Competition watchdog warns of local price rises after Heineken's Punch deal

Heineken's £403 million takeover of pub chain Punch Taverns could impact competition and see pub goers face higher prices in 33 areas across Britain, the competition watchdog has warned.

Photo issued by Punch Taverns of their The Rose and Crown pub near Sheffield city centre. Heineken's £403 million takeover of the pub chain could impact competition and see pub goers face higher prices in 33 areas across Britain, the competition watchdog has warned. PRESS ASSOCIATION Photo. Issue date: Tuesday June 13, 2017 . Photo: Punch Taverns/PA Wire

But the Competition and Markets Authority (CMA) said it did not believe the controversial tie-up would significantly cut the choice of tipples available.

This comes despite industry fears Heineken would give preference to its own beers and ciders and close off an important route to market for brewers that compete with the Dutch giant.

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The CMA said the 1,895 Punch pubs being snapped up by Heineken, which it will add to 1,100 leased pubs it already owns across the UK, only account for 4% of the market and is therefore “not a major route to market for brewers”.

It added Heineken was likely not to risk losing customers by reducing the range of beers and ciders on offer.

Heineken now has to address the CMA’s concerns over the 33 areas where competition could be reduced by June 20, or face an in-depth probe.

Andrea Coscelli, acting chief executive of the CMA and decision-maker in the case, said: “We have listened very carefully to a range of concerns about this merger.

“The companies will own less than 10% of all British pubs after any deal, but we are concerned about the loss of competition for pub goers in a number of local areas.

“Without sufficient competition from rivals, pubs in these areas might be able to raise prices or worsen the service they offer customers.”

The CMA said its investigation so far found evidence from brewers showing that the Punch pubs being bought typically account for only a small proportion of all of their sales to pubs.

It added that choice available was not set to be impacted badly, given the drinks currently stocked by Punch and the range available in Heineken-owned pubs.

Heineken said it was putting together proposals to address the CMA’s concerns and was “confident” these would allow the deal to go ahead as planned by the end of August without a full-scale probe.

David Forde, managing director for Heineken UK, said: “This decision by the CMA acknowledges that there are only a small number of local areas where competition may be diminished due to our acquisition.

“We are confident we can offer the CMA suitable undertakings to satisfy their concerns,” he said.

Heineken sealed its deal last December to snap up Punch Taverns with private equity firm Patron Capital, having fought off a rival bid from the pub chain’s co-founder Alan McIntosh with a 180p-per-share offer.

Under the deal, Heineken would buy 1,895 pubs, while Patron would acquire 1,329.

But concerns have been raised over the deal in the industry, with the Scottish Licensed Trade Association (SLTA) calling for the CMA to launch a probe.

The SLTA has previously warned that Heineken would give preference to its own drinks, which it claimed would be “simply not fair for brewers, publicans or consumers”.