Heineken (HEINA.AS) has been fined £2m ($2.5m) in the UK for forcing pubs it owned to sell “unreasonable levels of Heineken beers and ciders.”
The Dutch brewing giant was handed the fine on Thursday by the UK’s Pubs Code Adjudicator, an ombudsman set up to oversee the Pubs Code. The adjudicator also released a damning report alongside the judgement, calling Heineken a “repeat offender.”
Heineken rejected the findings and said it was considering appealing against the fine.
The Pubs Code, which came into force in 2016, legislate for how pub owners with more than 500 establishments should treat landlords. Heineken’s fine is the first financial penalty imposed by the Pubs Code Adjudicator.
“The report of my investigation is a game changer,” adjudicator Fiona Dickie said in a statement. “It demonstrates that the regulator can and will act robustly to protect the rights that parliament has given to tied tenants.”
Dickie investigated how Heineken’s pub company subsidiary, Star Pubs and Bars, treated its tenants between 2016 and 2019.
Pubs can be either tied or untied to a brewery. Tied pubs agree to stock a certain amount of a brewery’s beer. Untied pubs — or free houses — can stock whatever beer they like and only pay rent to the companies that own the sites.
Dickie found that Star Pubs and Bars was unfairly forcing untied pubs to stock Heineken beer. Until August 2018, almost 100 untied landlords were told 100% of their keg beer had to be brewed by Heineken. Other sites were told to switch to stocking 60% Heineken beers within a year.
Tenants told the adjudicator that these unfair terms harmed their business as they couldn’t “react to local conditions and changing tastes during their tenancies”.
“There was little demand for some products, including 'must stocks' and it would be a significant commercial risk for them to swap out currently popular products to make way for Heineken brands,” the report found.
The Pubs Code Adjudicator recorded 12 breaches of the code and concluded Star Pubs and Bars was a “repeat offender”.
“Despite meetings with me and findings I made in arbitrations, Star did not act in a timely, consistent or transparent way to correct what it was aware - or ought to have been aware - were instances of non-compliance,” Dickie said.
“The company must change its mindset and become proactive in its approach to compliance. I have decided this can best be achieved by the imposition of a sanction that will serve as a deterrent to future non-compliant conduct by Star and other pub-owning businesses.”
The £2m fine is based on the turnover of Heineken’s UK business. Star Pubs and Bars has been ordered to undertake a full audit of its business to bring it up to code compliance.
Lawson Mountstevens, managing director of Star Pubs & Bars, said the company was “deeply disappointed and frustrated at the outcome of this investigation” and was “actively considering an appeal.”
“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,” Mountstevens said in a statement.
“We are a responsible business that takes its regulatory obligations extremely seriously and strives to achieve the highest levels of professionalism.”
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