The major pub companies should be urgently referred to the Competition Commission for operating a business model that leads to “downright bullying” of tenants, MPs said today.
Unveiling its long awaited report in to the tied model, the Business and Enterprise Committee (BEC) said there was a serious imbalance of power in the relationship between pubcos such as Punch Taverns and Enterprise Inns and their tenants.
“We are not saying that all, or even any, pubcos abuse all lessees all the time, but it is clear that not only is there potential for abuse, but also that abuse occurs,” the report says.
The report calls for the controversial beer tie – exclusive purchasing obligations – to be “severely limited” to allow proper competition in the market. Every lessee, existing and new, should be offered the choice of being free-of-tie or tied, it says.
BEC chairman Peter Luff MP said: “The report explicitly acknowledges that not all the problems of the pub industry come from the tied pub model.
“Nonetheless, our inquiry found alarming evidence indicating there may be serious problems caused by the dominance of the large pub companies.”
In response, Punch Taverns called on the Government to reject the recommendation for a market investigation by the Competition Commission.
“The competition authorities have looked at this market a number of times,” Punch said in a statement. “We strongly believe that the tied pub model provides a fair and equitable approach to sharing risk between ourselves and our licensees, represents a low cost opportunity for entrepreneurs, and has a rightful place in the market.”
Nick Bish, chief executive of the Association of Licensed Multiple Retailers, agreed that the Competition Commission should not be called in, but welcomed the other recommendations.
“The relationship between the major, national pub companies and their tenants has come under tremendous strain over the past year,” he said. “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.”
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By Daniel Thomas
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