The Office of Fair Trading ( OFT) has rejected a government call for an investigation into the prices charged for soft drinks in pubs, bars and restaurants.

The government had claimed that soft drinks in bar and restaurants can be more than three times as expensive as in shops and supermarkets.

But the watchdog said it saw no evidence of abuse of market power or any competition issues.

It attributes the higher prices to the higher operating costs of bars and restaurants.

The watchdog did say it wanted a clearer display of prices of soft drinks in pubs.

"We have not found any evidence of anti-competitive soft drink prices in pubs, but would support greater transparency in displaying prices," an OFT spokesman said.

Price probe

UK consumer affairs minister Kim Howells has said he disagrees with the OFT assessment of the soft drinks market and the DTI is preparing a reply for later on Thursday.

He called for a price probe following a Department of Trade and Industry survey that showed pubs, bars and restaurants charged much higher prices than supermarkets.

Cola, lemonade and mineral water costs more than £3.50 per litre in bars and only £1 per litre in supermarkets.

This compares with £4 for a litre of beer and lager in bars and just over £2 in supermarkets.

The outcome will be good news for brewers, who are preparing for a bumper holiday season with prices up in selected pubs for the Millennium.

The government has been pressing for a broad investigation of why prices are higher in the UK than elsewhere in Europe. The OFT is also investigating the car industry, but has postponed its report until after Christmas