Watchdog Rules Lion and CUB Pass the Pub Test
A brewing class action has been shut down by Australia’s competition watchdog.
Following a three-year investigation into contracts and practices across 36 venues across NSW and Victoria, the Australian Competition and Consumer Commission has finally made a decision today to side with the world’s biggest beer brands.
Since 2015, the ACCC has undertaken investigations into the country’s two biggest beer giants, Lion and Carlton & United Breweries (CUB) who control more than 90 per cent of beer taps in Australia’s $2.5 billion draught beer market. Allegations were made against Lion and CUB for using exclusive licences to dominate beer taps at pubs, clubs and hotels.
The two brewers were accused of misusing their market power under the Competition and Consumer Act 2010 (Cth) and exclusive dealing to lessen competition. A number of rival craft brewers complained of being locked out of taps across NSW and Victoria, which they viewed as anti-competitive behaviour. It was alleged, Lion and CUB’s contracts required venues to dedicate over 80 per cent of beer taps to their big name brands in exchange for rebates, infrastructure investment and refurbishment loans.
Consumer advocacy group CHOICE managed to obtain provisions from a contract. It was discovered some contracts included minimum volume requirements that thwarted craft brewers from accessing taps in these venues. In February 2015, CHOICE issued a statement after conducting its own investigation into Lion and CUB, which confirmed Lion and CUB were “locking out genuine Aussie craft beers from the taps at your favourite local pub”.
No Misuse Or Abuse
However, the competition watchdog cleared the two major brewers of these allegations. After considering 33 contracts from small brewers and 140 from Lion and CUB, the ACCC concluded their impact is unlikely to substantially lessen competition in any of the markets it investigated. ACCC Deputy Chair Dr Michael Schaper said in a media release, “the venues were responding to consumer demand for certain beer brands, rather than restrictions imposed by the big brewers.”
Despite some venues having exclusivity arrangements, pubs and clubs have expressed to the ACCC they did not feel constrained from allocating taps to smaller brewers, and could make taps available for craft beer. Moreover, a number of small brewers reported they were not completely prevented from accessing venues that had contracts with major brewers. Instead of selling craft beer, the small brewers supplied draught and packaged beer, which has contributed to a significant growth in beer sales.
But the ACCC’s decision not to take further action was met with criticism from the Independent Brewers Association (IBA). The IBA described the decision as a “body blow” for craft brewers. The chairman of the IBA, Ben Kooyman, argued the ACCC’s claim that competition was not lessened was at odds with what an Essential Economics study found.
Mr Kooyan said he hopes the Australian consumer law would be able to provide protection to small businesses against the market practices of dominant players. Similarly, Melbourne craft brewer Thunder Road Brewing Company said “without regulatory intervention, the big two multinational brewers will keep targeting small brewers and kill off craft brewing in this country. Their approach seems to be ‘buy the competition or buy the taps’.” This “approach” was identified by CHOICE Head of Media Tom Godfrey reported as a ‘craft washing’ strategy, which locks genuine Australian craft beers out of the market.
Although the ACCC made no adverse findings, it announced it will continue to monitor for anti-competitive behaviour in the brewing industry.
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Fiona is a Paralegal working in our content team which aims to provide free legal guides to facilitate public access to legal resources. With an interest in information, media, consumer and employment law, her primary focus is on how technology will affect the future of the legal industry.