of Commons committee stage of the Small Business, Enterprise and Employment Bill finishes today [6 November].
It then moves on to the report stage, where further amendments can be tabled by MPs followed by a vote on the Bill’s third reading. It then moves to the House of Lords for consideration.
Written submissions to the committee
Spirit Pub Company
■ It suggested tenancy at will agreements shorter than 12 months should be exempt from the code
■ It said the parallel rent assessment template provided is “too basic” and should be adapted to accurately assess the cost differences between a tied tenant and a tied lessee and the real difference of a free-of-tie model (by including the cost of capital, cost of deposit and other figures)
■ Regarding lease assignments, it said there should be a requirement for the tenant wishing to assign the lease to be responsible for providing accurate statements of accounts and VAT returns for the last three years
■ It called for any amendments to the code at a later date to be subject to a full consultation
■ It states that without a market rent only option or parallel rent assessments (which it assumes pub companies will seek to
have omitted), the Bill will “fail to deliver any of the Government’s commitments”
■ It said the code should apply to all companies with more than 500 pubs — not 500 tied pubs
■ It said while an adjudicator may need to ‘subcontract’ its responsibilities, it is vital the issue of rents does not end up “back in the hands of a small group of conflicted surveyors claiming to be able to offer an impartial position”
Punch Tenant Network
Punch Tenant Network’s submission is around the discrepancy between the number of pints breweries sell to tenants and the number of pints for which brewers pay alcohol duty.
It states that breweries advertise there are around 72 pints in a nine gallon cask barrel, despite the fact they routinely only pay alcohol duty on around 68 pints, because duty does not need to be charged on any undrinkable sediment.
It called for an “independent” and “powerful” adjudicator to resolve issues like these that have “bedevilled the relationship between pubco and tenant for a decade”.