The Office of Fair Trading says that Monopolies are Fair!!!

October 22, 2009

pub_rev

As pub tenants and managers prepare to go on the offensive, the Office of Fair Trading (OFT) has released a report which suggests that Beer Ties (the practice of forcing pubs to by beer from one brewery) are fair. This from The Publican

“[The] report states there is no evidence consumers suffer as a result of the tie:

The Office of Fair Trading (OFT) has found “no evidence” that the beer tie is having a detrimental effect on consumers and will to take no further action on the issue.

Its assessment follows a 90-day investigation into the tie following a super-complaint by CAMRA, claiming that high rents and ‘tied’ beer prices are driving many good pub licensees out of business and contributing to the “destruction of Britain’s pubs through pub closures and chronic under-investment in pub facilities”.

While the OFT noted the concerns raised by licensees during the investigation about their rent assessment process with landlords, it ruled that this did not result in higher prices or lack of choice for customers.

Simon Williams, senior director of the OFT’s Goods group, said: “Any strategy by a pub-owning company which compromises the competitive position of its tied pubs would not be sustainable, as this would result in a loss of sales.

“Pub-owning companies are not therefore protected from competition by virtue of the supply ties agreed with their lessees.

“We understand that our response to CAMRA comes at a difficult time for the industry, but the evidence indicates that consumers benefit from a good deal of competition and choice within this sector.”

He added the OFT would be “taking no further action” in relation to the matter.”

READ THE FULL REPORT HERE

Beer ties came about because of government legislation that was created to try and break the brewery monopolies of the 1980s. 20+ years ago six brewery companies owned 75% of the market. The 1989 ‘Beer Orders’ made it illegal for a brewery to own more than 2000 pubs. The big six gave their managers ‘golden handshakes’ on the condition that they go and start Pub Companies (Pubcos); the breweries sold their pubs to the Pubcos as long as the Pubcos bought only their products (passed onto landlords as the ‘beer tie’). The breweries used Pubcos to circumvent (take piss out of…) anti-monopolies legislation and now they’re more powerful than ever – owning 84% of the market. In their report the OFT has effectively said that monopolies are fair!

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