Shares rise as beer contract complaint thrown out

Published on Thursday 22 October 2009 21:37

A LOBBY group campaigning for pub goers' rights has called for the government to intervene after its complaint about beer contracts imposed on pub lessees was thrown out.

The Campaign for Real Ale (Camra) complained to the Office of Fair Trading about exclusive purchasing agreements, which force pub lessees to buy beer through landlords, claiming this stifles competition.

Shares in pub groups leapt when the OFT said there was no evidence the agreements were having the impact Camra claimed.

"The OFT has found that there is generally effective competition between pubs and does not consider supply ties contribute to higher prices or prevent pubs offering a wide choice to consumers," the watchdog said.

Exclusive purchasing obligations force lessees to buy beer solely through their landlord, with beer often brewed by companies owned by the landlord.

In its complaint, Camra, which has more than 100,000 members, claimed the agreements meant higher prices and less choice for customers. Wholesale prices for lessees are up to 50p a pint more than their "non-tied" rivals face, it claims.

But the OFT rejected the arguments, saying it believed there is "generally effective competition between pubs" and plenty of choice for consumers.

Simon Williams, a senior director of the OFT, 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."

Shares rose across the sector indicating how seriously the City had taken the issue. Enterprise Inns was up 23 per cent and Punch Taverns climbed 15 per cent.

Camra urged Lord Mandelson, the Business Secretary, to overrule the OFT's decision and refer the matter to the Competition Commission.

Its chief executive, Mike Benner, rejected the OFT's findings. "It is difficult to see how the OFT can argue that competition is working well in the pubs sector when demand is falling, yet prices are rising," Benner said.

"Urgent action is now required by government to stem the flow of pub closures, build a sustainable future and ensure consumers get a fair share of the benefit from tied agreements as demanded by competition law."

Analysts warned that, while the announcement was good news for pub groups, yesterday's ruling may not be the end of the matter.

In May MPs on the business and enterprise select committee called for the Competition Commission to investigate the relationship between lessees and pub operators, claiming a serious imbalance of power which can amount to "downright bullying". The government is yet to respond to the report.