Competition watchdog calls for beer prices inquiry

The competition watchdog called for an inquiry into beer prices yesterday after blocking Scottish & Newcastle and Carlsberg from buying a division of Coors, the US brewer, that supplies and maintains beer dispensing equipment in pubs.

The Competition Commission said the Office of Fair Trading should consider investigating the practice of including the cost of equipment that dispenses beer in the price of a pint. It said that the brewers' ownership of these "technical services" - which include installing and maintaining equipment for beer refrigeration, the running of pipes from cellars to bars and the fitting of beer taps on behalf of brewers - was limiting competition and hindering the emergence of new independent equipment suppliers.

The commission said: "We have suggested that the OFT consider whether a market investigation into the pricing or supply of beer may be appropriate, with specific reference to these and related market features."

The request came as the commission announced it was blocking a plan by Serviced Dispense Equipment (SDEL) - a joint venture between Scottish & Newcastle and Carlsberg UK - to buy Coors' technical services division. It said the merger with Coors would have given SDEL a 55 to 60 per cent share of the market for equipment and related servicing. The market is worth about £350m.

"By blocking this merger, it is more likely that a fully functioning market for technical services equipment and related servicing will develop," Paul Geroski, of the commission, said. "This will be good news for both pub companies and their customers."

The brewers involved disagree. They say joining forces on the supply of technical equipment lowers their costs as well those for publicans, which will in turn lower charges to customers. A statement from S&N said the deal "would have brought simplicity, costs savings and efficiencies into this area of the licensed trade - thus benefiting trade customers".

The companies also called the inquiry into beer prices "unnecessary". Carlsberg said: "It is the company's belief that existing customers are content with their current arrangements", adding that it has unbundled charges for technical equipment when asked to by customers. Coors said it would review its options for the future of its technical services division. The jobs of about 300 people are under threat while the options are considered.