Beware of EU prying into tie

As the row over the tied house system gathers pace, I am intrigued by the role of the GMB trade union, which appears to have hopped into bed with Fair Pint and the Federation of Small Businesses.

All three plan to present their case against the tie to the European Commission. As I have argued before, there's a danger that a complaint against the behaviour of the giant pub companies could spill over into an all-out assault on the tie in general. If the EU were to outlaw the tie then mayhem could follow.

As Fuller's chairman Michael Turner said last week, an investigation of the tie would be hugely damaging, with brewers refusing to invest in their tied estates for fear they might lose them within a few years.

It's one thing to object to pubcos, quite another to crudely lump them together with brewers who own tied estates. Some of those estates are tiny, a few dozen pubs. Remove the tie and breweries would go out of business.

So why is the GMB lining up with Fair Pint and the FSB, two bodies with a free market attitude that does not distinguish between pubcos and brewers? A Fair Pint press release, announcing its appeal to the European Commission, says that as the EU's current opt-out on the tie — known as a block exemption — runs out in 2010, it's "an opportunity for licensees to make a strong case to the EU as to why the tie in the UK should not be allowed to continue. We expect this review will not simply be rubber-stamped as perhaps some pubcos and brewery executives hope or expect."

There's no distinction between pubcos and breweries. Fair Pint mixes them together and threatens the fortunes of pub-owning brewers.

I spoke to Martin Smith, the GMB organiser in charge of the union's policy on the tie, and asked him how the union got involved. He said a number of GMB members in the Midlands and the north who lost jobs in steel and other industries had invested redundancy money in pubs owned by the likes of Enterprise and Punch. Smith said the contracts his members had with the pubcos disadvantaged them to such an extent that some of them lost all their investments.

They appealed to the GMB to improve their contracts. When the union investigated the pubcos it found they were, to use his terms, "a cartel — they were just screwing people".

Smith added that the report by parliament's Business & Enterprise Committee into the pubcos was not only damning, but showed that many people who work in pubs do so for less than the minimum wage.

"We're not saying brewers should not own pubs," he said emphatically. "The GMB's focus is only on the property companies. Our job is to represent our members. We're not co-ordinated with Fair Pint or the FSB."

That doesn't quite sit with the news that both the union and Fair Pint plan to have a joint meeting with Prime Minister Gordon Brown at the GMB's annual conference in Blackpool.

Doomsday scenario​

It's not for me to say who the GMB should talk to or work with. But I think the union should think through the implications of a complete loss of the tie. Martin Smith said the GMB was not anti-brewer and he thought the notion that the European Union might lift the exemption on the tie for brewers as well as pubcos was a "doomsday scenario".

Don't be so sure. When the EU's Directorate General for Competition last gave a block exemption on the tie it said that brewers with a few hundred pubs were "de minimis" — too small to worry about. But the British pub scene has moved on. Brewers such as Marston's and Greene King now have far larger pub estates as a result of mergers and closures. Greene King has swallowed Belhaven, Hardys & Hansons, Morland and Ridley's, while Marston's includes Banks's and Jennings.

Are such large estates of thousands of pubs "de minimis"? Would the directorate accept that Wells & Young's pub estates are separate from the W&Y brewing operation?

The answer is that nobody knows until the EU directorate starts its investigation. But Michael Turner at Fuller's hit the soft peg on the head with a well-aimed mallet when he said an investigation would lead to great uncertainty.

Put simply, if you owned several hundred pubs, would you invest substantial amounts in their upkeep and improvement, if you thought there was a good chance the EU might declare within a few years that the tie was a "restraint of trade"?

As that great sage Miss Eliza Doolittle said in Bernard Shaw's Pygmalion: "Not bloody likely!"

And if pubs receive no investment and became tatty and tawdry as a result, people will stop using them and more of them will close.

Michael Turner pointed out that there have been no fewer than 19 investigations of the pub trade since 1966. Has any other trade or industry been pried into so relentlessly? As a result of the Beer Orders fiasco of the early 1990s, the pub business has known nothing but uncertainty.

Buffeted by the smoking ban and a 17% hike in duty last year, the pub trade cries out for a period of stability. The GMB has a right and a duty to defend its members' interests, but it won't do that by joining forces with people whose campaign can only inflict terrible damage on the already bruised and battered British public house.