Pub Companies - Business, Innovation and Skills Committee Contents

Written evidence submitted by LSO Ltd

Thank you for informing me that we have the opportunity to respond to the Government Response.

I am extremely disappointed. As the report pointed out this is the last in a series of Select Committee reports in which time after time the AWP tie has been recognised as of no benefit to the leaseholders and recommended to be removed. Each time the Landlords ignore the recommendation.

This time the report recommended to government to legislate the scrapping of the AWP tie. There is no reference to this in the Government response. The only reference to AWP is in regard to calculating rent reviews. If there was no tie then machine income would have no relevance to rent reviews as it would be private information retained by the leaseholder. But there is no mention of removal of the AWP tie.

I have already submitted evidence to the select committee before its recent deliberations. However since the publication of the recent sessions and in light of the recommendation to remove the AWP tie I contacted both Punch and Enterprise. At the select committee it became clear that several of the Landlords do offer some Free of AWP tie leases. I asked for details of their existing free of AWP tie pubs in the M25 area so that I might be able to tender individually to supply. I wanted to offer leaseholders true free market options. I was refused any information or indication as to the location of these houses under the auspices of "consumer confidentiality". How is this a positive response to offering leaseholders true free choice? It serves to illustrate the obstacles that the Landlords put up in this process - that was highlighted again in the committee report.

I was also advised by Punch that they had recently reviewed their supplier list and I was not on the approved list. This was revealing, as in February I had approached Punch to be considered for nomination. I was told at that time that they had sufficient suppliers but if a review in the future was made they would keep my details on file. Clearly a review has taken place—but without my knowledge or consideration. This does nothing but reinforce the notion that the tied AWP system is a closed shop—allowing a mechanism to source extra revenue from leaseholders via an exclusive arrangement that benefits only nominated suppliers and the Landlords. To be on the nominated list you have to pay a premium per site to the Landlord. Once nominated you have to use a Landlord recommended rent list to offer leaseholders. This allows an extra sum to be levied by machine suppliers to "cover" the premium paid to the Landlord. So the nominated supplier doesn't lose out but the Landlord gains extra revenue at the expense of leaseholder/tenant as the increased rent supplement collected by the operator funds the premium paid to be on the nominated list. Then of course there is the Landlords share of machine income. In the Free trade where publicans have freedom to choose supplier there is no share and rents are a product of a competitive market place—not a fixed scam. Free trade rents are generally 20% lower than the list system offered by nominated companies. It is also worth remembering that to be able to supply AWP in the UK an organisation has to undergo a rigorous process of application with the Gambling Commission. So any argument that allowing "other" suppliers to supply lowers standards should be taken in that context.

For me personally the scrapping of the tie would open up the market place for me to supply. However I am but a small player so in the greater scheme of things I would have little influence. However the principle of improving freedom of supply for consumers is very important. By removing the tie—the leaseholder would have a wider choice of supplier and be considerably better off financially. The machine supply business is very competitive and this competition drives performance and machine profitability for both supplier and customer. This would impact positively on the business overall and result in making the viability of the pub more secure—which is good for the general community. So this is an important issue for the general consumer.

I would urge the Government to revisit the report from the select committee and add in the legislature to force freedom of tie on AWP.

Leigh Smith

30 November 2011

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Prepared 11 January 2012