What reasons does the OFT give for not acting?
The OFT says a 2004 update to the Competition Act excludes so-called “land agreements” — relating to interest in land, such as rent for commercial properties. The exclusion can be withdrawn if the OFT believes it leads to market distortion — not currently the case with pubcos, says the OFT. The OFT cites European rules — the EC Block Exemption Regulation for Vertical Agreements — to argue that tied leases don’t breach competition law so long as a supplier doesn’t have more than 30% of the market and there are no “hardcore” restrictions like price fixing. Finally, the OFT says no one company has more than 15% of pub ownership so it’s “unlikely” that an individual pubco would be dominant in the market — 40% is the usual threshold. What is Fair Pint’s response? The OFT should be concerned because the tied tenant is worse off than if he were free-of-tie. This is because when added together, rent on a tied lease and price of drinks from pubcos costs more than a free-of-tie rent on the open
