MPs demand pub industry review

MPs are urging the Competition Commission to investigate the big pub companies after a report showed that there were `serious problems` over the way tenants have been treated.

The inquiry by the Business & Enterprise Committee into the tied pub system found `alarming evidence indicating there may be serious problems caused by the dominance of the large pub companies.`

The survey of 1,000 licensees found that:

• 44 per cent of licensees had not been given a breakdown of how their rent was calculated
• 67 per cent earned less than £15,000pa and 50 per cent of the licensees who had a turn-over of £500,000pa earned less than £15,000 — a 3 per cent rate of return
• 64 per cent of licensees did not feel their pubco added any value.

The report also found `strong indications` that the pub tie model pushed up prices to consumers and no evidence that its benefits outweighed its disadvantages.

BEC chairman Peter Luff said although there were good pubco managers, overall `there is a worrying pattern in the evidence presented to us of lack of support for lessees, of verbal agreements no honoured and, on occasion, of downright bullying.`

He said: "Our report challenges pubcos to demonstrate the benefits of the tie, by offering their lessees the opportunity to run their pubs on a free of tie basis. This can only work if there is a transparent system for negotiating rents.

"But even if the industry took up our challenge, the problems about the imbalance of bargaining power remain. We believe that the Department for Business, Enterprise and Regulatory Reform should examine this issue."

Responding to the report, Punch Taverns said it was disappointed with the results and said there were `good grounds` for the Government to reject the recommendation for a Competition Commission investigation. 

"The competition authorities have looked at this market a number of times," it said. "In particular, the European Commission and the European Courts considered the UK pub tie in detail and concluded that it was not anti-competitive.  And more recently, the Office of Fair Trading (“OFT”) provided evidence to the 2004 Select Committee suggesting that there was no basis for further investigation of the tie." 
 
The Association of Licensed Multiple Retailers said it welcomed the report. Chief executive Nick Bish said: "The relationship between the major, national pub companies and their tenants has come under tremendous strain over the past year. This is because the tied lease model has been insufficiently flexible to adapt quickly to the macro-economic downturn, resulting banking crisis and soaring operating costs. Today’s report published by the Business & Enterprise Committee accurately reflects the reality of today’s trading environment.”

For more news and analysis on the report into pubcos visit www.morningadvertiser.co.uk​​