Page last updated at 17:00 GMT, Thursday, 22 October 2009 18:00 UK

Pub sector 'ties' cleared by OFT

Pint of beer
Pubs have been suffering in the recession

The Office of Fair Trading (OFT) says it has found no evidence that ties between pub companies and landlords are harming competition in the pub sector.

Its inquiry followed a super-complaint from the Campaign for Real Ale (Camra) over so-called "beer ties" - landlords having to buy beer from pub owners.

The OFT said there was "generally effective" competition between pubs.

Camra said it would now be urging Business Secretary Lord Mandelson to overturn the OFT's decision.

"We do not accept that there is sufficient competition between pubs or adequate consumer benefit from competition and choice within this sector," said Camra chief executive Mike Benner.

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

'Consumer benefit'

The OFT said it did not consider that supply ties contributed to higher prices.

"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," said Simon Williams, senior director of the OFT's goods group.

"Pub-owning companies are not therefore protected from competition by virtue of the supply ties agreed with their lessees.

"We understand that our response to Camra comes at a difficult time for the industry, but the evidence indicates that consumers benefit from a good deal of competition and choice within this sector."

The OFT added that the issues raised in the super-complaint "do not warrant further assessment", and that it would be taking no further action.

News of the OFT's findings sent shares in pub companies soaring on the London Stock Exchange. Shares in Enterprise Inns jumped 23.4% in Monday trading while Punch Taverns climbed 14.8%.

Punch, which with 7,600 pubs is Britain's biggest operator, said it hoped the industry could "move forward constructively".

Meanwhile Enterprise, which has about 7,500 pubs, said that the beer tie had, for decades, "provided a low cost of entry to the pub industry for committed, entrepreneurial licensees who are unable to afford to buy a pub of their own".

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