Industry regulation: Beer orders
The UK pub industry has changed significantly over the last decade. The 1989 Report and the resulting legislation were important factors in these changes.
The 1989 Report contained a number of adverse findings related to the vertical links between brewing and pub retailing, and made recommendations aimed at loosening the tie between pub retailing and brewing to facilitate easier entry by, and increasing competition between, brewers, wholesalers and pub retailers.
Most of the recommendations were implemented, mainly by the Beer Orders imposing the following changes on "national brewers", that is, brewers with an estate of more than 2,000 on-licensed premises:
- their retailers would be free of tie for non-beer drinks and low-alcohol beers
- those retailers would have the right to buy one cask-conditioned beer and (as amended from 1998) one bottle-conditioned beer of their choice on the open market rather than through the brewer (the Guest Beer provision)
- and they were allowed only to tie a certain number of pubs. This forced the national brewers to sell or free from tie about 11,000 of the then estimated 60,000 UK pubs
The operation and continued relevance of the Beer Orders was reviewed by the Director General of Fair Trading ("DGFT") in 2000, and his recommendations were published in December 2000. The DGFT observed that, since the 1989 Report, the brewing and pub retailing industries have undergone significant structural change leading to an improvement in competition. In particular, over a third of the U.K.’s pubs have been transferred into the ownership of retail pub chains which have acquired a degree of countervailing buyer power in relation to the national brewers.
The beer orders were revoked on 17 January 2003.