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Pubcos: Bye-Bye To The Beer-Tie?

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Pubcos: Bye-Bye To The Beer-Tie?

October 21
20:07 2013
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Those opposed to the concept of the beer-tie view it as unfair and anti-competitive, as it requires publicans to purchase beer at a higher cost than might be charged by independent suppliers.  Opposition is nothing new. In the late 1990s, a class action of tenants took Scottish & Newcastle (S&N) all the way to the House of Lords and then to the European Court of Justice, eventually losing in both instances on competition law grounds. More recently, the Campaign for Real Ale (CAMRA) lodged a so-called super-complaint with the Office of Fair Trading but, again, the beer-tie was found not to be anti-competitive. CAMRA has appealed, and a decision is expected sometime in the Autumn. Meanwhile, pubcos have around the country have been highlighting the benefits of the beer-tie. These include, according to a recent report, ‘higher profits from gaming machines in tied pubs than in free houses’. However, despite the tenants’ lack of success in the courtroom, the anti-tie argument appears to have gained ground, having been supported by the incumbent Labour-led Government. February this year saw the appointment of John Healey MP as the Minister for Pubs, while the cross-party Business Innovation and Skills Committee has called for lessees to be given the power to choose whether to operate with or without the beer-tie. This is all well and good but what will happen now that Labour looks set to concede power? Their election manifesto included a specific mention of government intervention if the industry fails to get its house in order, but would their plans to relax the beer-tie still go ahead if they can no longer influence or set government policy? Moreover, they may have another challenge on their hands; the beer-tie did not feature in the other major parties’ manifestos, and the SNP appear to be keeping quiet on the matter, perhaps because they are focussing on other alcohol-related matters such as minimum pricing and social responsibility fees. Whoever’s responsibility it becomes, the industry will need some action soon. The sector contributes millions to the Inland Revenue’s coffers each year, and provides employment to many thousands of people throughout the UK. According to the British Beer and Pub Association, 2009’s closure of 2,365 pubs resulted in the loss of 24,000 jobs. If this continues, the ‘Revenue would lose in excess of £250 million in tax receipts this year alone. Perhaps, though, the tide is already turning. Punch has announced that, from September, they will trial new leases which will include greater flexibility to allow licensees to purchase beer produced by brewers who qualify for progressive beer duty (i.e. smaller independent brewers). Likewise, S&N has offered free-of-tie leases on pubs which have been on the market for more than four months. It is in everyone’s economic interest to ensure that the rising number of pub closures is swiftly stemmed, and that the industry is able to assist the country in emerging from recession. Whether government intervention is required in order to encourage the pub sector to be more competitive remains to be seen, as does the question of whether there is the political will to do so in the months to come.

For more information on this and other legal or licensing matters, visit www.todsmurray.com

This article has been edited from its original version. For the complete feature, please see Catering in Scotland magazine May/June 2010.

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The beer-tie – when pubcos require their tenants to buy beer and other products from them in return for lower rent and a degree of business support – has been a controversial subject for some time; Katie Corrigan outlines the future of this disputed practice…

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