Australia’s craft brewers say big breweries are locking them out of pubs

A decision by the competition watchdog to take no action against major breweries over tap contracts in pubs and clubs has been criticised by the craft brewing industry.

The Australian Competition and Consumer Commission conducted a three-year investigation into allegations from craft brewers that the major brewers, Carlton United Breweries and Lion, were locking them out of beer taps in pubs, clubs and live venues through the use of exclusivity provisions and volume requirements in tap contracts.

Tap contracts at 36 venues across New South Wales and Victoria were investigated but the ACCC found that, while volume rules and exclusivity arrangements were in place, they were unlikely to substantially lessen competition.

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The Independent Brewers Association (IBA) described the decision as a "body blow" for craft brewers.

Ben Kooyman, the chairman of the IBA, said the competition watchdog's claim that tap contracts did not substantially lessen competition was at odds with an Essential Economics study that found market access was the second greatest constraint to growth behind excise.

“This investigation has been dragging on for more than three years and to now find out that the status quo will be maintained is a bit hard to take,” he said. “The big winners from this decision are a select group of multinational companies.

“For any small business to survive it needs protection from the market practices of dominant players. We had hoped that Australian consumer law, as interpreted by the ACCC, would be able to provide that protection.”

The competition watchdog says it will continue to closely monitor conduct and developments in the market.

The complaints from craft brewers stemmed from some of Lion and CUB’s contracts requiring venues to dedicate over 80 per cent of beer taps to their big name brands in exchange for rebates, infrastructure investment and refurbishment loans.

A spokesman for Carlton United Breweries said the company was pleased the ACCC investigation found that the range of taps and brands stocked by venues is determined by consumer demand, not by restrictions.

“CUB embraces the healthy competition that exists in our industry ... and welcomes the conclusion of the ACCC’s investigation, which made no adverse findings,” he said.

The ACCC deputy chairman, Michael Schaper, said that although some venues had exclusivity arrangements, most pubs and clubs did not feel constrained from allocating taps to smaller brewers and could make taps available for craft beer if necessary.

Some contracts included minimum volume requirements that could make it harder for craft brewers to gain access to taps in these venues.

“While some craft brewers may have been refused access to taps by certain venues, our investigation found that the venues were responding to consumer demand for certain beer brands, rather than restrictions imposed by the big brewers,” Schaper said.

“There has been a significant growth in craft beer sales during the ACCC’s investigation and we will continue to monitor for anti-competitive behaviour.”

Christopher Sidwa from Batch Brewing in Marrickville in Sydney's inner west also voiced disappointment that it had taken three years for the ACCC to decide to take no action.

Sidwa said the problem of small brewers being locked out of pubs and clubs because of tap contracts was one that “definitely exists” and he had encountered.

However he warned that “even getting rid of tap contracts is not going far enough” and there needed to be a greater emphasis on fostering competition.

In the US, where he grew up, tap contracts aren’t allowed, he said.

“The rules in the US are that you can’t give any incentive as a beer manufacturer - other than a competitive price - to stock a certain brand.”

“In an economy like Australia’s that’s set up as a string of duopolies, it’s really frustrating that the ACCC refuses to take action.”

Sidwa says craft brewers will need to look past the ACCC decision and instead look to win concessions on the excise tax treatment for smaller breweries similar to the arrangements that exist in the wine industry.

“We’re hoping that where the ACCC has failed, the parliament can take some action.”

- (Guardian News and Media 2017)