Scottish Tied Pubs Adjudicator's investigation policy: consultation analysis

Section 2: Responses to the consultation questions

The consultation paper explained that the Adjudicator cannot carry out an investigation until a statement has been made publicly available on:

• The criteria that the Adjudicator will adopt in deciding whether to carry out an investigation
• The practices and procedures that the Adjudicator will follow in carrying out an investigation
• The criteria that the Adjudicator will adopt in deciding (i) whether to take enforcement action, and (ii) what type of action to take
• The criteria that the Adjudicator will use in setting the amount of a financial penalty imposed.

The consultation paper set out the proposed approach on each of these aspects of investigation and enforcement. Four questions invited views. The responses to each question are presented below.

Criteria for investigation (Q1)

The consultation outlined the proposed approach for the criteria that the Adjudicator will adopt when deciding whether to commence or continue an investigation. Criteria proposed included impact, strategic importance, risks and benefits, and resources.

Question 1: Does the information under this section provide clarity on the criteria the Adjudicator will adopt when deciding whether to commence or continue an investigation? [Yes / No / Don’t know]

All eight respondents answered Question 1. Four respondents (3 pub-owning businesses and 1 organisation) answered ‘yes’, and two respondents (1 pub-owning business and 1 organisation) answered ‘no’. The remaining two respondents (2 organisations) selected ‘don’t know’. See Table 2.1.

Four respondents (2 pub-owning businesses and 2 organisations) provided additional comments at Question 1, as follows:

• One pub-owning business agreed that the factors listed are relevant, and that the Adjudicator should consider impacts on pub-owning businesses. They also thought that formal investigation should be a last resort, and that the Adjudicator should work collaboratively with pub-owning business and tenants and provide guidance. There was also a suggestion that the Adjudicator should be added to the Scottish regulators' strategic code of practice developed under the Regulatory Reform (Scotland) Act 2014. Regulators should understand the sectors they regulate and tailor their approach, recognising challenges for small businesses.
• One pub-owning business suggested that the Adjudicator’s approach should differentiate between compliant businesses and those choosing not to comply.
• One organisation acknowledged that scale of impact was an understandable criterion, but suggested that it was important for fairness across the sector that the size of the pub-owning business should not affect the protections available to tenants.
• One organisation suggested that the Adjudicator should be included in the code of practice under the 2014 Act (see above) – they particularly highlighted the need to understand the businesses being regulated and the economic impact of regulation. They also suggested that a compliance reporting system, similar to that used in England and Wales, be adopted, and wished to see greater clarity on how the Adjudicator will record suspected breaches and communicate these to pub-owning businesses.
• One organisation thought that the formal investigation process appeared to be too onerous, and could lead to significant costs and time delays for those wishing to raise a formal grievance.
• Another organisation similarly considered that formal investigations should be considered by the Adjudicator as a last resort, with other available powers used where possible.
• Two organisations suggested that, once a formal investigation has been opened, there should be a stay on any arbitrations on the issues involved.

Practices and procedures for investigations (Q2)

The consultation paper outlined the proposed practices and procedures for investigations in relation to scoping and planning, scope refinement, consultation with subject matter experts, detailed investigation and the summarising of findings.

Question 2: Does the information under this section provide clarity on the practices and procedures the Adjudicator intends to adopt during investigations? [Yes / No / Don’t know]

All eight respondents answered this question. Four respondents (3 pub-owning businesses and 1 organisation) said the information provided clarity on the practices and procedures the Adjudicator intends to adopt, and two respondents (1 pub-owning business and 1 organisation) said it did not. The remaining two respondents (1 organisation and 1 individual) selected ‘don’t know’. See Table 2.2.

Four respondents (2 pub-owning businesses and 2 organisations) provided additional comments at this question. They made the following points:

• One pub-owning business queried at which stage and when a pub-owning business would be entitled to make any factual and/or legal submissions before any summary of findings is made.
• One pub-owning business and one organisation advised that the allocation of resources needed to be proportionate and commensurate with the alleged breach.
• One pub-owning business suggested the policy should set out how the Adjudicator proposed to deal with less serious breaches of the Code.
• One organisation sought further information on the failure to provide information on provisions contained in Schedule 2 (section 5) to the Act.
• One organisation disagreed with the statement: ‘For isolated or inadvertent suspected and/or alleged breaches, the Adjudicator may discuss the matter with the relevant pub-owning business initially.’
• One organisation noted a need to prevent conflicts of interest in professional advice provided to the Adjudicator.

Enforcement action criteria (Q3a and Q3b)

The consultation paper outlined the criteria to be used in considering enforcement action:

• Consistent: Ensuring fair, equitable and non-discriminatory enforcement by coordinating actions between tenants and pub-owning businesses.
• Fair: Decisions on enforcement are guided by legislation. The Adjudicator will ensure that the choice of enforcement option is always consistent, balanced and fair.
• Impartial: Enforcement decisions are made impartially, avoiding conflicts of interest or undue influence.
• Transparent: Providing written explanations of contraventions and proposed actions, with opportunities for discussion before final decisions.
• Proportionate: Enforcement action will be proportionate to the circumstances of each case and will not be affected by improper or undue pressure from any source. Where the Adjudicator considers that formal action is necessary each case shall be decided on its own merits.

The consultation paper further stated that contraventions of the Code will be confirmed in writing, with the consequences for failing to remedy these set out clearly. These may include directing the business to do, or stop doing, something specified to comply with the Code; directing the business to publish specified information related to the investigation in a specified manner by a specified deadline; and imposing a financial penalty on the business.

Two questions sought views as follows:

Question 3a: Does the section on enforcement powers provide clarity on how the Adjudicator will decide whether to use these powers? [Yes / No / Don’t know]

Question 3b: Does this section provide clarity on how the Adjudicator will decide which powers to use? [Yes / No / Don’t know]

All eight respondents answered each question.

At Question 3a, seven respondents (4 pub-owning businesses and 3 organisations) agreed that the section on enforcement powers provides clarity on how the Adjudicator will decide whether to use these powers. The remaining respondent (an individual) selected ‘don’t know’. See Table 2.3a.

At Question 3b, six respondents (4 pub-owning businesses and 2 organisations) agreed that the section provides clarity on how the Adjudicator will decide which powers to use. The remaining respondents (1 organisation and 1 individual) selected ‘don’t know’. See Table 2.3b.

Four respondents (2 pub-owning businesses and 2 organisations) provided comments on their response at either or both of Question 3a or 3b. Two respondents provided explanation for their response and three provided comments on additional specific aspects of the investigation process for improvement:

• One pub-owning business noted that the costs of investigation, and the legal costs that might be associated with such an investigation, could be substantial. As the Code applied to all pub-owning businesses, irrespective of size, there is a risk that enforcement action might result in insolvency for some businesses.
• One pub-owning business advised that consistency and transparency are key to a successful approach. A collaborative approach should be used for discussing and remedying any potential inadvertent breaches of the Code.
• Two organisations believed that there needs to be greater clarity about outcomes, particularly in relation to (i) whether tenants will be compensated for losses as well as costs, and (ii) ensuring that any penalty is sufficient to deter breaches of the Code.

Financial penalty criteria (Q4)

The consultation paper outlined the proposed approach to setting financial penalties in situations in which the Adjudicator finds, following an investigation, that a pub-owning business has breached the Code. The maximum set for such financial penalties is 1% of the annual turnover of the pub-owning business. The consultation paper outlined the steps – that is, initial assessment, and consideration of mitigating and aggravating factors – for determining financial penalties.

Question 4: Does the information under this section provide clarity on the criteria the Adjudicator will use to set the amount of a financial penalty? [Yes / No / Don’t know]

All eight respondents answered Question 4. Views on financial penalties were split, with three respondents agreeing (2 pub-owning businesses and 1 organisation) and three respondents disagreeing (1 pub-owning business and 2 organisations) that the information provided clarity on the criteria the Adjudicator will use to set the amount of a financial penalty; the remaining two respondents (1 pub-owning business and 1 individual) selected ‘don’t know’ See Table 2.4.

Six respondents (3 pub-owning businesses and 3 organisations) provided further comments regarding financial penalties:

• Three pub-owning companies thought that the upper limit for financial penalties set by the regulations was disproportionate. All three suggested that the limit should have been set at 1% of turnover relating to Scottish tied pubs only, while two suggested a fixed cash sum maximum as an alternative. However, this matter has already been set by regulations, and falls outside the scope of the current consultation.
• One pub-owning company observed that, although the upper limit for any financial penalty had been set by The Tied Pubs (Fees and Financial Penalties) (Scotland) Regulations 2024, there needed to be clarity on how and by what measurement the ‘initial penalty amount’ will be determined.
• One organisation queried whether tenants would receive any of the money paid by pub-owning businesses as financial penalties; if not, it was suggested that the Adjudicator should support tenants that are taking legal action to recover damages for any breach of the Code. (Note that under section 10 of the Act, financial penalties are paid into the Scottish Consolidated Fund.)