Member News
A report from the Commons business and enterprise committee has warned that there are "serious problems" in the way that large pub companies treat pub tenants.
MPs are recommending that large pub firms should be referred to the Competition Commission after evidence of "downright bullying" by some 'pubcos' was discovered.
The committee also warned that an imbalance of bargaining power between lessees and pubcos remains and rent assessments remain opaque, despite problems being identified by the trade and industry committee four years ago.
The report called on the Department for Business, Enterprise and Regulatory Reform to look "urgently" at these inequalities.
The practice of pubcos selling businesses they no longer require with restrictive covenants preventing their use as a pub should be banned, the committee also said.
And the report said there are "strong indications" that the tie between pub companies and their tenants was pushing up prices to lessees and consumers.
Chairman of the committee Peter Luff stated: "Our inquiry found alarming evidence indicating there may be serious problems caused by the dominance of the large pub companies."
The committee also published a survey of lessee views on their pubco.
It found that almost two-thirds of lessees did not think their pubco added any value, and a fifth had got into a dispute with their pubco.
The committee expressed "astonishment" to learn that over two-thirds of lessees earned over £15,000 per annum.
Luff said: "It is not clear that the benefits of the tie outweigh its disadvantages.
"Our report challenges pubcos to demonstrate the benefits of the tie, by offering their lessees the opportunity to run their pubs on a free of tie basis.
"This can only work if there is a transparent system for negotiating rents."
He called for an urgent investigation by the Competition Commission to examine these issues.
But he accepted that the problems cannot simply be covered by a single policy recommendation.
The dispute over ties, however, could be ended "easily", the committee argued, if every lessee could be offered the choice of being free or tied.
This would allow both sides to prove competing claims about pub companies, the report said.
Dods Parliamentary Communications Ltd