Tied house

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This article is about tied public houses. For houses or cottages rented by employees, see Tied cottage.
The White Horse Inn, Beverley is a Sam Smith's Old Brewery tied house.

In the UK a tied house is a public house that is required to buy at least some of its beer from a particular brewery or pub company. This is in contrast to a free house, which is able to choose the beers it stocks freely.

A report for the UK government described the tied pub system as "one of the most inter‐woven industrial relationships you can identify in the UK, with multiple streams of payments running in both directions, from the pub tenant to the pubco and vice versa, generally negotiated on a pub‐by‐pub basis."[1]

Free and tied houses[edit]

The pub itself may be owned by the brewery or pub company in question, with the publican renting the pub from the brewery or pub company. This is termed a tenancy. Alternatively, the brewery may appoint a salaried manager while retaining ownership of the pub; this arrangement is a "managed house".[2] [3] Finally, a publican may finance the purchase of a pub with soft loans (usually a mortgage) from a brewer and be required to buy his beer from it in return.[citation needed] The traditional advantage of tied houses for breweries was the steadiness of demand they gave them; a tied house would not change its beer supplier suddenly, so the brewer had a consistent market for its beer production.[citation needed]

However, this arrangement was sometimes disadvantageous to consumers, as when a regional brewer tied nearly every pub in an area so that it became very hard to drink anything but its beer. This was a form of monopoly opposed by CAMRA, especially when the brewer forced poor beer onto the market owing to the lack of competition from better breweries.[citation needed] Some or all drinks were then supplied by the brewery, including third party spirits and soft drinks, quite often at an uncompetitive price relative to those paid by free houses.[citation needed] From 1989-2003, some tied pubs in the UK were legally permitted to stock at least one guest beer from another brewery to give greater choice to drinkers.[4]

Outside the United Kingdom[edit]

Canada[edit]

In Canada, alcohol laws are the domain of the provinces. Tied houses were eventually banned in all provinces in the aftermath of the repeal of total alcohol prohibition. In the 1980s the concept of the Brew Pub or Microbrewery was introduced to Canada beginning in the Province of British Columbia. Through the 1980s and 1990s this concept expanded to other provinces but was not a return to fully tied houses in the traditional sense.

Saskatchewan regulations provide that a restaurant or pub may brew its own beer if its total annual production does not exceed a proscribed limit. Alberta regulations say that every brewery may operate one restaurant and no more.

—History of Bushwakker Brew Pub, Chapter 3[5]

Very few alcohol producers or distributors survived prohibition, creating a concentrated market ripe for abuses. For example, in British Columbia in 1952 there were “no licensed restaurants or private liquor stores and only about 600 bars and clubs” compared to “over 9000 licensed establishments, including 5,600 restaurants” in 2011.[6] A proposal to loosen the restrictions was put forward by the government of BC in 2010, in response to these changes, but regulation to implement the law was still under debate in 2012.[7]

United States[edit]

In the late 19th and early 20th centuries, saloons (both Western and in the eastern cities) in the United States were often tied houses, with breweries having exclusive contracts with drinking establishments and often helping prospective saloon keepers get their start in business.[8] Competition between saloons was fierce, especially as many areas had several saloons, each tied to a different brewery; the breweries often ran aggressive marketing campaigns through their tied houses to increase demand and increase their market share.[8] This system ended with the enactment of nationwide Prohibition in the United States in 1919.

Although Prohibition was repealed in 1933, alcohol remained heavily regulated in the United States, with the Twenty-first Amendment to the United States Constitution granting the states broad power to regulate the alcoholic beverage industry. Thus under the post-Prohibition alcoholic beverage regulatory regime in effect today, tied houses are generally illegal in the US. Tied-house restrictions have been construed as forbidding virtually any form of vertical integration in the alcoholic beverage industry. As the Supreme Court of California explained in a landmark 1971 decision:

In recent years, several major distillers have been successful in securing very specific exceptions to California's strict tied-house laws.[10]

There have also been some arrangements between breweries and non profit venues. The brewery partner donates beer at wholesale to the non profit obtaining an exclusive high profile account. The non profit receives a major portion of its income from the retail beer sales.

References[edit]

  1. ^ Modelling the impact of proposed policies on pubs and the pub sector, London Economics, December 2013, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/265460/Tied_Pubs_Final_Report.pdf
  2. ^ House of Commons Library, Pub companies, pub tenants & pub closures, http://www.parliament.uk/briefing-papers/sn06740.pdf
  3. ^ Ibid
  4. ^ (Slade 1998, pp. 565)
  5. ^ http://www.bushwakker.com/inside/history_chp3.htm
  6. ^ http://www.ag.gov.bc.ca/legislation/lclb/pdf/2011-lclb-tied-house-and-trade-practices.pdf
  7. ^ Paddy Treavor (May 29, 2012). "Tied House Laws Revisited - Middle Ground May Be the Way to Go". VanEast Beer Blog. 
  8. ^ a b Burns, Ken; Novick, Lynn (2 October 2011). "A Nation of Drunkards". Prohibition. Episode 1. PBS.
  9. ^ California Beer Wholesalers Ass'n v. Alcoholic Beverage Control App. Bd., 5 Cal. 3d 402, 407-408 (1971).
  10. ^ Dispatches from the Wine Law Wars, speech by James Seff at Stanford University, 9/28/10.

Further reading[edit]

Slade, M.E. (1998), "Beer and the Tie: Did Divestiture of Brewer-Owned Public Houses Lead to Higher Beer Prices?", The Economic Journal 448 (108): 565–602, doi:10.1111/1468-0297.00305