Publication of the report by The Business, Innovation and Skills Committee (BISC), on pub companies and their relationships with tenants, will take place at 4.30pm on Tuesday 20 September.

The report will analyse how pub companies have responded to criticisms about their treatment of tenants. Pubcos were attacked for failing to provide information for a national database on rents and other costs for tenants. Criticism was also levelled at the BII for failing to implement one a previous committee recommendation to publish the level of discounts against rents available on pubco agreements online.
There is no detail on the report as yet, although one possibility is that pubcos may find a statutory code of conduct being imposed upon them. A response by the Government is expected within three months of the release of the report
The full text will be available on the BISC website on the 20th at www.parliament.uk/bis

BEC originally recommended a full-scale review of the tie by the Competition Commission. As we have seen, the OFT is not going to make any such referral. It is still open for the Secretary of State for Business (Lord Mandelson) to order a review.

But will he?
Leaving aside the domestic political agenda (and frankly, Lord Mandelson has a lot on his plate ahead of the next General Election) it is highly unlikely that any referral will happen before May 2010 (if at all).

Why?
Because the Competition Commission is bound by the wording of the Competition Act 1998. And, if the EC maintains a block exemption in respect of vertical supply agreements (which would include the beer tie), then there can be no case to answer under 1998 Act. In essence, anything which is ‘ok' by the EC is automatically ‘ok' for the purposes of the domestic legislation.

So, the big issue is whether the EC will see fit to renew the block exemption for vertical supply agreements and, if it does, whether it will be materially different from the current one. 

The existing exemption is due to expire in May 2010. We will be reporting developments on this in the coming months.

The OFT has today published its response to the Campaign for Real Ale (CAMRA) super-complaint relating to the supply of beer in pubs.
In its complaint, CAMRA argued that the tie leads to higher beer prices and less choice for consumers. CAMRA also raised other issues including the methods used by pub-owning companies for calculating rents.

The OFT has found no evidence that the tie is resulting in competition problems that are having an adverse impact on consumers.
Its executive summary states that:

 “at a national, regional and local level, the evidence indicates that there is a large number of competing pub outlets owned by different operators and that there is competition and a choice between different pubs. We consider that in a competitive market, any strategy by a pub company which compromises the competitive position of its lessees would not be sustainable, as this would be expected to result in sales and margin losses for the lessee and, in turn, for the pub company. To that extent, pub companies' commercial interests would appear to be aligned with the interests of their lessees.

Further, we do not consider that tied lease agreements prevent pub
offering a wide choice to consumers.

We are aware that some lessees are dissatisfied with the prices and rent levels that they pay to their pub landlord, and/or with the rent assessment process more generally. We received a large number of submissions from individual pub lessees outlining such concerns.

Given the degree of competition between pubs and also between retail on-trade outlets more generally, we do not consider that issues relating to the negotiation process between pub companies and lessees can generally be expected to result in consumer detriment. As such, we consider that lessees' concerns regarding terms of supply, the conduct of negotiations with their pub company, or issues raised in the super-complaint regarding rental valuation methods used in the pub industry, are either matters for pub companies to address with individual lessees or are issues for industry or other relevant bodies to consider.

Overall, the OFT has reached a view that further investigation of
competition problems within the beer and pub market is not warranted. In particular, we do not propose to undertake further investigation either in the form of a market study, or investigation under the provisions of the Competition Act 1998”

It should be noted that the OFT's remit  was to consider the merits of the complaint from the stand-point of consumer choice etc. The response cannot therefore be seen as a comment on the fairness of the tie to pub tenants.

The full text of the OFT's response can be found here

The Business and Enterprise Committee (BEC) will re-convene before Christmas to consider developments since it published its report in May. In particular, BEC will consider the plans for reform put forward by the BBPA and the report into the modification of pub rent reviews presented by RICS.

BEC chairman Peter Luff MP has so far refused to make any specific comment on the OFT's decision, reported this morning, to take no action in response to CAMRA's super complaint. Speaking to the Morning Advertiser he said “the committee needs to consider its full report and all the developments” before determining whether to take further action.

BEC originally recommended a full-scale review of the tie by the Competition Commission. Whilst such reviews are generally instigated by means of referral from the OFT which, as we have seen, will not now happen, it remains open for the Secretary of State for Business (Lord Mandelson) to order a review.

If a referral is ordered, the Commission's role would be to investigate whether the tie prevents, distorts or restricts competition within the UK beer market within the meaning of the Competition Act 1998. 

However, it is important to remember that, if the EC maintains a block exemption in respect of vertical supply agreements (which would include the beer tie), then there can be no case to answer under 1998 Act. In essence, anything which is ‘ok' by the EC is automatically ‘ok' for the purposes of the domestic legislation.

So, perhaps the biggest issue on the horizon for the industry now is whether the EC will see fit to renew the block exemption for vertical supply agreements and, if it does, whether it will be materially different from the current one. 

The existing exemption is due to expire in May 2010 and, as we have already reported, the public consultation on this has now closed.

We will be reporting developments on this as they emerge.

We are exploring this issue in detail in our latest article and, in particular, look at the principles laid down by the European Court in Stergios Delimitis v Henninger Brau AG.

Article 81 will apply only where the existence of a network of supply agreements acts as a significant barrier to competitors accessing a particular market.

So when considering whether a network of trading ties might fall foul of Article 81, it is necessary to determine what is the relevant geographical market.

Delimitis has the answer.

CAMRA (Campaign for Real Ale) has expressed the view in The Publican magazine that the chances of the beer tie being abolished are “nigh on impossible”, because of the huge change needed in European law. The view of CAMRA is that even if the block exemption is lifted next May it is unlikely it would lead to a total removal of the tie. Jonathan Mail, head of policy and public affairs at CAMRA suggested that even if the block exemption was removed, the only difference would be that brewers and pubcos would have to demonstrate to the EU Commission how their agreements complied with article 81 of the EU Treaty.

Whilst at first glance it may be surprising for CAMRA to express this view, the reasons for it should become clear when we revisit the Delimitis case in our forthcoming article.

The purpose of this blog is to bring regular commentary on the progress of events relating to the future of the tie, including any output from Europe. We hope you find it useful. Take the opportunity to post your own comments or questions to add to the ongoing debate.