ACM in favor of clearer contracts with breweries
The Netherlands Authority for Consumers and Markets (ACM) calls for clearer and simpler contracts between breweries and business owners in the accommodation and food services industry. Clearer and simpler contracts help strengthen the position of business owners vis-à-vis breweries. However, ACM sees no reason to prohibit breweries from including exclusive dealing provisions in the contracts they conclude with business owners.
The Dutch beer market is sufficiently dynamic. Breweries compete for locations, and business owners compete amongst each other. That is the main conclusion of ACM’s beer market analysis. Chris Fonteijn, Chairman of the Board of ACM, comments: ‘These exclusivity provisions have not large enough an effect on competition to justify a prohibition of them. However, we do find it important to strengthen the bargaining position of business owners in the accommodation and food services industry vis-à-vis the breweries.’
Results of the beer market analysis
Following previous studies of EIM (Economic Institute for Small and Medium-sized Businesses) and the call of KHN (the Dutch trade association for the accommodation and food services industry), ACM analyzed competition on the beer market. It sat down with all relevant market participants. The analysis reveals that breweries compete for locations in the accommodation and food services industry. In that process, breweries and business owners may decide to commit themselves to each other for a longer period of time. More than 20 percent of business owners are untied. Other owners have draft beer systems on loan (more than 50 percent), lease the space (17 percent) or receive a loan (10 percent). ACM has established that, in practice, untied business owners do not pay lower prices than tied business owners. Business owners that lease space from a brewery do have worse bargaining positions. However, the share of space-tied business owners (17 percent) is not so large that it results in insufficient competition.
Position of business owners in the accommodation and food services industry
In order to provide a bigger counterweight to the breweries, ACM finds it important to strengthen the bargaining position of the business owners in the accommodation and food services industry. This would make it easier to switch beer suppliers. ACM sees two options to realize this objective:
- Clearer and simpler contracts
- Setting up a better system for taking over goods on loan
The contracts between business owners and breweries must be clear about the long-term conditions, for example about early termination, depreciation systems for goods on loan. In addition, business owners should have the right to take over the goods on loan at residual value, giving them freedom in choosing suppliers. ACM together with the industry have established there is room for improvement. The ball is now in the industry’s court to take measures that strengthen the bargaining position of business owners vis-à-vis the breweries.
Breweries use the ‘Model for taking over goods on loan’ to settle their financial claims amongst each other when taking over goods on loan. ACM is in favor of publishing this model, which will provide more clarity about the value of goods on loan (such as the beer draft systems) and about the depreciation system. In that context, it is crucial that the depreciation and valuation systems have realistic assumptions in order to prevent the creation of unnecessary barriers to entry or switching barriers. This will ultimately lead to increased competition for beer tap presence, more options for business owners, and more options for consumers. The trade association for Dutch brewers is currently reviewing the model for the abovementioned items.