By Karen Peattie

A HEFTY £2 million fine has been handed out to Edinburgh-headquartered Star Pubs & Bars after it was found to have “seriously and repeatedly” breached the legally binding Pubs Code over nearly three years.

Fiona Dickie, the Pubs Code Adjudicator, found that Star, the group which operates the pub estate business of Heineken in the UK, had “persisted in forcing its tenants to sell unreasonable levels of Heineken beers and ciders when they requested to go free of tie”. This was despite repeated regulatory interventions and clear arbitration rulings from the PCA, she said.

“The report of my investigation is a game-changer,” Ms Dickie said. “It demonstrates that the regulator can and will act robustly to protect the rights that Parliament has given to tied tenants.”

In a hard-hitting warning, she added: “I will be holding discussions with all the companies I regulate following my findings about how they will ensure they are Code compliant. My message is that if anyone previously had any doubts about my resolution to act when I find breaches, they can have no doubt now.”

The fine, said Ms Dickie, would act as a deterrent to Star and other pub-owning businesses from future non-compliance.

During the investigation, the PCA found that Star had committed 12 breaches “with the result that it had frustrated the principles of the Pubs Code”. As well as identifying how the company had offered stocking terms that acted as a deterrent to tenants pursuing a free-of-tie tenancy, the PCA highlighted “systemic corporate failures” by Star in its approach to compliance.

Ms Dickie described Star as a repeat offender and said the company had been given opportunities to set itself on a compliant path “but intentionally or negligently failed to do so”.

“It failed to heed statutory advice, the PCA's regulatory engagement and learnings from arbitration awards,” she said. “It did not engage frankly and transparently with its tenants or meet the standards required of a regulated business when engaging with the PCA.

“Where it did change its approach, the efforts it made to comply were for the most part inadequate and not credible.”

Ms Dickie’s investigation covered the period from July 21, 2016, when the Pubs Code came into effect, until July 10, 2019. She found multiple breaches by the company relating to stocking obligations. In particular, up to August 2018, 96 tenants who requested a free-of-tie option were told that 100 per cent of the keg beer they sold had to be Heineken brands.

Lawson Mountstevens, managing director of Star Pubs & Bars, said the company was “deeply disappointed and frustrated” at the outcome of the investigation, and described the penalty as “unwarranted and disproportionate”. He said: “It 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.

“We are a responsible business that takes its regulatory obligations extremely seriously and strives to achieve the highest levels of professionalism. From the outset we have been transparent and repeatedly sought guidance from the regulator on the terms we were offering those licensees looking to take up the Market Rent Only (MRO) option, but the PCA consistently declined to respond to those requests. Instead it chose to launch a long, costly and unnecessary investigation.

“We are dedicated to the Pubs Code in both word and spirit, and do not believe the outcome of this investigation accurately reflects the culture of our business or the good working relationship we have with the vast majority of our licensees. In our view there are flaws in the way the statutory framework is applied, and we call on the Government to examine this as part of their statutory review.”