Luff: We stand by every word on pubcos

Business Innovation & Skills Committee chairman Peter Luff writes exclusively on his follow-up report on the pubco/tenant relationship.

As I said in the Morning Advertiser​ (MA) after the publication of our report in May last year, I have been a close follower of the MA throughout this long inquiry into pub companies.

So I know from reading this paper's forums that a lot of readers are, to put it mildly, disappointed the Business, Innovation & Skills Committee did not recommend the Secretary of State to make an immediate referral of the beer tie to the Competition Commission.

There is further surprise that we have given the pub companies until June 2011 to prove that they can reform.

Some of the personal abuse against me shows how strongly feelings run! If it makes you feel better, carry on hurling the insults, but I am determined to make the lives of lessees better and not just win easy headlines.

So I will set out our reasoning and to try to convince the MA's readers that we have not been "nobbled" by the pubcos into backing down - far from it!

We have not in any way backed down and we stand by every word and recommendation in our 2009 report. The potential Competition Commission reference still stands. So why no immediate referral recommendation — and why June 2011?

A question we all have to ask and answer honestly is what an immediate Competition Commission referral would achieve.

Yes, if we had recommended a referral, it would have been headline-grabbing route to take — but what would happen next? What would we actually have achieved? Crucially, could the potential achievements of a Competition Commission inquiry be gained anyway and more quickly by other means?

Just look at the Monopolies & Mergers Commission (MMC) inquiry into the Supply of Beer in the 1980s.

Yes, many apparent problems in the industry were found by them in 1989, following a three-year investigation, and yes, the MMC made some far- reaching recommendations, including: a ceiling of 2,000 pubs per brewer; an end to restrictive covenants on the sale of pubs; the outlawing of ties on anything but beer; a minimum of one guest beer from a supplier other than the landlord; the code of practice to be incorporated into tenancy agreements; price-lists including discounts to be published. Anything sound familiar?

Competition Commission​

The problem for the MMC's successor, the Competition Commission, is that in the same way as the Government can choose whether to take forward our recommendations, Government can also choose which, if any, of the Competition Commission recommendations it follows up.

As you can see, many of the 1989 MMC recommendations were ignored by Government. And we have no guarantee this wouldn't happen again.

We also have to consider what the Competition Commission may find and what it may recommend.

Firstly, there is the risk that the Competition Commission will not find against the pub companies and the beer tie, in the same way as the Office of Fair Trading last year. Then what?

Secondly, what recommendations is the Commission likely to make? Look at the Competition Commission's inquiry into the Groceries Market. In 2000 the Commission reported that there should be a Groceries Supply Code of Practice.

In 2008 the Competition Commission looked again and recommended that this supply code should be stricter and be enforced by a monitoring and compliance body. Only in February of this year did the Government eventually open a consultation on "Taking forward the establishment of a body to monitor and enforce compliance with the groceries supply code".

Have the Trade and Industry Committee, the Business and Enterprise Committee and Business Innovation and Skills Committee not already made similar recommendations in regard to the pub industry?

Bank the changes​

So what I am trying to explain is this: the Commission could come up with a comparable set of recommendations to those that we have already made, with as much influence on the Government as us — but in a further three to four years' time.

We say that we should bank the changes now that have been made following our 2009 report — and because of it.

The establishment of the Independent Pub Revenue Scheme (PIRRS); formation of the IPC; new strengthened BBPA Framework Code of Practice; and RICS recognition of the necessity of change to the valuation system are all welcome developments that happened because of our report — now we need to build on them. As Badger Pubs director Matt Kearsey recently told the MA: "I think we have had five years' worth of change in the last year alone.

"The inquiry has brought arguments from both sides to the forefront. It's exciting that we are now in an era of change and it will be interesting to follow what others come up with".

Next week: What we'll be looking for in June 2011​

Editor's comment: The tie's moral dimension​​