The Government has "not ruled out" legislation to ensure rent reviews for pubco licensees are fair.
However, consumer affairs minister Gareth Thomas did rule out other action to reduce the power of pubcos or change the way they treat tenants.
Thomas was quizzed on pubcos in Parliament yesterday by Tory MP Nicholas Winterton, who supports the anti-pubco Fair Pint campaign.
On the issue of upward-only rent review, Thomas flagged up the voluntary Code for Leasing Business Premises in England and Wales 2007.
This urges against upward-only rent reviews and if these do exist, reasons should be given why.
Thomas said: "Although the code is voluntary, [the Government department] Communities and Local Government will be keeping an eye on the market and have not ruled out legislation as an option."
Winterton asked if Government would consider legislation making mandatory the Trade & Industry Select Committee's 2004 recommendations about how pubcos treat tenants.
Difficulty
Thomas said the Government saw "difficulty" with imposing a statutory code of practice on the industry.
"Any competition concerns that arise in relation to the behaviour of the pub companies would be a matter for the competition authorities," Thomas said.
Winterton asked if the Department for Business, Enterprise and Regulatory Reform would bring forward legislation to reduce pubco estates to 500 pubs, investigate the beer tie and refer the tie and rent process to the Competition Commission.
Thomas said: "Ensuring that markets operate freely and fairly is a matter for the independent competition authorities, rather than for the Government.
"The UK competition framework has established the Office of Fair Trading as an independent statutory body which is responsible for ensuring that markets operate competitively, and it has the powers to investigate and take action if companies are abusing a dominant position in a market or behaving anti-competitively."