Landlord and tenant: Brewery tie

Whether beer ties infringing article 81 of EC Treaty - claim dismissed

Crehan v Inntrepreneur Pub Co and another: ChD (Mr Justice Park): 26 June 2003

The claimant publican occupied two public houses under a lease granted by the first defendant.

The lease agreement provided that the claimant would purchase beer from the second defendant brewery at full list price, even though tenants or owners of freehold public houses were able to purchase their beer at discounted prices from the same brewery.

The claimant experienced financial difficulties and the second defendant commenced proceedings against him in respect of unpaid bills.

The claimant counterclaimed on the basis that, among other things, the beer-tie agreement breached article 81 of the EC Treaty, the purpose of which was to promote trading freedom within the common market by making void any agreements that would prevent, restrict or distort competition.

At first instance, the court found for the second defendant.

The claimant appealed to the Court of Appeal, which referred certain questions to the European Court of Justice.

It considered that the claimant had an arguable case for damages and the matter was referred back to the English courts.

David Vaughan QC, Mark Brealey QC and Mark Wonnacott (instructed by Charles Russell) for the claimant; Kim Lewison QC, Nicholas Green QC, James Flynn and Martin Rodger (instructed by Sprecher Grier Halberstam) for the defendants.

Held: The claim was dismissed.

The two questions for the court were - whether the structure of the beer distribution industry in the UK was such that the beer ties in the first defendant's leases infringed article 81; and if so, whether the failure of the claimant's business was attributable to those ties.

In order to decide whether the lease of a public house contravened article 81, two issues had to be addressed, namely - did the terms of the particular lease, bearing in mind its economic and legal context, prevent competitors from gaining access to the national market for the distribution of beer and the sale of drinks?

And if competitors were prevented from entering the market by a 'network' of leases, did the particular network to which the impugned lease belonged significantly contribute to the exclusion of that specific competitor?

In the instant case, the claim did not fulfil the requirements of the relevant test.

The distribution of beer in the UK market did not operate to exclude competition from those who wished to enter the market or increase their market share.

The first condition was not satisfied and the second did not arise.

Accordingly, the claim for damages was unfounded.