Tied house

In the UK a tied house is a public house that is required to buy at least some of its beer from a particular brewery. This is in contrast to a free house, which is able to choose the beers it stocks freely.

Definition of "tied"

The pub itself may be owned by the brewery in question, with the publican renting the pub from the brewery. This is termed a tenancy.^{[citation needed]} Alternatively, the brewery may appoint a salaried manager to run the pub it owns, and this form of tie can sometimes be termed a managed house.^{[citation needed]} Finally, a publican may finance the purchase of a pub with soft loans (usually a mortgage) from a brewer and be required to buy his beer from it in return.^{[citation needed]} The traditional advantage of tied houses for breweries was the steadiness of demand they gave them; a tied house would not change its beer supplier suddenly, so the brewer had a consistent market for its beer production.^{[citation needed]}

However, this sometimes could victimize consumers, as when a regional brewer tied nearly every pub in an area so that it became very hard to drink anything but its beer. This was a form of monopoly opposed by CAMRA, especially when the brewer forced poor beer onto the market owing to the lack of competition from better breweries.^{[citation needed]} Some or all drinks were then supplied by the brewery, including spirits and soft drinks, quite often at an uncompetitive price relative to those paid by free houses.^{[citation needed]} From 1989-2003, tied pubs in the UK were legally permitted to stock at least one guest beer from another brewery to give greater choice to drinkers.^[1]

In the United States

Under the current post-Prohibition alcoholic beverage regulatory regime, tied houses are generally illegal in the United States. Tied-house restrictions have been construed as forbidding virtually any form of vertical integration in the alcoholic beverage industry. As the Supreme Court of California explained in a landmark 1971 decision:

“

Following repeal of the Eighteenth Amendment, the vast majority of states, including California, enacted alcoholic beverage control laws. These statutes sought to forestall the generation of such evils and excesses as intemperance and disorderly marketing conditions that had plagued the public and the alcoholic beverage industry prior to prohibition . . . By enacting prohibitions against "tied-house" arrangements, state legislatures aimed to prevent two particular dangers: the ability and potentiality of large firms to dominate local markets through vertical and horizontal integration . . . and the excessive sales of alcoholic beverages produced by the overly aggressive marketing techniques of larger alcoholic beverage concerns . . . . The principal method utilized by state legislatures to avoid these antisocial developments was the establishment of a triple-tiered distribution and licensing scheme . . . Manufacturing interests were to be separated from wholesale interests; wholesale interests were to be segregated from retail interests. In short, business endeavors engaged in the production, handling, and final sale of alcoholic beverages were to be kept 'distinct and apart' . . . . In the era when most tied-house statutes were enacted, state legislatures confronted an inability on the part of small retailers to cope with pressures exerted by larger manufacturing or wholesale interests . . . Consequently, most of the statutes enacted during this period (1930-1940) manifested a legislative policy of controlling large wholesalers; the statutes were drafted in sufficiently broad terms, moreover, to insure the accomplishment of the primary objective of the establishment of a triple-tiered system. All levels of the alcoholic beverage industry were to remain segregated; firms operating at one level of distribution were to remain free from involvement in, or influence over, any other level.[2]

”

In recent years, several major distillers have been successful in securing very specific exceptions to California's strict tied-house laws.^[3]

There have also been some arrangements between breweries and non profit venues. The brewery partner donates beer at wholesale to the non profit obtaining an exclusive high profile account. The non profit receives a major portion of it's income from the retail beer sales.

References

1. ^ (Slade 1998, pp. 565)
2. ^ California Beer Wholesalers Ass'n v. Alcoholic Beverage Control App. Bd., 5 Cal. 3d 402, 407-408 (1971).
3. ^ Dispatches from the Wine Law Wars, speech by James Seff at Stanford University, 9/28/10.

Further reading

Slade, M.E. (1998), "Beer and the Tie: Did Divestiture of Brewer-Owned Public Houses Lead to Higher Beer Prices?", The Economic Journal 448 (108): 565–602, doi:10.1111/1468-0297.00305