Written evidence submitted by Justice
for Licensees
Justice for Licensees would like to thank the Business,
Innovations and Skills Committee for the opportunity to be able
to submit evidence with reference to the Government Response.
BACKGROUND
Justice for Licensees (JFL) is a campaign group,
initially borne out of the need to discover whether the questionable
practices of the pubcos were prevalent across the companies and
the country. JFL, through its campaigning, has in excess of four
hundred and thirty thousand members and supporters, these consist
of tied licensees, free of tie licensees, managers, ex licensees,
employees of the industry and consumers. We are very proud to
be one of the founding members of the Independent Pub Confederation
(IPC). JFL fully supports the findings and recommendations made
in the Business and Enterprise Committee 7th report—Pubcos
2008-09 and the Business, Innovation and Skills Committee reports
of 2009-10 and the subsequent 10th report of 2010-12.
SUMMARY
We are disappointed with the government response,
we are disappointed and frustrated that they have reneged on their
pre-election promises (1 & 2) and with the apparent failure
of ministers to engage with all stakeholders. Tackling the symptoms
of the imbalance in power and financial reward for risk taken,
without resolving the underlying causes offers only short term
relief, ultimately government will have to address the underlying
cause. Lack of competitiveness in conjunction with a raft of questionable
practices and a certain lack of forward thinking have led to an
imbalance in the market resulting in the evidence that the select
committees have witnessed. It is, without doubt, the licensees,
their customers and the pubs of this land bearing the brunt of
the cost.
CONTENT
— (i) We
welcome the governments clarity in declaring the principles it
has followed:
— That
the OFT has found no evidence of competition problems that are
having a significant adverse impact on consumers and therefore
the Government is not minded to intervene in setting the terms
of commercial, contractual relationships.
— That
legally binding self-regulation can be introduced far more quickly
than any statutory solution and can, if devised correctly, be
equally effective.
— (ii) Competition
law has three main elements and in particular:
— Prohibiting
agreements or practices that restrict free trading and competition
between business.
— (iii) It
is apparent that the tied model is based upon a prohibitive agreement
which restricts free trading. We believe that the OFT and now
the Department for Business, Innovations and Skills have failed
to account for one of the main elements of competition law and
that is competition between business. It would appear that the
ability of tenants/lessees to be able to compete in the open market
place may well have been overlooked somewhat? Due to over-renting
and artificially inflated product lists competition between business
has been severely restricted and restriction of competition should
not be acceptable to any right thinking individual.
— (iv) Using
the government's statistics 28,800 pubs operate under the tenanted/leased
model which equates to 51.8638573743922% of the market, we believe
that it would be ill-conceived to think that the brewers do not
over rent or overcharge for their products, we believe that this
produces a dominant market share.
— (v) It
is not beyond the wit of man to realise that in business, any
business, costs have to be passed on to the end consumer, to suggest
that manipulation of the rental system in conjunction with artificially
inflated prices in a dominant market place will not significantly
impact adversely on the consumers is questionable to say the least.
It is incumbent upon this government to resolve this underlying
cause, until this is addressed sufficiently the suffering and
misery witnessed will continue and grow exponentially.
— (vi) We
understand that under European law the tie is legal, however the
principles that the government bore in mind in determining the
most appropriate course of action was "That the OFT has found
no evidence of competition problems that are having a significant
adverse impact on consumers" and not the legality of the
tie. We believe that there are competition problems between business
which will undoubtedly have a significant adverse impact on the
consumer and that is incumbent upon this government to resolve
this underlying cause. We believe that it is totally unacceptable
that this government rely on a principle which is open to question.
— (vii) We
fully support a quick and effective resolution, people's lives
and livelihoods and the wonderful icon that is the Great British
pub are at stake here. That said the resolution must be effective
and we are not convinced that the proposals put forward will be
effective. This government are relying on an Industry Framework
Code, written by the very people who have been found to be wanting
(3), to prevent the ills that are so apparent (4,5 & 6), we
would welcome much further transparency on the following:
— Why
does the government think that the majority of stakeholders in
this industry(7) refused to endorse the Industry Framework Code?
— Do
they not find it questionable that the only bodies to sign up
are the bodies that have been highlighted throughout the 4 reports
(8)?
— Would
this government allow criminals to write the penal reform code
and implement said code? What's the difference?
— We
would like full transparency of all and every "industry"
meeting, telephone call and correspondence which the government
has based its decision upon.
We appreciate that we require much further transparency
from the government before reaching a final conclusion.
Conclusion to date
If conclusions have been drawn on principles that
are questionable and on an imbalance of input then those conclusions
are open to question and have no right to influence such an important
issue.
THE BEER
TIE
— (i) We
are bitterly disappointed that government have failed to take
into account business closures when using closure statistics to
form their conclusions. There are many business closures that
do not reach the criteria for pub closures because the pub does
not close because they have a management company or tenant sat
by waiting to move in, however that business closes in exactly
the same way as if the pub had closed. It is incumbent upon this
and any government to do their utmost to get to the truth of the
matter, until they address this underlying issue they will be
at a disadvantage in securing the correct proposals that will
protect the innocent and bring about the fairness and justice
that many are striving for to protect the British Pub.
— (ii) We
are unsure why the minister would appear to believe that this
industry is calling for abolition of the tie in its entirety (9),
that is not the case at all (10) and would welcome further transparency
on how he reached this conclusion.
— (iii) We
would welcome further transparency why a FOT option with an open
market rent review would be so detrimental to the industry when
the majority of stakeholders feel it is the way forward and the
pubcos have stated quite categorically that the majority of their
tenants are indeed happy with the tie and any dissent is due to
a vocal minority (11). If it is the case, that the majority are
indeed happy, then the pubcos have nothing to worry about as the
majority will remain tied, if the pubcos have been somewhat economical
with the truth on this issue then what other truths have they
been economical with? Perhaps more importantly if there is a level
of discontent that means that sufficient number of tenants choose
to go FOT as to jeopardise the pubco business, then does this
not show the level of discontent within the estates?
— (iv) We
are pleased that the committees and the government have realised
that "significant reforms are needed quickly", we believe
whole heartedly that the committees have identified the areas
for significant reform but are bitterly disappointed that this
government have failed to heed their own Select Committees.
CONCLUSION
We believe that the government proposals will fail
to significantly address the right balance of risk and reward
in the relationship between tenant/lessee and landlord. We have
to ask the obvious questions, what is the point of years and mounting
costs of endless investigations if the government choose to cherry
pick rather than what is right, fair and just? How can the government
ever expect to be trusted if they renege on their own promises
so easily?
BRULINES
We would welcome full disclosure on exactly how this
government reached the conclusion that Brulines equipment is not
in use for trade. We are aware of QC opinion which believes that
the equipment is in use for trade.
RENTALS
It is apparent that whilst the RICS improved guidelines
are to be welcomed, they are open to manipulation. It is imperative
that this government ensures that RICS re-word the improved guidelines
to prevent manipulation and abuse.
THE GOVERNMENTS
RESPONSE
We are pleased that the committees and the government
have realised that "significant reforms are needed quickly",
we believe whole heartedly that the committees have identified
the areas for significant reform but are bitterly disappointed
that this government have failed to heed their own Select Committees.
— An
Industry Framework Code is of no use whatsoever if it fails to
address the underlying causes which have brought about years of
suffering and misery and years of government investigation and
suggestion of resolution.
— PICAS
is of no use if it can be manipulated by those with a conflict
of interest.
— A three
year re-accreditation of codes is of some use if and only if the
codes address the underlying causes and any loopholes that may
become apparent are closed to prevent further abuse.
— PAS
must provide full disclosure on all aspects of this industry,
warts and all, failure to do this will not prevent the atrocities
that we have witnessed.
— A strengthened
Framework Code can only be welcomed if it has the full support
of the majority of stakeholders, licensees included!
FINAL CONCLUSION
Whether the government proposals will address the
significant reform that all have identified is required will depend
entirely on whether this government will ensure that underlying
causes are addressed with all due haste. To date the government
have failed to address the underlying causes, they are treating
the symptoms and not the disease.
1 December 2011
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