Pub tie system faces new challenge

Two test cases have brought into question a system whereby pub landlords are dictated to by suppliers, reports Roger Pearson.

Pub tenants and breweries are waiting for the outcome of two challenges to the brewery tie system, under which brewery landlords stipulate who their tenants must buy supplies from – ranging from drink to fruit machines.

If the system is successfully challenged the result could be a flood of cases totalling more than £450m.

Among other things it is argued that the tie system is unlawful under the provisions of Article 85 of the EC Treaty, which prohibits agreements that prevent or distort competition.

The two test cases have been fought in London at the High and Appeal Courts. In the Appeal Court, Leicestershire publican Graham Gemmel challenged a High Court ruling in which Deputy Judge Anthony Thompson QC ordered him to leave the Red Lion in Market Street, Shepshed. Gemmel had got into arrears with lease payments and allegedly breached the tie agreement.

In the other case, Bernard Crehan, who ran the Cock Inn and The Phoenix at Staines, is being sued in the High Court by Courage and Inntrepreneur Estates over alleged breaches of the brewery tie.

But in a cross action Crehan is seeking rulings that the tie system is unlawful. Target Developments, which currently operates 13 pubs as tied tenants, are also parties to that action.

A spokesman for Group Action, the pressure group which is supporting the tie challenge says: "If this case goes against Courage then claims for damages amounting to in excess of £450m are likely to follow."

He says that the targets for claims would be Inntrepreneur, the property-owning arm of Courage, and Japanese bank Nomura, which are behind plans to bring 6,000 UK pubs under their control.

Judgments have been re-served on the two cases, and are expected to be given during the next month.