The White Horse Inn - 22 Hengate - geograph

In the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...

, a tied house is a

public house A pub (short for public house) is a kind of drinking establishment which is licensed to serve alcoholic drinks for consumption on the premises. The term ''public house'' first appeared in the United Kingdom in late 17th century, and wa ...

required to buy at least some of its

beer Beer is one of the oldest and the most widely consumed type of alcoholic drink in the world, and the third most popular drink overall after water and tea. It is produced by the brewing and fermentation of starches, mainly derived from ce ...

from a particular

brewery A brewery or brewing company is a business that makes and sells beer. The place at which beer is commercially made is either called a brewery or a beerhouse, where distinct sets of brewing equipment are called plant. The commercial brewing of bee ...

or pub company. That is in contrast to a free house, which is able to choose the beers it stocks freely. A report for the UK government described the tied pub system as "one of the most inter‐woven industrial relationships you can identify in the UK, with multiple streams of payments running in both directions, from the pub tenant to the

pubco A pub chain is a group of pubs or bars operating under a unified brand image. Pubs within a chain are tied houses and can, generally, only sell products which the chain owner sanctions. Pubs in a chain normally display their chain branding promi ...

and vice versa, generally negotiated on a pub‐by‐pub basis."

Free and tied houses

The pub itself may be owned by the brewery or pub company in question, with the publican

renting Renting, also known as hiring or letting, is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for a ...

the pub from the brewery or pub company, termed a tenancy. Alternatively, the brewery may appoint a salaried manager while retaining ownership of the pub; that arrangement is a "managed house". Finally, a publican may finance the purchase of a pub with

soft loan A soft loan is a loan with a below-market rate of interest. This is also known as ''soft financing''. Sometimes soft loans provide other concessions to borrowers, such as long repayment periods or interest holidays. Soft loans are usually provid ...

s (usually a mortgage) from a brewer and be required to buy his beer from it in return. 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. However, the arrangement was sometimes disadvantageous to consumers, such 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 A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...

opposed by the Campaign for Real Ale, especially when the brewer forced poor beer onto the market from the lack of competition from better breweries. Some or all drinks were then supplied by the brewery, including

third party Third party may refer to: Business * Third-party source, a supplier company not owned by the buyer or seller * Third-party beneficiary, a person who could sue on a contract, despite not being an active party * Third-party insurance, such as a V ...

spirit Spirit or spirits may refer to: Liquor and other volatile liquids * Spirits, a.k.a. liquor, distilled alcoholic drinks * Spirit or tincture, an extract of plant or animal material dissolved in ethanol * Volatile (especially flammable) liquids, ...

s and soft drinks, quite often at an uncompetitive price relative to those paid by free houses. From 1989 to 2003, some tied pubs in the UK were legally permitted to stock at least one

guest beer In 1989, licensing legislation passed by Margaret Thatcher's Conservative government made it possible for a tied pub to stock at least one guest beer from a different brewery. The Monopolies and Mergers Commission was concerned that the market ...

from another brewery to give greater choice to drinkers.

Outside the United Kingdom

Canada

In Canada, alcohol laws are the domain of the provinces. Tied houses were eventually banned in all provinces in the aftermath of the repeal of total alcohol prohibition. In the 1980s the concept of the

Brew Pub Craft beer is a beer that has been made by craft breweries. They produce smaller amounts of beer, typically less than large breweries, and are often independently owned. Such breweries are generally perceived and marketed as having an emphasis o ...

or Microbrewery was introduced to Canada beginning in the Province of British Columbia. Through the 1980s and 1990s this concept expanded to other provinces but was not a return to fully tied houses in the traditional sense. Very few alcohol producers or distributors survived prohibition, creating a concentrated market ripe for abuses. For example, in British Columbia in 1952 there were “no licensed restaurants or private liquor stores and only about 600 bars and clubs” compared to “over 9000 licensed establishments, including 5,600 restaurants” in 2011. A proposal to loosen the restrictions was put forward by the government of BC in 2010, in response to these changes, but regulation to implement the law was still under debate in 2012.

United States

In the late 19th and early 20th centuries, saloons across America were often tied houses, with breweries having exclusive contracts with drinking establishments, including helping business start-ups. Competition was fierce among competing breweries' tied houses within cities. This system ended with the enactment of nationwide Prohibition in the United States in 1919. Although Prohibition was repealed in 1933, the

Twenty-first Amendment to the United States Constitution The Twenty-first Amendment (Amendment XXI) to the United States Constitution repealed the Eighteenth Amendment to the United States Constitution, which had mandated nationwide prohibition on alcohol. The Twenty-first Amendment was proposed by ...

grants the states broad power to regulate the alcoholic beverage industry. Tied-house restrictions have been construed as forbidding virtually ''any'' form of

vertical integration In microeconomics, management and international political economy, vertical integration is a term that describes the arrangement in which the supply chain of a company is integrated and owned by that company. Usually each member of the suppl ...

in the alcoholic beverage industry. As the Supreme Court of California explained in a landmark 1971 decision: In recent years, several major alcoholic beverage makers have been successful in securing very specific exceptions to California's strict tied-house laws.''Dispatches from the Wine Law Wars'', speech by James Seff at Stanford University, 9/28/10.

Free and tied houses

Outside the United Kingdom

Canada

United States

References

Further reading