Memorandum submitted by The Federation
of Small Businesses (FSB)
This update complements both the written and
oral evidence the FSB submitted to the Committee's 2008-09 inquiry.
The FSB has been a key player in the formation
of the Independent Pub Confederation (IPC), a new umbrella organisation
bringing together all representative bodies and campaign groups
representing publicans, consumers and the lobbying organisation
of small brewers in the fight against the unfair practices of
pubcos. The FSB fully endorses the IPC's submission to this inquiry
and will play an active role as a member of the IPC.
In August 2009, the FSB published the results
of a survey of publican members whose findings agreed with the
committee's and highlighted that significant problems remained
in the tied pub sector. The key findings of our survey are outlined
in Box 1 below:
FSB publican survey: Key statistics
— 87% of tied publicans say that the tie
is a problem for their business.
— 75% supports the opportunity to opt out
of the tie at the signing of a new contract or at each subsequent
rent review.
— 56% supports the initiation of an independent
ombudsman to support tied publicans in conflict resolution cases.
— 77% of tied publicans say that the transparency
in rent reviews is a problem for their business.
— 69% supports a new thorough investigation
of the beer/pub market by the competition commission.
— 53% supports a statutory code for Pubcos.
— 69% supports a new thorough investigation
of the beer/pub market by the Competition Commission.
The FSB does not believe that the tie should
be abolished, but that it should be urgently reformed. All lessees
should be offered a choice of being tied or free. Furthermore,
there should be significantly greater transparency and fairness
in all rental agreements and in the issuing of leases.
Over the summer the FSB was involved in an industry-wide
mediation process in an attempt to generate agreed changes to
current practices across the industry. The FSB was disappointed
that the mediation process did not result in any agreement. We
were also disappointed by the recent response from the OFT to
the super-complaint issued by CAMRA which concluded that there
was currently no cause for concern. The FSB does not accept this
decision and believes it must be overturned.
The FSB believes that since the publication
of the Committee's report there has been much activity by the
pub companies but little meaningful change. The British Beer and
Pub Association (BBPA) has agreed a new Framework Code of Practice
on the Granting of Tenancies and Leases with the Federation of
Licensed Victuallers (FLVA) and the British Institute of Innkeepers
(BII). The FSB believes that this agreement is nothing more than
window-dressing as it does not offer any reform that is not required
by law and it is not legally-binding.
The BII have also recently announced their Independent
Pub Rent Review Scheme (PIRRS) which establishes a panel of surveyors—approved
by pubcos—to settle rental disputes. The FSB believes that
this system will not be fair or transparent and will quickly fall
into disrepute due to pubco vested interests. It is important
to note that PIRRS specifically excludes the involvement of the
Royal Institute of Chartered Surveyors' (RICS). The FSB believes
that PIRRS will only have credibility if pub businesses are free
to engage any qualified surveyor who is a RICS member.
The FSB welcomes RICS' Pub Industry Forum report
and recommendations. The FSB especially welcomes RICS' endorsement
that a tied tenant should be no worse off than a free of tied
tenant.
The FSB has responded to a European Commission
consultation on the review of the competition rules applicable
to vertical agreements. The FSB's response focused solely on the
tied pub sector where we believe there is a significant imbalance
in the larger pub company (pubco) market share. The FSB is calling
for the current block exemption guidelines in relation to the
tied pub sector to be revised as a matter of urgency. Given the
nature of this particular market the FSB believes that the 30%
exemption threshold should be significantly reduced in order to
recreate a level playing field for all.
The FSB also responded to the UK Government's
consultation on the Land Agreements Exclusion and Revocation Order
2004. Again, the FSB's response focused on the tied pub sector
and agreed with the Government that the Exclusion Order should
be repealed altogether to create a fairer market. Anti-competitive
practices by Punch Taverns and Enterprise Inns are having a significant
impact on local pubs and are resulting in the closure of over
seven pubs a day. The situation is worsened by the practice of
implementing restrictive covenants by these two pubcos preventing
potential new publicans from taking over a pub premises if their
landlord is not the same as that of the previous tenant.
In conclusion the FSB is calling for:
— Urgent review of OFT decision on CAMRA's
super-complaint.
— Immediate reform of the beer tie—all
lessees should be offered a choice of being tied or free.
— Greater transparency and fairness in
all rental agreements and in the issuing of leases. Government
to give legal backing to the proposed RICS Code of Conduct.
— Repeal of the Land Agreements Exclusion
and Revocation Order 2004.
— European block exemption guidelines in
relation to the tied pub sector to be revised and significantly
reduced.
18 November 2009
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