London - Britain's competition watchdog said Thursday it found no evidence that making pubs buy beer from the companies that own them was damaging competition, dismissing a complaint from campaigners for drinkers' rights.

The ruling from the Office of Fair Trading, ending a months-long inquiry into the pub sector, sent pub company shares higher on the London Stock Exchange.

The Campaign for Real Ale, or CAMRA, had argued that so-called beer ties - which force pub franchise holders to buy beer from the companies that own their pub - pushed up prices at the tap and limited choice for pub patrons.

But the Office of Fair Trading said it found "generally effective competition between pubs" and would not be taking further action.

"Any strategy by a pub-owning company which compromises the competitive position of its tied pubs would not be sustainable, as this would result in a loss of sales," said OFT senior director Simon Williams. "Pub-owning companies are not therefore protected from competition by virtue of the supply ties agreed with their lessees."

Still, Williams acknowledged the competition ruling comes at a difficult time for the pub industry. Pubs have faced falling business in recent years thanks to the introduction of a nationwide smoking ban, increased competition from supermarkets selling cheaper alcohol, higher taxes and the recession.

More than 2,350 pubs closed in the year to July, according to the latest figures from the British Beer and Pub Association.

CAMRA, a major consumer group which claims over 100,000 members, said the ruling ignored a report by a Parliamentary committee earlier this year that urged reforms. The group campaigns for traditional ale, consumer rights and the pub as a focus for community life.

A formal response by the government to the Parliamentary report is still awaited. CAMRA called for the government to overrule the Office of Fair Trading's decision and order an investigation by the Competition Commission, which can impose sanctions and generally investigates on a referral from the OFT.

"It is difficult to see how the OFT can argue that competition is working well in the pubs sector when demand is falling, yet prices are rising," said Mike Benner, CAMRA's chief executive.

Enterprise Inns PLC, whose shares jumped 17 percent to 139.7 pence after the report, said the beer tie had benefited the industry by providing a low cost of entry to potential franchisees who are unable to afford to buy a pub of their own.

"The tie provides an attractive mix of low fixed cost rent plus variable beer margin which reflects the performance of the pub," the company, which has 7,600 leased and tenanted pubs.

Shares in Punch Taverns PLC, the other major pub company, rose 14 percent to 96.45 pence.

Copyright 2009 The Associated Press.