The Government is to consult on putting the pub Industry Framework Code into statute, in order to regulate the relationship between pub companies and their tenants.
Business secretary Vince Cable announced today that his department would install an independent adjudicator, as well as a new statutory code to look at the relationship between big pub companies and their licensees.
Family brewer/pub companies are not expected to be affected because the changes will only apply to firms with 500 or more tied leases.
The Department for Business Innovation and Skills, which announced the move, said the new code would ensure fair practices for a number of issues including rents and the prices publicans pay for beer. It would also have the power to investigate and deal with disputes between pub companies and publicans, and in some cases have the power to fine.
In particular, the proposed Code would prevent abuses of the beer tie, which oblige publicans to sell particular types of beer and enshrine the principle that "a tied licensee should be no worse off than a free-of-tie-licensee", the Government said
Cable said: "There is some real hardship in the pubs sector, with many pubs going to the wall as publicans struggling to survive on tiny margins. Some of this is due to pubcos exploiting and squeezing their publicans by unfair practices and a focus on short-term profits. Four Select Committee reviews since 2004 have highlighted these problems.
"Last year we gave the pubcos one last chance to change their behaviour but it is clear that the self-regulatory approach was not enough and in October I wrote to the industry to seek their views. A change in the law is now needed to shift behaviour.
"I hope these measures mean publicans are given a fairer chance at running their pub, which in turn will help them grow their businesses instead of losing them."
The formal consultation on the measures will be launched the spring.
The relationship between tied licensees and pub companies has long been a point of contention, and the BIS Select Committee has staged several hearings and produced a number of reports on the matter since 2009.
In 2011 the committee recommended that the Government implement a binding industry Code and establish a Code Adjudicator. In November 2011 the Government announced a self-regulatory approach, with the Code being brought into legal contracts and the industry establishing an independent arbitrator and advisory services.
The British Beer and Pub Association (BBPA) said it was "disappointed" by today's announcement, warning that the statutory underpinning of recent industry reforms would result in "unnecessary red tape and bureaucracy".
Jonathan Neame, chairman of the BBPA, comments: "It is disappointing that self-regulation has not been given a proper chance to work, after all the hard work from the BBPA, ALMR, FLVA, BII, and other industry colleagues on Version Six of the Code of Practice.
"However, today's announcement does at least provide some clarity and certainty over the direction of policy. In the consultation, we will be urging the Government to ensure that any statutory process is light-touch and cost-effective, to protect consumers from bearing the brunt of unreasonable additional costs.
"BBPA members are working continuously to evolve the services and support they give to their licensee partners to ensure that tied houses offer the best investment opportunities in the pub market.
"We hope that pub goers, beer drinkers and all those who are passionate about the future of Britain's pubs will now work with us to lobby the Chancellor for a fairer tax system, to stimulate investment and job growth in our sector so that pubs remain a vibrant hub in our communities for generations to come."
By Neil Gerrard
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