Heineken's pub arm Star Pubs & Bars has been fined £2m by an industry watchdog after it allegedly forced tenants to sell "unreasonable levels" of its own alcohol.
The company "seriously and repeatedly" breached the pubs code over nearly three years, the pubs code adjudicator said.
But Star Pubs said it "fundamentally disagreed" with aspects of the report and is considering an appeal.
The investigation claims that from 21 July 2016 to 10 July 2019 there were "multiple breaches" of the code by Star Pubs. This including telling 96 tenants who requested to go free-of-tie that 100% of the keg beer they sold had to be Heineken brands.
A job description for the company's code compliance officer was found to include the responsibility to ensure the code was interpreted ‘to the commercial benefit of Heineken UK'.
Pubs code adjudicator Fiona Dickie said: "The report of my investigation is a game-changer. It demonstrates that the regulator can and will act robustly to protect the rights that parliament has given to tied tenants.
"I will be holding discussions with all the companies I regulate following my findings about how they will ensure they are code compliant. My message is that if anyone previously had any doubts about my resolution to act when I find breaches, they can have no doubt now."
The pubs code was introduced in 2016 to give tenants in England and Wales running pubs owned by companies with 500 or more sites the chance to move away from rent-only contracts and tied leases that require them to buy a set amount of beer from their landlord.
This is the first time the regulator has penalised one of the major brewers.
Heineken will have to pay a £2m fine, which is based on the turnover of its entire UK company, and must ensure all its free-of-tie tenancies are compliant with the code.
Lawson Mountstevens, managing director at Star Pubs & Bars, said: "This penalty is unwarranted and disproportionate, and comes at a time when the entire sector is in serious financial crisis as we work around the clock to support our pubs and licensees to keep their businesses afloat.
"We are a responsible business that takes its regulatory obligations extremely seriously and strives to achieve the highest levels of professionalism. From the outset we have been transparent and repeatedly sought guidance from the regulator on the terms we were offering those licensees looking to take up the Market Rent Only (MRO) option, but the PCA consistently declined to respond to those requests. Instead it chose to launch a long, costly and unnecessary investigation.
"We are dedicated to the pubs code in both word and spirit, and do not believe the outcome of this investigation accurately reflects the culture of our business or the good working relationship we have with the vast majority of our licensees. In our view there are flaws in the way the statutory framework is applied, and we call on the government to examine this as part of their statutory review."
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