Pubcos should not view the OFT's decision as a 'victory'

I suspect there were huge sighs of relief in the offices of the country's pub companies and regional brewers last week when the Office of Fair Trading (OFT) announced it was not going to refer the sector to the Competition Commission.

The OFT said it found no case to answer in regard to the 'super complaint' submitted by the Campaign for Real Ale (CAMRA), in which the latter argued the existence of "serious market failures which create the wrong incentives for market participants" in the beer and pub market.

Such 'failures' included the beer tie; the way tied lease agreements were structured and implemented; the ability of small brewers to enter the market, and the basis upon which rents for pubs decided.

After a 90-day investigation the OFT has effectively given the industry a clean bill of health, rejecting CAMRA's claims that issues surrounding all of the above stifled competition to the "detriment of the consumer".

While it wasn't assessing the fairness or otherwise of the pubco model, the OFT decided that when push came to shove "pub companies' commercial interests would appear to be aligned with the interests of their licensees". This will come as a bit of a shock to some tenants, to put it mildly.

Opponents of the pubco model are dumfounded the OFT did not take a tougher stance. Vocal critics from within the tenant community were hoping an OFT referral would ultimately consign the pubco model to the scrapheap, though thinking this might have aided their own chances of economic survival in the short term could have been of the 'wishful' variety.

For its part the OFT repeatedly stated its findings were commensurate with the specifics of CAMRA's complaint.

Game over then for the anti-tie types? For now, perhaps. There have been calls for the government to do something, but I reckon ministers have bigger fish to fry right now than a few 'ornery pubcos and some disgruntled licensees.

This does not mean the issue has gone away for good. After all, we've had many enquiries into the pub industry. It is likely we'll have another at some point, and then the anti-tie groups might get their way. But not this time.

So what now?

Pub companies and regional brewers alike should use the respite as a chance to get to grips with what is an incredibly onerous situation for many in the on-trade. It is not all one-way traffic; the big companies going bust wouldn't solve the ills of those pubs on the brink. There are other factors at work too.

But lest they get too carried away, pubco executives should not see the OFT decision as a victory; rather it should be seen as an opportunity to address the sectors problems and turn things round for the benefit of all concerned…