Supplementary memorandum submitted by
Simon Clarke
ADDITIONAL RESPONSE TO MISS KIRKBRIDE'S QUESTIONS
207-209
Thank you once again for inviting me to submit
evidence for your consideration and allowing me the opportunity
to speak as a witness in the recent Committee hearing.
1. My previous submissions contained a "Personal
Introduction" and I am assuming you would rather I avoid
any repetition in this regard.
2. Miss Kirkbride raised questions (Q207 &
208) which I consider require embellishment in order to satisfy
her own mind and perhaps the minds of other Committee members.
3. Where I refer to "pubcos" I
refer to any pub owning company, including brewers operating a
tied business model.
4. The pubcos themselves claim that the
disadvantages of being tied are outweighed by the purported "countervailing
benefits" they offer, it follows that if this were true the
tenant would be no better off being free of tie than they would
being tied and therefore no tenant would implement the choice
of being free of tie.
5. If a tenant were to take up the choice
offered, then the deed of variation to a lease should be accompanied
by a rent review to the open market rental value reflecting the
revised lease terms. The pubcos claim that this rent review would
result in higher rents and therefore, if they are to be believed,
one could conclude they have no financial benefit in maintaining
the tie at all.
6. Miss Kirkbride indicates "…we
do not go after other people's private business practices."
(Q207). In practice, we do go after other people's private business
practices in many ways, both by ensuring they operate legally,
within parameters set out in documentation eg leases and contracts,
and fairly, through legislation (eg Unfair Contract Terms Act).
7. The historic tied business model, whilst
flawed in other ways, was operated to ensure brewers could distribute
their product, it was never initiated as an unregulated, mandatory
purchasing agreement allowing the supplier of tied products to
dictate price increases at will, to any level and at any time.
8. The pubcos have purported the existing
model is fair. We do not require a change to a fair model. We
do dispute the pubcos interpretation of a fair model and wish
to ensure the model is fair on both parties, landlord and tenant,
and does not continue to be the root cause of so many pub closures.
9. Hand in hand with the tied model comes
a responsibility to ensure fairness to the tenants on whom the
restriction is imposed.
10. By offering tenants a choice of tie
the landlords would have a genuine incentive to ensure that the
benefits they offer, on a discretionary basis, are sufficient
to outweigh the burden of the ties they wish to enforce.
11. If the pubcos, properly offered the
above then they would have nothing to fear from offering a release,
or relaxation, of the tie to their tenants, as none would take
up the offer.
12. If a tenant is faced with the unpleasant
discovery that their pubco are taking advantage of their position
of power then legal action is invariably the only option, an option
that all too often is outside the tenants reach as they have,
at the time of realisation, already been bled dry of financial
resources to fund such an action.
13. The option for tenants to go free of
tie is the very incentive the pubcos need to ensure they offer
attractive benefits, rather than the window dressing and false
promises currently tabled. It is an efficient and solid backstop
to discourage the abuses currently all too apparent by some of
the bigger companies.
14. Miss Kirkbride is partially correct
in her final statement (Q209) if the pubcos did deal with the
first bit they would not have to deal with the second, as no tenant
would implement their choice to go free of tie. The very existence
of the second bit ensures effective and relatively swift policing
and enforcement of the first without the necessity for legal redress.
15. The reason I say "partially correct"
is that the "first bit", to which Miss Kirkbride refers,
is the current proposal from the BBPA, outlined in their heads
of terms for a revised code of practice. Their proposed code barely
scratches the surface of the previous BESC report recommendations.
The "first bit" should encompass all the BESC recommendations,
not just a few easier options, and that is far from being offered.
16. In total there were 25 BESC recommendations.
If we consider the entire industry response to the Report, 18 recommendations
(by my count) remain untouched in any shape or form. In reality
the pubcos and BBPA have fully addressed none of the issues raised
in the BESC Report. Instead, once again, the pubcos have merely
given the impression that the industry is capable of self regulation
by "promising" to partially address the less substantial
recommendations. There has been no demonstrable change for tenants
since the BESC Report was published and those minor changes currently
proposed will do nothing to alter the current status quo. Just
like post TISC 2004, and as we have seen in the banking community
of late, self regulation generally means no regulation at all.
17. The existence of a free of tie option
would encourage continued efforts by pubcos to ensure they are
offering a fair and reasonable exchange with their tenants to
effectively reimburse for the detrimental effects of the tie.
18. The Committee may recall that the pubcos
have long argued that the tie is liked by the majority of their
tenants and is only disliked by a noisy minority. To offer a free
of tie choice to tenants was a BESC 08/09 recommendation
and was born from the differing opinions in this regard. The absence
of any proposal to implement this recommendation does rather suggest
that the pubcos may have misled the committee in this matter and
that the "noisy minority" were correct all along.
21 December 2009
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