Crehan v Inntrepreneur Pub Company (CPC)

Hearing dates: 10 February 2003 to 4 March 2003; 7 March 2003 to 24 March 2003

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

TABLE OF CONTENTS

These are contained in the Table in the Annex at the end of this judgment. I suggest that a reader who is unfamiliar with the detailed facts of the case should detach the Annex or make a copy of it, so that he or she can have it separately to hand while reading through the main body of the text.

Overview

Mr Crehan is a publican. In July 1991, pursuant to agreements for leases, he took occupation of two pubs which Inntrepreneur owned: The Cock Inn and The Phoenix; they are situated close to each other in Staines, a town on the Thames a little to the west of London. The leases annexed to the agreements contained beer ties whereby Mr Crehan was bound to purchase most of his beer from Courage at the full prices in Courage's price lists from time to time. Tenants or owners of free houses (as opposed to tied houses like The Cock Inn and The Phoenix) were able to purchase their supplies of beer, whether from Courage or from other suppliers, at prices which were discounted heavily below the listed prices which Mr Crehan was obliged to pay. Mr Crehan's business failed and he became involved in protracted litigation with Courage and with Inntrepreneur. The case finally came to trial and was heard before me over a total of 29 days. It involves substantial issues of EC law revolving around whether the beer ties in Inntrepreneur leases infringed article 81 of the EC Treaty. It has already been to the CJEC. The effect of the CJEC's decision, announced in September 2001 and reported at (among other places) [2002] QB 507, was that Mr Crehan might have a claim for damages against Inntrepreneur, but that there were substantial questions which needed to be decided by the national court.

The hearing before me took place in order to decide those questions. The case is very complicated, and it would be impossible to encapsulate all of the issues in a brief overview at the beginning of this judgment. However, in my view the two questions of overriding importance are as follows: (1) In 1991 (when Mr Crehan took his leases from Inntrepreneur) and in subsequent years was the structure of the beer distribution industry in this country such that the beer ties in Inntrepreneur leases infringed article 81? (2) If it was, was the failure of Mr Crehan's business caused by the beer ties in his two leases, or was it caused by other factors altogether? For Mr Crehan to succeed, the answers to the first question has to be yes (i.e. the beer ties in Inntrepreneur leases did infringe article 81), and the answer to the second question has to be that the failure of his business was caused by the beer ties, rather than by something else. In my judgment the answer to the second question is in favour of Mr Crehan (i.e. it was the beer ties, and not other factors, which caused the failure of his business), but the answer to the first question is adverse to Mr Crehan (i.e. the beer ties in the Inntrepreneur leases did not infringe article 81). It follows that Mr Crehan's claim for damages fails. What I say now will be no consolation to him, but he does not fail on any ground for which he could be said to have been personally responsible. He fails because of complex and difficult issues of EC law at a high level, and nothing that he did or failed to do in relation to The Cock Inn and The Phoenix influences those issues at all.

I should record that Mr Crehan was represented by Mr David Vaughan QC, Mr Mark Brealey QC, and Mr Mark Wonnacott. Mr Wonnacott was particularly concerned with the property aspects of the case. In the event they receded in importance as the case progressed, and a stage came when Mr Vaughan and Mr Brealey were responsible for the contentious parts of Mr Crehan's case. Inntrepreneur was represented by Mr Kim Lewison QC, Mr Nicholas Green QC, Mr James Flynn and Mr Martin Rodger. Since the hearing Mr Lewison has become Mr Justice Lewison and Mr Flynn has become Mr James Flynn QC.

Article 81; the Delimitis case

Article 81 is the first of the articles of the Treaty which deal with competition. The relevant parts of it read as follows.

Article 81

(1) The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings, and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which … [five subaragraphs (a) to (e) follow which I will not reproduce here].

(2) Any agreements or decisions prohibited by this Article shall be automatically void.

(3) The provisions of paragraph 1 may, however, be declared inapplicable in the case of:

• any agreement or category of agreements between undertakings

• [irrelevant in this case]

• [also irrelevant in this case]

which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:

• impose on the undertakings concerned restrictions which are not indispensable to the attainment of those objectives;

• afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

. I will have to explain later how the article applies (or fails to apply) in the particular circumstances of this case, but at this point it is worth pointing out two features of it. First, the words of paragraphs (1) and (2) which are critically in point in the present case combine as follows: 'all agreements between undertakings … which may affect trade between Member States and which have as their … effect the prevention, restriction or distortion of competition within the common market … shall be automatically void.'

. Second, paragraph (3) creates a power, vested in the Commission in the first instance, under which a particular agreement or category of agreements which would otherwise be invalidated by paragraphs (1) and (2) may be exempted from invalidation. There are two ways in which the power can be exercised. One is by the introduction of a 'block exemption', analogous to delegated legislation, whereby agreements which precisely comply with the terms of the block exemption are valid notwithstanding paragraphs (1) and (2). There was a block exemption capable of applying to beer ties, and whether it applied in this case is one of the issues which I have to decide. My decision is going to be that it did not. The other way in which the exempting power can be exercised is through the grant by the Commission of an individual exemption in a particular case. Part of the history of this case concerns unsuccessful attempts by Inntrepreneur and Courage to persuade the Commission to grant an individual exemption.

. The leading case about article 81 and beer ties is the CJEC decision in Delimitis v Henninger Bräu AG, Case C-234/89, [1991] ECR I-935. Hereafter in this judgment I shall refer to the case simply as Delimitis. I shall have to examine a number of detailed aspects of it later, but it indicates that a beer tie in a lease of a pub may or may not be in contravention of article 81. Two critical questions have to be asked. First, having regard to the economic and legal context of the lease in question, is it...