OFT rejects new pubco probe

OFT: lease agreements do not raise concerns

Situation "extremely worrying," says MP

The Office of Fair Trading (OFT) has rejected calls for a new probe into pubcos.

The OFT said pubco lease agreements "do not raise competition concerns" and it won't ask the Competition Commission (CC) to investigate. The news was revealed in a letter, seen by the Morning Advertiser, from OFT chief executive John Fingleton to Liberal Democrat MP Tim Farron.

Farron asked for the CC to investigate pubcos, claiming they have an "almost monopoly position", which they use to "exploit" tenants by charging excessive rents.

Fingleton's letter says: "The relationship between pubcos and their tied tenants has been examined in depth in the past, under both European and UK competition law. The conclusion has been that tied lease and tenancy agreements do not raise competition concerns."

The letter says a 2004 update to the Competition Act excluded obligations relating to commercial property agreements, such as rent charged by pubcos.

It says beer ties are exempt from competition law so long as the supplier doesn't have more than 30% of the market and there is no price fixing. The letter says it is "unlikely that any individual pub company would be dominant in a relevant economic market" because none has more than 15% of pub ownership nationally.

Farron said: "The news that the OFT is not prepared to have a look at the dominance of large pub chains is extremely worrying.

"Refusal to do so misses the point that the tradition of the great British pub is being lost because of the conduct of a few large companies. I am disappointed, but I will continue to seek to have this situation aired at the highest possible levels."

The letter points to "independent reports" saying many tenants' problems "stem from their failure to get proper legal and financial advice". The letter urges prospective tenants to "scrutinise the terms and conditions of their lease" before signing and "seek independent legal advice".

Cumbrian MP Farron previously discussed the conduct of pubcos with Freedom for Pubs Association founder Mike Bell and surveyor David Morgan, of Cookseys DMP.

To date eight MPs have signed Farron's Early Day Motion, tabled with fellow MP Greg Mulholland, calling for action to curb pubco power. The OFT's letter re-confirms its view aired at the Trade & Industry Select Com-

mittee investigation into pubco power in 2004.