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It May Be Closing Time For British Beer Consumer Group’s Pub Complaint

Posted  October 29, 2009

British antitrust authorities may be telling CAMRA (the Campaign for Real Ale) that it’s closing time for its complaint charging beer prices have increased due to lack of pub competition, but the consumer group isn’t going home quietly.

CAMRA is asking Lord Mandelson, Britain’s Secretary of State for Business, to refer its complaint to the Competition Commission, following the October 22, 2009, announcement by Britain’s Office of Fair Trading (OFT) finding no significant harm to consumers despite slightly higher beer prices.

The consumer group is arguing that British consumers are being harmed by purchasing requirements that are imposed on so-called tied pubs, which are pubs operated by tenants who lease the premises, which are typically owned by a large pub management company or brewer.  The challenged purchasing requirements obligate the pub to buy most or all of its beer from the landlord or a supplier designated by the landlord.

CAMRA filed a complaint with the OFT in July 2009, charging that the pubs’ landlords use the exclusive purchase requirements to force the pubs to buy beer at higher prices than they would pay if they were free to choose their suppliers and buy directly from these suppliers.

On October 22, however, the OFT published its response, stating that it “has not found evidence of competition problems that are having a significant impact on consumers,” in spite of the slightly higher average retail prices at tied pubs versus independent pubs, also known as free houses. The OFT concluded that the large number of pubs owned by different operators ensures a satisfactory level of choice and competition to pub patrons.  While tied pub tenants must source their beer from the pub company that owns the pub, these pub companies generally buy from a variety of suppliers.

In addition, the OFT said, pub companies have an incentive not to price beer to their tenants at a unsustainable level, as driving the pub operators’ sales and margin down would ultimately be detrimental to their own bottom line.  According to the OFT, the purchasing requirements increase the price of a pint of lager by only about 8p – roughly 13 cents.

CAMRA is not taking no for an answer, and is calling on the British Government to refer the issue of unfair tie arrangements in the pub sector to the Competition Commission

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