Greene King is being threatened with a legal complaint to the Office of FairTrading by a group of 91 tenants. Thecomplaint centres on the controversial issue of beer prices and what constitutes dominance' in the marketplace.Ewan Turney looks at the issues
Greene King tenants have claimed that a proposed legal complaint to the Office of Fair Trading is being pursued because the company has failed to respond to repeated callsto reduce beer prices in line with its managed division.
At the eye of the storm is Meeko Oates, licensee at the Shoulder of Mutton in Wantage, Oxfordshire, and a four-year Greene King tenant until 24 March when his pub was sold to Admiral. He claims that Greene King tenants in the area are being forced out of business because they are being undercut by the company's own managed houses. Of the 12 pubs in Wantage, six are Greene King tenancies and two are Greene King managed houses.
Oates now has support from 91 tenants, the vast majority of whom are based within a 12-mile radius of nearby Abingdon, who feel they have no choice but to make a stand. "I have been telling my BDM about the wholesale prices for three years," said Steven Ward of the Hinds Head in Abingdon. "If they haven't heard about this problem then either there is a lack of communication at Bury St Edmunds or they are not listening."
Evidence Oates has collated suggests that there is a "staggering" 132% mark-up to tenants on a22-gallon barrel of Foster's and 102% on Stella Artois. The group claims the managed houses are undercutting them on price by between 10p to 20p a pint. One tenant, in the Blackbird Leys district, has claimed that there is a 30p-per-pint price gap. "It would be financial suicide for us to sell beer at the same prices as the managed houses," said Andy Chalmers of the Lamb Inn, Wantage.
The Shoulder of Mutton is currently making a loss of £5,000 a year, despite being a former Camra pub of the year. "It is absolutely down to the beer tie and an unfair playing field," said Oates.
His GP on beer is currently below 44%, which is not enough for what he describes as a "local boozer" that does no food due to not having a kitchen. "Greene King expects you to live off the food offerings now. It has got greedy and you just can't make a living from the beer."
According to Oates, his trade has disappeared 150 yards down the road to the Greene King managed Blue Boar over the last year. He is scathing of one of the promotions in operation at the venue an offer of four drinks for the price of three, which runs all week and up to 6pm at weekends. The system works on credit, so in theory, customers could buy £100 of tickets for drinks at a four-for-three rate and exchange them any time. "It infuriates me," he said. "It holds the customers there."
Another Greene King tenant, who wished to remain anonymous, is quitting his pub to concentrate on his freehouse bar. "We are leaving because we haven't made a single penny in the three and a half years we have been here," he said. "Our bar is a freehouse and we can get beer from Greene King at half the price now."
Chalmers, who is joint treasurer for the group, claimed he has received little support from Greene King in running promotions. "I have been here five years and all I have been given is 20 ashtrays, two dozen IPA glasses and I don't even sell the product and a pack of drip mats. It can't be right to have a freehouse, a managed house and a tenancy all on the same high street, all competing for the same people when we have to pay twice as much for beer."
Greene King Pub Partners managing director David Elliott said he was "disappointed" and "surprised" by the news but had still to hear from the group. "Every eight weeks there is a tenant development group meeting with 12 elected tenants to act on behalf of the tenants' interests and this issue has not been raised once," he said. "We are waiting to be contacted. We fully complied with the Competition Act when we acquired Laurel and had to dispose of 13 pubs."
He added: "At what level do you go to say there is a dominant position? If a village has two pubs, each owned by a different company, is there adominant position? If any of the group would like to contact us, we'd be more than happy to discuss this."
l Meeko Oates is urging all tenants facing similar problems to contact him on 07836 380543 or by e-mail at meeko@ntlworld.com
l Leader column p16
Brewers' managed and tenanted estates
Company Managed Tenanted
Greene King 519 1,300
Wolverhampton & Dudley 488 1,600
Hardys & Hansons 77 172
Shepherd Neame 70 292
Thwaites 80 370
Fullers 123 117
SA Brain 119 100
Hall & Woodhouse 96 163
Wadworth 45 207
Legal weaknesses
Morning Advertiser legal expert Peter Coulson believes that competition lawyers Maitland Walker will find it difficult to prove that the beer tie is anti-competitive and that Greene King has a dominant position. "In the past the beer tie has been found to be in the interests of tenants overall. Greene King will claim that tenants get other advantages from the tie. The recent TISC pubco report exonerated the tie."
Further problems could arise in thesolicitor's wish to narrow down the focus of an area to a single town, according to Coulson, because Greene King will wish to do exactlythe opposite.
He added: "All other arguments about monopolies have been between different companies and I don't think there has ever been one between two different arms of an organisation."
Case could be the next Crehan says Maitland Walker
The tenants have engaged the services of competition lawyers Maitland Walker who represent Bernie Crehan in his decade-spanning dispute over the beer tie with Inntrepeneur.
Solicitor Rupert Croft confirmed he had met with a group of around 50 of the tenants on1 February. "We expect to go ahead with a challenge and have a good case, but it is early days," he said. "It is potentially the next Crehan."
The group currently has a fighting fund of £4,775 and Oates is hoping he can obtain £40 contributions from all tenants in the estate. The group believes it would need at least £20,000 for an initial cost of a complaint to the Office of Fair Trading.
Croft and the tenants would have to persuade the OFT that Greene King has a dominant position under the Competition Act because it owns more than 40% of the pubs in a certain area. This could be as narrow as Wantage, Oxfordshire, or extended to the 91 tenants within a 12-mile radius of Abingdon. However, usually the OFT would look at the petty sessional division the area within which a magistrates' court grants licences to see whether a pub operator owned more than 25% of the pubs.
"The Competitions Act applies not only to the UK as a whole but also to any part of it," Croft said. "There is an argument that it might be as narrow as Wantage. If this were the case, it should be fairly straightforward to establish that Greene King are dominant."
The plan is to then claim the company has "abused its dominant position" by imposing "unfair purchase or selling prices" and "applying different trading conditions to equivalent transactions".If successful, the doors would be open for a flood of compensation claims.