WRITTEN QUESTION E-2647/97 by Richard Howitt (PSE) to the Commission (1 September 1997)

Subject: Brewery ties/Inntrepreneur Pub Company Limited

Tenants of 'Inntrepreneur' Pub Company Limited and similar companies in my constituency entered into agreements with Inntrepreneur on the basis that their business would be free of the tie by 1998 and on the premise that the tied trade agreement would entitle them to discounts, support and concessions that would compensate for the loss of discounts available on the 'free' market. Inntrepreneur have reneged on their agreements to release all their tied houses, tenants have not commercially benefited from the arrangements but have in fact been significantly disadvantaged compared to those operating in the free market.

Under these circumstances, can the Commission please confirm that in order to ensure a fair and competitive trading environment, it will reject Inntrepreneur Pub Company Limited's application for a special exemption to Article 85/1 of the Treaty of Rome?

Answer given by Mr Van Miert on behalf of the Commission (16 September 1997)

Inntrepreneur has asked the Commission to look into its standard agreements. In the Commission's view, the Inntrepreneur lease in common with most other standard leases used in the United Kingdom does not fulfil a technical requirement of Commission Regulation (EEC) No 1984/83 on the application of Article 85 (3) of the Treaty to categories of exclusive purchasing agreements, the so called 'beer block exemption' ((OJ L 173, 30.6.1983. )). The problem concerns the specification of the beer tie by type, rather than by brand.

In considering whether such standard leases may be exempted by specific decision the Commission must check whether all the conditions of Article 85 (3) of the EC Treaty are fulfilled. In such examinations the Commission, using average figures, takes into account the overall effect of the network of standard leases in question. It is within this context that the Commission has been examining, primarily on the basis of a report by the Office of

fair trading, the price differential between the tied lessee and the individual free-house operator. Accordingly this examination has focused, in the case of Inntrepreneur, on the whole network of its leases. For this reason the Commission has concentrated on the average differential between tied and free trade prices as charged directly by Courage, now Scottish Courage. The same averaging has also been used concerning any countervailing benefits.

Any claims made by Inntrepreneur will be thoroughly checked, and will be only taken into account insofar as the typical free trade operator has no access to the same kind of benefit. In this regard, the new Inntrepreneur RetailLink scheme, which has been introduced following the announcement by the Department of trade and industry of its agreement to release Inntrepreneur from the obligations in earlier undertakings, constitutes an important change in the circumstances of price discrimination and countervailing benefits prevailing previously. Inntrepreneur notified this new purchasing agreement in March 1997.

The Commission hopes to make its provisional position known in the forthcoming weeks.